FEX Bk of Instrctn

FOREWORD Our Bank has been a pioneer in implementing the guidelines of the Reserve Bank of India in all areasincluding Foreign Exchange Business. The existing Book of Instructions on Foreign Exchange was released in the year 2005. Ever since, many changes have taken place in the system / methodology, most significant being continuous liberalization of rules under Foreign Exchange Management Act (FEMA) as also accountability relating to their compliance. These changes have necessitated revision of the Book of Instructions. In order to equip the staff to perform their functions in an efficient manner as also to ensure compliance of different aspects of related guidelines pertaining to foreign exchange transactions, the Book of Instructions on Foreign Exchange has been revised by International Banking Division. The Chapters addressing the issues on various types of transactions have been recompiled so that they are readily available for removing the knowledge gaps. I am pleased to release this Book of Instructions, which shall be a useful and reliable reference to staff associated with handling of foreign exchange business. CHAIRMAN & MANAGING DIRECTOR Book of Instructions on Foreign Exchange  contents  Chapter No.     Particulars                Page No.  1   ‐  39   1   ‐ 18   1   ‐  39  1.               Import Credits        2.     Inward Bills          3.     Export Letters of Credit &  Negotiation of Bills     4.     Foreign Outward Bills      5.       6.       7.           8.         9.          10.     Travel Instruments        1   ‐ 24   1   ‐  28  Clean Remittances –     Outward and Inward     1   ‐ 20     1   ‐ 26   Nostro – Vostro Accounts  and  Currency  Position        Forward Contracts – Customer  Non‐Resident Accounts      1   ‐ 30   1   ‐ 27   1   ‐ 17    Foreign Currency Accounts    of Residents    1. IMPORT CREDITS  CHAPTER 1 : IMPORT CREDITS GENERAL GUIDELINES APPLICABLE TO ALL BRANCHES 1. GENERAL This chapter deals with the opening of letters of credit by importers in India in favour of exporters in foreign countries and the documents negotiated under our letters of credit. Branches shall be guided by general provisions and definitions contained in the Uniform Customs and Practice for Documentary Credits (UCPDC) 2007 revision, ICC Publication No. 600 and Uniform Rules for reimbursement (URR), ICC publication No. 725 and revision thereof from time to time. All imports into India are subject to FEMA Provisions and Foreign Trade policy in force at the time of opening the letter of credit (Refer FEMA guidelines, Foreign Trade Policy, Handbook of Import-Export Procedures, FEDAI guidelines and current foreign exchange circulars on the subject). Branches may further ensure to adhere to “Know your Customer” (KYC) guidelines issued by RBI/Bank. 2. DOCUMENTARY CREDIT It is an arrangement whereby a bank, acting at the request and on the instructions of a customer, undertakes to pay a third party by a given date according to agreed stipulations and against presentation of stipulated documents, the counter value of goods or services despatched /supplied, rendered or otherwise. It is one of the most convenient methods of settling payments in international trade. 3. TYPES OF DOCUMENTARY CREDITS Letters of credits are classified into various categories depending upon the nature and the function of the Credit. Some of these types are as follows:   Irrevocable Revocable Payment Credit Deferred Payment Credit Acceptance Credit Negotiation Credit Confirmed/Unconfirmed Letter of Credit Sight Credit Usance Credit Fixed Credit Revolving Credit Page 1 of 39  4. i) Instalment Credit Transit Credit Reimbursement Credit Transferable Credit Back-To-Back Credit Red Clause Credit Green Clause Credit Standby Letter of Credit PARTIES TO A LETTER OF CREDIT THE PRINCIPAL OR APPLICANT: This is the party, which asks the bank to open the documentary credit, and is normally the buyer of the goods or services to be imported. ii) ISSUING BANK: This is the Bank, which issues or establishes the credit. iii) ADVISING BANK: This is the Bank, which advises the beneficiary that a letter of credit has been opened in his favour. The advising bank does not assume any responsibility, except for authenticity of the credit and merely acts on behalf of the issuing bank. iv) BENEFICIARY: This is the party, who is entitled to receive payment under the credit on presentation of the documents in terms of the credit, and is usually the seller/exporter of the goods/services to be exported. v)        SECOND BENEFICIARY In case, the letter of credit is transferable and the original beneficiary transfers the credit to another party, then the party in whose favour the credit has been transferred is known as second beneficiary. vi) CONFIRMING BANK: Page 2 of 39    This is the bank, which adds confirmation to a letter of credit. By adding confirmation, the confirming bank assumes a firm and independent obligation to make payment. The confirming bank will not have any recourse to the beneficiary once it has made the payment without reserve even though the issuing bank should later on for one reason or the other not be able to remit the required cover for payment. vii) NOMINATED BANK: The nomination of a bank by the Issuing bank for negotiation of documents under a credit does not constitute any undertaking on the nominated bank unless the credit is confirmed by it. Negotiating Bank may be the bank of the beneficiary of the credit and/or a bank, which pays value against a set of documents drawn under a credit. Issuing Bank will reimburse the nominated bank if it had negotiated the documents as per the terms of the Letter of Credit. viii) REIMBURSING BANK Reimbursing bank will reimburse the claim made by the negotiating bank or by any claiming bank under a documentary credit under the authority of the issuing bank. 5. OPENING OF LETTER OF CREIDT Branches may open following types of letters of credit: ‐          Irrevocable ‐         Confirmed. ‐         Unconfirmed ‐         Payment Letter of Credit ‐         Acceptance Letter of Credit ‐         Negotiation Letter of Credit ‐         Revolving Page 3 of 39    ‐         Transferable ‐         Stand by Letter of Credit (Revocable letters of credit cannot be opened) Branches shall refer the matter to International Banking Division, Head Office, in case of any other type of Letter of Credit to be opened. EXAMINATION OF CUSTOMER’S REQUEST FOR OPENING LETTERS OF CREDIT   6. Request for opening of a documentary letter of credit is similar to an application for any other type of a credit facility and must, therefore, be examined with equal care. The bank, which issues a letter of credit, gains a security interest in the merchandise covered by credit when its account is debited for payment to the beneficiary, and releases that security interest only when it is reimbursed by the customer. Consequently, careful attention must be given to the value of the merchandise to be imported and its marketability. The integrity and the means of the customer must be carefully examined by the Incumbent-in-charge, if he is to take full advantage of this type of financing without running undue risks. 7. The Branch Manager must ensure that necessary limits are sanctioned in favour of customer for letter of credit facility and for any other facility, which may be necessary at the time of retirement of documents. Prior sanction must be obtained from the competent authority unless the credits are within the vested powers of the Incumbentin-charge. In case letter of credit is issued on usance basis, the branch must ensure that specific sanction for such facility has been obtained and provides for delivery of documents etc., on the basis of approval/ undertaking to meet the payment of the bill as per guidelines of the bank. In all such cases, Incumbents must satisfy prior to opening of LC that the importer has sufficient funds to pay all the applicable custom duties, post/clearance charges, inland freight etc. relating to taking delivery of the merchandise. Page 4 of 39    Branches must satisfy themselves by reference to the related contracts and import regulations that the documents asked for in the credit are appropriate to the nature of the transaction and for clearance of the goods at port of arrival. The items are permitted for import as per “ ITC (HS) Classifications of Export & Import items” or any other provision of the prevalent ‘ Foreign Trade Policy ‘ or any other law in force. If required, the goods to be imported should be covered by an import licence/customs clearance permit. 8. IMPORT LICENCE Import of goods from outside India is subject to provisions of prevalent Foreign Trade Policy. The imports of goods for some items are regulated through import licences, which are issued by the Director General of foreign Trade (DGFT). Normally import licences are issued in duplicate. One of the copies is marked as “For Customs Purposes” and the other copy is marked as “For Exchange Control Purposes”. The customer must produce a valid import licence marked “ For Exchange Control Purposes” issued by DGFT.Where the goods to be imported are not subject to licence, the customer should state the Import Trade Control (H.S.) classification number together with the serial number allotted to commodity there under on the relative form A1 and LC application. The particulars thereof should be verified by branches and placed on banks record. Such import was commonly referred to as import under “Open General Licence” (OGL). As no licence is issued for the same, the term OGL has become obsolete and is no longer referred in Export-Import policy. However, the term OGL is still widely prevalent in practice. Whenever the same is referred, it may be deemed to imply that import of those items can be freely made without any import licence/permit etc. The applicant of the credit should normally be the party in whose favour the licence has been issued. Branches may open letters of credit where the exchange control copy of relative import licence has been issued in the name of a party other than the applicant provided the applicant produces a letter of authority granted by the import licence holder in his favour (subject to the terms and conditions, if any, stipulated in import policy in force) authorising him inter-alia to open letters of credit or make remittances in payment towards imports under the licence. Page 5 of 39    Value indicated on import licences is always for the CIF value of goods authorised to be imported. Remittances for the goods covered by import licence are governed by FEMA Regulations. As per present FEMA Regulations, the amount debitable to Exchange Control copy of licence are total cost of the goods, which includes CIF value of goods plus commission paid to local as well as foreign agents and interest paid on import bills. In no case the c.i.f. value of the merchandise covered by the credit should exceed the amount of the licence; otherwise the importer will become liable to heavy penalties for exceeding the amount available under the licence. Consequently, if insurance is covered by the buyer and/or freight is payable at destination, the credit will have to be opened for a lesser amount in order to provide for insurance and/or freight. Branches shall scrutinize /examine the important prevalent features/conditions of import licences before opening the Letter of Credit and also ensure that: a.      The description, value and the quantity of the imported goods are in accordance with the licence/customs clearance permit, where applicable. b. The shipment/dispatch of the goods from the supplying country takes place within the validity period of the licence/customs clearance permit and no trade/exchange control regulations are in force for import from/remittance to that country. c. The terms and conditions contained in the licence/customs clearance permit and the Foreign Trade policy and procedure, in regard to the item(s) and other connected matters are fulfilled, eg: ‐  List of items permitted for import ‐  Validity of licence ‐  Licencing period ‐  Signature of issuing authority ‐  Security seal ‐  Specific conditions of licences ‐  Quantity of goods ‐  Value of licence Page 6 of 39    ‐  Licences issued in duplicate ‐  Period of validity of licence & criteria for determining validity ‐  Date of shipment/ Despatch ‐  Port of import 9. HIGH SEA SALES Foreign Trade policy recognizes high seas sale of imported goods and permits such sales. High seas sale is selling of goods while they are in mid-seas i.e. before they arrive at the shores. Such sale takes place by transfer/endorsement of documents of title to goods. In such cases if the bank had opened L/C or retires a collection bill, the remittance would have been effected by one importer while clearance of goods would be made by another importer. When bank receives Bills of Entry in such cases, the name of importer appearing on Bill of Entry may differ. Banks may accept such Bills of Entry as sufficient evidence of import provided all other details agree. 10. FREIGHT TO BE PAID BY THE BUYER When freight for the imports is paid by importer in Rupees, the amount has to be specifically marked off from exchange control copy of import licence unless the import is covered otherwise by Foreign Trade Policy. The shipping company in such cases, before accepting payments in Indian Rupees, will invariably require a certificate from the bank that freight has been marked off in the exchange control copy of the licence. Branches may issue such certificates after endorsement of the amount on the licence. 11. INSURANCE COVERED BY THE BUYER In the event of insurance being covered by the buyer in India, a cover note on which premium has duly been paid must be obtained before the credit is opened. The cover note must be made out in name of the Bank and cover the merchandise stipulated in the credit for c.i.f. value. The cover note should be valid upto arrival of goods at the final destination, covering risks enumerated in the bank’s application form and also any other risks appropriate to the goods or voyage. Cover note/policy should be properly checked to ensure that onerous stipulations concerning the carrying vessels such as “Shipment by first class steamer”, “subject to usual marine insurance clause” etc. are not incorporated in the cover note/policy. Page 7 of 39    Payment of premium on marine insurance policies should be marked off on exchange control copy of valid import licence held by importer unless the import is not subject to licence. In the case of customer holding open policy it should be ensured that necessary declaration has been made and premium paid to cover the relative shipment. 12. DESCRIPTION OF THE MERCHANDISE The general description of the merchandise should be the same as mentioned in the licence / ITC (HS) classification published and Notified by DGFT under Foreign Trade Policy. Nevertheless, it is important that the description of the goods in a documentary credit should be in simple and unambiguous terms and lengthy detailed description should be avoided as this often leads to difficulties when documents arrive. However, where the contracted description is in great details or complicated, it is preferable to stipulate in the credit that the invoice should show the general description of the goods and link it with reference to indent/order/contract etc. However, such contract should not be made a part of credit. 13. VALIDITY OF THE CREDIT Validity of a letter of credit refers to the last date of shipment and the last date for presentation of documents under the credit. In case of imports under licence, the last date of shipment must be within the expiry date/validity of licence. 14. COMMISSION & CHARGES a) COMMISSION Commission for opening letters of credit will be charged at the time of opening the letter of credit in terms of extant guidelines of bank. Commission will be retained in whole by the branch where the business originates and credited to “Commission on foreign documentary credits” account. Care must be taken to ensure to pass the Page 8 of 39    liability vouchers and charge commission for the total liability of the credit including interest payable under the credit, if any. b) CHARGES (POSTAGE, COURIER, SWIFT ETC.)   Actual postage/fax & SWIFT charges as prescribed by the bank must be debited to the customer at the time of opening letter of credit. Similarly other out of pocket expenses incurred, if any, shall be recovered from the importer client. Branches without direct authorisation should remit the same to concerned authorised branch and recover from their customer accordingly. 15. MARGIN Credits may be opened with or without margin under sanction from the appropriate authority. Each case should be judged on its own merits. However, while deciding the percentage of margin, following points must be kept in mind; a)    The standing of the importer; b)    The standing of the supplier; c)     The state of the market for the goods e.g. do they enjoy a ready demand? d)    The nature of the goods being imported e.g. are they perishable, etc. e)     Volatility of particular foreign currency. Concessions/relaxations, if any, must be allowed in terms of banks guidelines issued from time to time. The margin should be credited to ‘Margin money on foreign letters of credit’ account opened in the current account ledger or should be maintained in the shape of fixed deposit receipt ,duly discharged and kept under bank’s lien and a note should be made in the appropriate column of ODCM menu in CBS. GUARANTEE OR MARGIN FROM THIRD PARTIES While establishing Import Letters of Credit, incumbents may, at their discretion, accept guarantee offered or margin deposited by a person, company or firm other than the client on whose behalf credit is to be opened. It must, however, Page 9 of 39    be ensured that the customer will be able to retire the bills falling due under the Letter of Credit. 16. REVOLVING LETTERS OF CREDIT Generally, Import letters of credit should not be established on revolving basis. Occasionally, however, importers may wish to open letters of credit providing for payment against drafts, at any one time, within a fixed limit which is restored automatically on the drawing being honoured; but the aggregate drawings under the credit are limited to the balance available on the import licence/certificate/permission. There is no objection to opening such credits provided that the balance on the import licence covers the aggregate amount of drawings to be made under the credits. Branches should remember that revolving Credits have some inherent drawbacks, for the reasons, that they would not know how much they are committing themselves under such credits and may lose control over the opener and may be lending name and money for an indefinite amount and period. However, they may be issued, with explicit stipulations, on the ceiling for aggregate drawings, total period for which the credit will be available etc, as under: “This credit is revolving subject to the condition that once utilized in full it shall be available again only after the previous negotiations made under it have been honoured by the applicant and confirmation thereof has been received by the negotiating bank from the opening bank. The total drawings under this credit shall not exceed _____________(amount). 17. TRANSFERABLE CREDITS The transferable credit is a credit in which the beneficiary has the right to give instructions to the paying/negotiating/accepting bank to make the credit available in whole or in part to one or more third parties (second beneficiaries). A credit can be transferred only if it is expressly designated as “Transferable” by the issuing bank. It should, however, be noted that a transferable credit can be transferred only once i.e. transferee cannot pass on the credit to another party. If it is desired to allow part of a credit to be transferred or the fractions of the credit to be transferred separately, the credit must permit partial shipment. Page 10 of 39    Transfer should be restricted to the beneficiaries within the country of the first beneficiary or another country that conforms to method of payment permitted under FEMA. Accordingly, the following stipulations must be given on the top of the letter of credit: “Transferable within________________________only.” (Name of country (ies)) Transferable credits should be opened keeping in view the standing of the importer. 18. REVIVAL OF EXPIRED CREDITS Sometimes, an importer customer may require an expired letter of credit to be revived or reinstated. Branches may revive or reinstate expired credits subject to recovery of usance charges and commitment charges from the date of expiry upto the validity of revived credit and also, of course, subject to validity of the import licence. 19. IMPORTER-EXPORTER CODE NUMBER (IEC) No Import shall be made by any person without an Importer-Exporter Code No. unless specifically exempted. Any person/organization importing goods, whether against a specific licence or otherwise, is required to obtain Importer-Exporter code number from DGFT. The customs authorities do not allow clearance of goods to an importer who does not possess a valid Importer-Exporter Code number. Branches must ensure at the time of opening letters of credit that the importer is in possession of a valid ImporterExporter Code number. 20. ADVANCE REMITTANCES Page 11 of 39    Branches may allow advance remittances against import of goods/services into India subject to compliance with FEMA/banks guidelines, issued from time to time. 21. TIME LIMIT FOR SETTLEMENT OF IMPORT PAYMENT The remittances against imports should be completed within six months from the date of shipment except otherwise provided by FEMA/RBI guidelines. 22. PAYMENT OF INTEREST ON IMPORTS Branches shall allow payment of interest on usance bills or overdue interest for a period of less than three years from the date of shipment at the rates prescribed in the FEMA Regulations issued from time to time. 23. PROCEDURE FOR AUTHORISED BRANCHES RECEIPT OF THE APPLICATION Applications for the opening of documentary credits should be accepted only on the prescribed form FEX – 1. This form has been devised to give legal protection to the bank through the agreement printed on the back of the 3rd copy, and also to give the customer the guidance on the points which usually need to be included in a credit. The form is in a set of three copies, which are to be used as under: 1st copy to be retained as file copy by the authorised branch. 2nd copy to be returned to the customer alongwith the copy of the letter of credit 3rd copy to be filed as a security document under the control of a designated officer as this contains the agreement with the customer. Page 12 of 39    The customers’ signatures on the agreement and the application form must be obtained at appropriate place and no credit should be opened unless the agreement has been signed. The signatures of the customer on the agreement and the application form must be verified with those available on records. In case of request for opening of credits on behalf of branches without direct authorisation, the signatures of the customer should have been verified by them. The authorised branch in turn should verify the signatures of the person who has verified the signatures of importer customer on the application and the agreement. The authorised branch must ensure that the branch without direct authorisation has signed the certificate in the bottom left hand corner of the top copy to the effect that the form of agreement has been signed by the customer and that the application is covered by appropriate sanction. The agreement establishes a contractual relationship between the importer and the banker issuing the credit and makes clear the obligation undertaken by the customer towards the bank. It also contains details of the undertaking on the part of the applicant to repay the bank for payments made under the credit. Before execution, form must be stamped in accordance with the requirements of the stamp act in force in the state where the form is executed. In case of customers signing in vernacular languages, the branch must ensure that the customer understands fully the contents of the agreement before obtaining his signatures. A certificate should be attached with the agreement that the contents of the application were duly explained to the customer who had signed after properly understanding the same. The certificate should be duly witnessed by a person known to the Bank. 24. CONDITIONS TO BE FULFILLED FOR OPENING LETTER OF CREDIT (L/C) a)                 Import L/C should be opened only on behalf of bank’s own customers. The “Know your customer” (KYC) norms issued by RBI/bank should be adhered to. L/C should be opened by the branches where imports are made in terms of current Foreign Trade policy. Page 13 of 39    b) L/C should be opened on the basis of underlying sale contract/purchase order of the importer duly confirmed by overseas supplier/Proforma invoice of the overseas supplier confirmed by the importer/indent or offer from overseas supplier or his authorised agent. c) If import is under licence, exchange control copy of licence must be obtained for endorsement purposes. D) Branches must ensure to comply with the terms & conditions of sanction before opening of letter of credit. LC can be opened with the margin or guarantee offered by a third party but the basic precaution must be observed that the importer has necessary financial ability to retire the bills received under LC as also customs duties, etc. e) In case the terms of sanction or extant Bank/RBI guidelines require the obtention of credit information report (CIR) on the beneficiary prior to opening of LC, the same must be obtained from our foreign correspondent bank/reputed credit agencies (Like Dun & Bradstreet). 25. ENDORSEMENT ON IMPORT LICENCES Import licences must be endorsed at the time of opening of letter of credit under stamp and signatures. The Rupee value of the credit should be endorsed under column 3, the endorsement under column 4 should be made at the time when importer retires bills drawn there under. The Rupee equivalent for endorsement should be calculated at the rate mentioned on the import licence, if any, or at the current selling rate for bills, at the time of opening of letter of credit. Actual amount of remittance should be endorsed on the import licence under column 4 at the time of retirement of documents at the rate at which exchange was sold to importer. In case where exchange is sold forward to importers subsequent to the opening of letter of credit and the Rupee value of the credit at the forward rate at which exchange is sold, exceeds Rupee value already endorsed on import licence, under column 3 ,the additional amount should also be endorsed under column 3 of the licence, in order to arrive at the correct balance, for which further commitments can be made. In the opposite cases, authorised branches may recredit the difference in value under column 3 of the licence. Page 14 of 39    The amount of actual remittance may exceed the c.i.f. value mentioned on the import licence, on account of exchange rate fluctuations. The excess amount may be condoned and suitable remarks given on the import licence. 26. RECORD OF LICENCES Licences should be held in the custody of an officer in a separate file, and a proper record should be kept for deliveries made. In no case any licence should remain attached to file copy of the credit. 27. SURRENDER OF IMPORT LICENCES Exchange Control copy of Import Licence submitted by importer for opening of Letter of Credit or making remittance, when fully utilised, should be retained by the authorised dealer and may be preserved till its scrutiny by the internal auditors or inspectors. 28. RETURN OF LICENCES TO IMPORTERS Authorised dealers may return Exchange Control copy of Import Licence to importers only if: a)    they have been partially utilised and further remittances are being made against them through another bank. OR b)    they have to be resubmitted to DGFT for extension or revalidation. Before handing over the licence authorised dealer should ensure endorsing the licence for utilization and it should be delivered with proper acknowledgement. Page 15 of 39    The branch for future reference and records should retain a photocopy of (front and back side of) licence in such cases. 29. CANCELLATION OF ENDORSEMENTS Branches may cancel endorsements of remittances made on exchange control copy of current import licence provided the sale of foreign exchange or transfer of Rupees to Vostro Account is itself cancelled. Where the goods are short supplied, damaged, short landed or lost in transit, and the exchange control copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the original endorsement to the extent of the value of the lost goods may be cancelled by the branches and fresh remittance for replacement imports may be permitted, provided the insurance claim relating to the lost goods has been settled in favour of the importer. 30. ALLOTMENT OF NUMBER OF LETTERS OF CREDIT Authorised branches have been allotted series of numbers in accordance with their estimated requirements. The letter of credit should be numbered in seriatum from the allotted series. The branches without direct authorisation will be allotted the number on receipt of application by the authorised branch. 31. LIABILITY ON FOREIGN LETTERS OF CREDIT AND CONTRA ACCOUNTS   As the principal debtor (importer customer) is not discharged of his liability to the bank until he pays the bills drawn under the credit, a party-wise record must be maintained at each branch in respect of its own customers. The records should be maintained in Liability in ODCM menu in CBS. The authorised branch will maintain this in respect of business, which originates at that branch only. Items handled for branches without direct authorisation will be shown in the liability register of the concerned branch without direct authorisation. Page 16 of 39    The following contra vouchers shall be passed by authorised branch under ODCM Menu in respect of credit opened by them for their own customers only: Debit Import Credits – Customers For Rupee equivalent at current selling rate of exchange used for entry into various books. Credit Import Credits – Banks The contra entries will be reversed at the time of utilisation, cancellation or Letter of Credit expiring unutilised. The total outstanding Letters of Credit i.e. the Liability on Foreign Letters of Credit at any time should agree with the balance of above contra accounts. 32. FOREIGN LETTERS OF CREDIT REGISTER Authorised branches will keep a record of all credits opened by them whether for their own customers or for branches without direct authorisation in ODCM menu in CBS, which will be maintained date wise in the system. 33. OPENING OF LCs BY SWIFT Authorised branches shall open Letter of Credit through SWIFT. The SWIFT connectivity has been provided to authorised branches to enable them to have a smooth flow of forex communications with speed, security and authenticity. The use of this information technology not only facilitates easy exchange of messages but also improve the customer service in order to attract more business. The SWIFT message relayed constitutes an operational instrument at destination and is not to be followed by any mail / telex confirmations. Branches must issue LCs, amendments and reimbursement authorizations etc. through SWIFT network wherever SWIFT facility is available. All SWIFT messages are issued on Page 17 of 39    standard formats. Branches shall observe all the operational guidelines issued from time to time by the bank in this regard. (Note: In case of branches which have been rolled over, SWIFT messages are being sent by CBOTF) 34. CORRESPONDENTS REGISTER Authorised branches will maintain ‘Correspondents Register’ in CBS (Menu - FPCM) in which each correspondent will be allotted a separate page. The following columns will be provided in the Register: 1. 2. 3. 4. 5. 6. 7. Our Number Branch of Origin Expiry date Amount of L/C Opened Utilisation and Cancellation Balance Remarks Separate registers should be maintained for business handled for own customers (CBS Menu – FLC) and business received from branches without direct authorisation (CBS Menu – XFLC) in the CBS system. Credits outstanding should be checked with the correspondent’s register in CBS every month. The total of all outstanding credits whether opened on behalf of own customers or other branches should agree with the totals of the “Correspondents Register” (CBS Menu – DCREG). The totals of outstanding credits on behalf of own customers should also agree with the balance in the Import Credits customers account in the subsidiary ledger and also with total of “Correspondents Register” maintained for own business. 35. CHOICE OF CORRESPONDENT Page 18 of 39    Letters of credit should be advised to the beneficiary through our correspondent / approved banks. In countries where we do not have any agency arrangements with any foreign bank, the matter should be referred to International Banking Division, Head Office expeditiously, who will advise the name and address of the correspondent bank to be used for advising letter of credit after ensuring that they will be prepared to undertake business on behalf of our bank. In cases where customer requires a letter of credit to be advised through a bank with whom no agency arrangements exist the needful may be done by forwarding the letter of credit to one of our correspondents with a request to advise the same through the Bank named by applicant. 36. ESTABLISHING THE LETTER OF CREDIT Documentary letters of credit can be established either by SWIFT or by mail depending upon the instructions of the customer. In case of credits to be opened by mail, branches must use the bank’s standard form FEX – 41 and forward the same to the foreign correspondent under cover of form FEX – 40 for delivery of the credit to the beneficiary. Form FEX – 41 is a multiple copy form and the copies are to be used as follows: 1st & 2nd copy To be sent to foreign correspondent under cover of form FEX – 40 for handing on the first copy to the beneficiary and retaining the 2nd copy for their records. 3rd copy To be placed in file (separate file should be opened for each credit) with the application on form FEX – 1 and all other relevant documents and correspondence so that history of each credit is readily available at all times. 4th copy To be sent to the branch without direct authorisation on whose behalf the credit is being opened. In case of credits opened on Page 19 of 39    behalf of own customers, this may be treated as an additional copy and kept in file. 5th copy To be sent to the customer alongwith copy of the application on forms FEX – 1. In case of credits on behalf of branches without direct authorisation, 4th & 5th copies should be sent to the branch without direct authorisation who will hand over the 5th copy to the customer alongwith the copy of the application. 37. When credits are opened by Swift, care must be taken that all necessary information as per banks guidelines is included in the LC message. 38. Where the credit is issued either through a bank with whom we do not maintain an account or issued in a currency other than the currency of the country where the credit is made available, the paying or negotiating bank will be reimbursed by a correspondent with whom we maintain an account in the currency of the credit. In such cases form FEX – 40 / Swift MT-700 -701 (letter for hand on import letter of credit) must state how the paying bank is to obtain reimbursement. Similarly the reimbursing bank must be clearly instructed to honour drawings of the negotiating bank. Form FEX – 12 (Swift MT – 740) should be used for sending reimbursement instructions to them. A copy of such instructions issued must be sent to the Position Maintaining Office whose foreign currency account is to be debited. 39. While opening letters of credit care must be taken to ensure that various clauses as per the instructions issued to branches from time to time, are invariably incorporated in the letter of credit. 40. Special care must be taken while considering request for establishing LCs wherein the bills of lading are subject to conditions of a charter party on account of additional risks. Similar is the position wherein third party shipment is to be permitted or house airway bill is to be made acceptable. For details, the branches must refer to the prevailing guidelines, issued through circulars from time to time. Care must be taken to ensure that this is done only in case of customers of good repute and standing, after obtaining prior approval of appropriate authority as per extant guidelines of the bank. Page 20 of 39    41. All outgoing letters of credit must be carefully checked by two responsible officers and signed by two authorised officers who will add their distinctive “E” Nos. If an officer checking a letter of credit is not also one of the officers signing, he must initial it. The officers will be held responsible for the contents of the credit issued. One of the officers signing the letter of credit must be the Manager or Dy. Manager. The swift message for establishing Letter of Credit shall be created/verified and authorized by two separate authorized officials. The following points must be carefully observed in the letter of credit: i)                    Revenue stamps for the stamp duty in force should be affixed on all outgoing letters of credit. ii)                    All alterations in the credit must be initialed by at least one of the officers signing the credit and no credit in which figures have been overtyped or erased should be sent to a correspondent as this can lead to delay and serious complications. iii)                  The amount of credit should also be protectographed as a further precaution against a fraudulent increase in the amount available under the credit. iv)                The letter of credit should normally be restricted for negotiation to advising bank only. However, negotiation may also be permitted to some other correspondent/approved bank at the specific request of the opener, if desired by the beneficiary. v)                  The foreign correspondent should be requested to add confirmation to a letter of credit, only at the specific request of the customer and after explaining the implications thereof to the importer client. Clear instructions must be sought as to confirmation charges are for which party. In case, such charges are on account of beneficiary, the same must be mentioned Page 21 of 39    prominently and should be made clear to the foreign bank that they may not add their confirmation in case of non payment of charges by the beneficiary and in the event of their adding confirmation to the LC without ensuring so, the responsibility for confirmation charges shall not vest with our bank at any subsequent stage. Note: The clause relating to adding confirmation in the covering letter FEX – 40 should be deleted, where it is not required by the customer. vi)                The letter of credit should invariably incorporate period of negotiation permitted after date of shipment depending upon the proximity of country and time taken for arrival of goods. It should not exceed 21 days to take care of provisions of UCPDC(ICC Publication 600) 42. Branches should advise the customers on the following points, at the time of opening letters of credit: - i)                     Importer should be advised that no amendment to the irrevocable letter of credit is binding on the beneficiary unless and until accepted by him. ii)                    The attention of the importers should be drawn to the fact that as far as possible goods should be imported direct from the country of origin, to ensure quality of goods. 43. DESPATCH TO FOREIGN CORRESPONDENT After the credits have been checked and signed they must be despatched by registered air-mail/approved courier on the day of opening of the credit. 44. ACKNOWLEDGEMENT FROM FOREIGN BANK Foreign correspondents should acknowledge receipt of the credit by sending a copy of their advice to the beneficiary. This must be carefully checked to ensure conformity with the instructions given in the letter of credit, while issuing a credit. Page 22 of 39    If no acknowledgement is received from foreign correspondent in respect of any letter of credit, matter should be followed up with them for receipt of the same. On receipt of the acknowledgement the details of foreign correspondent reference should be noted in the foreign letters of credit register. 45. CORRESPONDENTS CHARGES On receipt of advices from advising bank stating that nostro account of concerned Position Maintaining Office has been debited with a certain sum in respect of advising charges, the authorised branches shall ensure that charges are recovered immediately from the customer and remitted to the concerned Position Maintaining Office. In case of credits opened on behalf of branches without direct authorisation, charges would be recovered from the concerned branch and remitted to concerned Position Maintaining Office. AMENDMENTS 46. When customers make request for existing Letters of Credit to be amended, the branch shall ensure that the proposed amendments are permissible under the terms of the relative Import Licence or Foreign Trade Policy and Indent/Order. All requests for amendments must be in writing. Requests from branches without direct authorisation, if they involve an increase in the amount of credit, must be accompanied by a certificate from the Branch Manager that amendment is covered by sanction or his vested powers. 47. Amendment charges must be recovered at the time of issue of the amendment. When the amendment involves an increase in the amount of credit, additional margin money may have to be taken. Branches shall keep this aspect in mind and recover additional margin, where necessary. Extra commission will also be charged on the enhanced amount. 48. Details of amendment should be noted in red ink on the file copy of Form FEX-41 in order that amendment is not overlooked when documents received from abroad are Page 23 of 39    being examined. Details of amendments should also be recorded in the CBS under ODCM menu. 49. The amendment may be advised by SWIFT or by courier if SWIFT arrangement is not available. Where the amendments are to be advised by mail, branches will issue amendment on form FEX – 43 which is in multiple set. The individual copies are to be disposed of in the same way as in case of form FEX– 41. The amendment should be forwarded under cover of form FEX – 42 for delivery of the same to beneficiary. All amendments must be signed by authorised officers in the same way as the original advice of opening the credit. It should also be kept in mind that if the reimbursing agent is third bank, it will be necessary to advise them of the amendment, in cases where amount is increased or validity date is extended. When amendments are to be advised by SWIFT/fax , care must be taken that all necessary information is included in the amendment message and the same shall be an operative instrument. 50. Amendments involving an increase in amount will necessitate an adjustment in the amount of the contra accounts. The contra account entries should be passed as at the time of opening the credit for increase in amount. Where amendments involve an increase in amount, branches should endorse licence for additional CIF value as per procedure. If insurance is obtained in India, cover note for additional amount should also be obtained in such cases. 51. It should be noted by the branches and advised to customers, who ask for an irrevocable credit to be amended that amendments to irrevocable credits cannot become effective unless all parties to the credit agree to the amendment. Thus where amendment is advised it must be understood that it will become effective only after it has been accepted by the beneficiary, and if it is not accepted, documents negotiated in accordance with the previously existing terms of the letter of credit will have to be honoured by issuing bank and its customers. 52. CANCELLATION OF LETTERS OF CREDIT If a customer requires an irrevocable Letter of Credit to be cancelled before expiry, beneficiary’s consent should be obtained through advising bank. Through CBS Menu – ODCM (U & Z), contra entries passed at the time of establishment of credit will be reversed. Page 24 of 39    EXAMINATION AND PAYMENT OF DOCUMENTS 53. GENERAL When documents are received from correspondents they will be entered in the FBM Menu in CBS a separate portion of which must be reserved for bills received under Import Credits. Although the documents have been checked by the negotiating bank for their conformity with the terms of credit, it remains responsibility of the authorised branch to examine the documents once again to ensure that there are no discrepancies in the documents. The branches should examine documents immediately on receipt of the same for their conformity with the terms of credit. If the documents are not examined properly and the customer on examining them discovers any discrepancy, he may refuse to pay them. While examining the documents branches will be guided by the rules of Uniform Customs and Practice for Documentary Credits. On scrutiny, if the documents are found to be in order, a new covering letter will be made out addressed to the customer on Form FEX – 109 (or through the originating branch in case the documents relate to a branch without direct authorisation), containing clear instructions for them. The documents in the meantime will be held in the custody of the branch. All the documents will be stamped with the bank’s round stamp and bill number with date, taking care to see that no important details are obliterated. Where goods have been insured in India and a cover note instead of policy is held, the insurance company must immediately be informed about the shipping details (of the consignment) on getting the same from the foreign supplier / bank, in order to get the Policy issued. 54. EXCHANGE RATES Unless a customer has booked forward exchange contract, for the purchase of necessary currency, the bill will be converted into Indian rupees at bills selling rate prevailing on the date of retirement of the bills. In case of the usance bills the bills will be converted into Indian Rupees at the bills selling rate prevailing on the date of maturity of bills. 55. CRYSTALLISATION OF IMPORT BILLS All foreign currency import bills drawn under letters of Credit, in the event of nonretirement shall be crystallized into Rupee liability on the 10th day after the date of receipt of documents as per FEDAI guidelines and the customer should be informed accordingly. 56. DOCUMENTS WITH DISCREPANCIES Page 25 of 39    On receipt of documents and examination, if they are not found to be in accordance with terms and conditions of the credit, the foreign correspondent must be advised immediately (not later than 5th Banking day, after the presentation day), by SWIFT/fax (or if that is not possible, by other expeditious means), giving them necessary details and a notice to the effect that the documents are held at their disposal and risk, pending their instructions. Under Uniform Customs and Practice for Documentary Credits, if the issuing bank fails to hold the documents at the disposal of the remitting bank or fails to return the documents to such bank, the issuing bank shall be precluded from claiming that the relative payment, acceptance or negotiation was not effected in accordance with the terms and conditions of the credit. 57. PRESENTATION OF DOCUMENTS TO CUSTOMERS The form FEX 109(I) should be used for presenting/seeking acceptance of documents received under import LCs. The acknowledgement/acceptance of the importer should be obtained on the second copy of form FEX 109 (II) duly signed by authorised signatories. 58. PAYMENT/ACCEPTANCE OF DOCUMENTS WITH DISCREPANCIES The discrepancies observed if any, in the documents will be advised to the customer and his instructions sought in the matter. If the importer customer pays/accepts documents despite discrepancies, the foreign correspondent should be advised accordingly. 59. BILLS NEGOTIATED ABROAD UNDER RESERVE OR GUARANTEE In the case of bills, which are negotiated by foreign correspondents under reserve or guarantee for any reason whatsoever, or attention of the issuing bank and / or confirming bank, if any, is drawn to any discrepancy (ies) in the document(s), the issuing Bank and/or Confirming Bank, if any shall not be thereby relieved from any of their obligations under any provision of article 14 of UCPDC which deals with discrepant documents and notice. The branches should examine documents immediately on receipt of the same for their conformity with the terms of credit and discrepancies already pointed out by the foreign bank alongwith further discrepancy (ies), if any, found should be brought to the notice of importer client immediately for waiver of discrepancies. However if the importer does not approve the discrepancies or there is delay in response from him, the notice of dishonour must be lodged with the remitting bank in accordance with the provisions of UCPDC so that bank’s rights remain intact. Page 26 of 39    However, if the importer chooses to accept the documents with discrepancies, it is advisable that after acceptance or payment of such bills, notwithstanding discrepancies, branches should obtain a separate letter from the drawees authorising releasing of the reserve or guarantee and advise the correspondent accordingly. Branches without direct authorisation will advise the authorised branch from whom they receive the documents, by fax/courier, who in turn will advise the correspondent. 60. NON PAYMENT / NON ACCEPTANCE OF BILLS Importers are not to be permitted to refuse documents, which are in order, and if they refuse, then the documents must be treated as dishonored and notice of dishonor must be served upon them. The Circle Head will be informed of the dishonour of the bill stating reasons of non-payment/non acceptance. Further, for payment of such bills under foreign letters of Credit, the guidelines issued by Risk Management Division shall be followed as is in the case of Inland letters of Credit. Efforts should, however, be made to recover the amount at the earliest possible. The documents are to be delivered only on getting the account regularized or upon receipt of payment for such bills. Documents are to be treated as security for allowing the accommodation but in cases where the shipment arrives earlier to payment of bills and it becomes necessary to clear the goods to avoid demurrage and other port charges etc., such goods would be taken as security in place of documents pending payment. Remarks to the effect “dishonoured” should also be made in the remarks column of the Liability Under FBM menu of CBS against the relative entry already marked as negotiated. If payment is subsequently tendered by the drawees it must be for the amount of the dishonoured bill plus interest thereon upto the date of final payment plus all charges as listed in the relative bill control sheet including noting expenses. The Circle Head must also be advised of the payment and record in the Liability under Foreign Letters of Credit Register should be amended. 61. CONTROL OF BILLS AND DOCUMENTS All bills and documents must be kept in a safe under dual control. Bills must be sorted according to serial order in the Foreign Inward Bills Register so as to facilitate reference and the bank’s instructions relating to Inland Bills should be complied with where appropriate. Page 27 of 39    The bill control sheet on Form FEX – 23 duly initialled by an officer giving a full history of the bill and showing all expenses incurred must be attached to each item. For usance bills, a due date diary containing the particulars and amount of each bill will also be maintained. Customer should be reminded of the due date of the bill one week before the maturity. 62. MISCELLANEOUS CHARGES INCURRED Charges incurred in handling bills, documents and goods relating to import credits should be debited to party’s account. Charges incurred should also be noted in the bill control sheet on form FEX – 23. 63. ACCOUNTING PROCEDURE If the documents on examination are found to be in order, the following accounting procedure is broadly followed, through CBS Menu – FBM. i) Reverse contra account entries passed when the credit was opened. Debit Import Credits – Banks Credit Import Credits – Customers. ii) Dr. – Party’s Account For a) Amount of bill at current selling rate of exchange or contract rate, if forward cover has been booked. b) Correspondent’s charges c) Commission charges in terms of Banks guidelines, wherever applicable. d) Interest from the date of negotiation upto the date of debit to party’s account. e) Postage, SWIFT and other charges. Cr. Concerned PMO for (a), (b) and (d) Cr. Commission on Foreign Documentary Credits for ( c ) Cr. Appropriate heads for ( e ) 64. In case of deposit of rupee equivalent in Government account for imports under foreign aids, form ‘S’ should be forwarded to Reserve Bank of India alongwith relevant challan etc for credit to appropriate head in accordance with instructions conveyed in the relevant public notice/RBI circulars issued from time to time. Page 28 of 39    In case of imports under Foreign Aids where no foreign currency remittance is involved but the rupee equivalent is to be deposited in Government account, following entries will be passed: Debit For Party’s account. a)    Face amount of draft at prevailing exchange rate b)    Foreign Correspondent’s charges. c)     Commission charges in terms of Bank rules. d)     Interest at the rate stipulated by Government of India for particular foreign aid, from the date of payment to supplier to the date of deposit into Government account. e)     The postage and other charges. Credit – Cash order/Draft favouring Reserve Bank of India/State Bank of India, as the case may be. The cash order/draft should be submitted alongwith prescribed challan form duly completed. 65. In case of documents under letters of credit calling for usance drafts and in terms of which our foreign currency account abroad is to be debited on maturity of the usance draft, a fresh set of contra entries will be passed for the rupee equivalent of the documents, as under through CBS Menu – FBM, Debit – Import Acceptance Credits – Customers. Credit – Import Acceptance Credits – Banks. Page 29 of 39    On due date when our foreign currency account is debited, the above contra account entries will be reversed and the entries similar to those passed in the case of sight bills under letters of credit will be passed. Payment in retirement of bills drawn under Letters of Credit must be received, irrespective of amount, by debit to the party’s account only. 66. FOR CREDITS ESTABLISHED ON BEHALF OF BRANCHES WITHOUT DIRECT AUTHORISATION   The authorised branch will debit amount to their Suspense Account and remit the same to concerned Position Maintaining Office. The amount will then be claimed from the Branch without direct authorisation together with interest accrued upto the date, the amount is remitted. On receipt of credit advice, branch will adjust their suspense entry and credit the difference amount to respective heads. 67. PAYMENT TO FOREIGN CORRESPONDENTS Payment can be effected to correspondent either by issuing reimbursement instructions at the time of opening credit or at the time of receipt of documents. If the payment is to be effected to the correspondent on receipt of documents at the branch, the amount should be remitted in accordance with instructions of the correspondent. It must be ensured that payment to foreign correspondent is provided in terms of permitted methods of payment under FEMA Regulations. 68. REPORT OF SALE IN R-RETURNS Sale of foreign currency should be reported to Reserve Bank of India in the relative RReturns. Page 30 of 39    As per revised guidelines submission of R-return has been centralized and Bank Wide RReturn is being submitted by IBB,Delhi. 69. PAYMENT BY CUSTOMERS The customer must retire the sight bills on presentation and the usance bills on maturity, in terms of the sanction. For sanction of limits and retirement of bills, prevalent instructions of Risk Management Division, Head Office should be followed. 70. CLEARANCE OF GOODS In order to protect the bank’s interest, wherever involved, it is essential that proper arrangements should be made for clearance and protection of the goods, immediately on their arrival. If the importer refuses or neglects to make such arrangements, the branches must arrange for the merchandise to be cleared, stored and insured at the risk and expense of the customer, under advise to him. For the purpose of clearing the goods the documents should be forwarded to an approved clearing agent under cover of form FEX – 5, alongwith the customs copy of the import licence, subject to limits fixed. Documents may be forwarded to one of our port branches under cover of form FEX – 6 for clearance of goods. Note: In case the customer does not honour the bills and does not produce licence for the clearance of goods, customs authorities will allow clearance of goods on banks providing the customs, certificates to the effect that the import has been made and that foreign currency has been remitted by the bank under the authority of valid import licence and an irrevocable Letter of Credit; and on production of exchange control copy of the licence, or if the same is not available, on furnishing full particulars of the licence and the licensee. Page 31 of 39    Forms FEX – 5 and FEX – 6 are in a set of 3 and copies will be used as under: First copy – to be forwarded with the documents to the clearing agent/port branch. Second copy – to be returned by clearing agent/port branch as acknowledgement. Third copy – to be retained for purpose of office records. All details must be recorded in the Clearing Agents Register i.e. in CBS. The customers must pay clearing agent’s charges immediately they are claimed unless arrangements have been made for the bank to pay them. For list of approved clearing agents, the branches should refer to the operative Risk Management Division circular on the subject. 71. ATTESTATION OF INVOICES At the time of the clearance of goods, importers need to submit a copy of the invoice attested by authorised bank branch as corroboratory evidence of the value of goods declared on the Bill of Entry. To enable importers to comply with this Customs requirement, authorised branches may attest copies of invoices in cases where the relative import LC is issued through them. 72. PAYMENT OF CUSTOMS DUTY Customs duty payable on the shipment should be ascertained in advance, whenever possible, and where the Bank is to pay the duty, it should be paid direct to the customs authority. Branches in port towns may make payment themselves but upcountry branches should arrange for payment to be effected through a main branch in the port town in question. The amount of duty so paid plus interest thereon should be charged to the customer. Payment of duty by the Bank is subject to sanction from the appropriate authority. 73. DISPOSAL OF GOODS IN CASE OF NON-PAYMENT OF DUES BY IMPORTER   Page 32 of 39    In case of non-payment of dues by importer, goods should be disposed of after complying the instructions contained in the approval/sanction of the appropriate authority, in the matter. The disposal of goods will always be subject to due notice to the importer and completion of other legal formalities. 74. INSURANCE OF GOODS As the bank has an interest in the merchandise upto the time payment is made by the customer, it is necessary that full insurance should be provided. Where insurance ceases on the goods being landed, it is essential that further cover by an approved company should be arranged before the marine cover ceases. Marine insurance generally ceases 60 days after landing. Insurance premium and other expenses will, of course, be for the account of the customer. 75. GOODS FORWARDED BY AIR Where credits provide for goods to be imported by air, it must be remembered that the goods often arrive before the relative documents, and that it may be necessary for the importer to take delivery of the goods against delivery order from the bank. Such delivery order should be issued only after receiving full amount of the bill drawn under credit. 76. IMPORTS BY POST Where credits relate to goods to be imported by parcel post, the party must be informed as soon as the intimation of arrival of the parcel is received from the post office. If the bills are not paid before the parcels arrive, the postal authorities should be instructed to hold the parcels and wait for Bank’s instructions. In the event of the customer failing to retire the bill within the prescribed period, the branches should take delivery of the parcel from the post office and pay the customs duty, if any, so as to protect the interest of the Bank, under intimation to Circle Head. If the customer retires the bill within the prescribed period, the postal authorisation should be endorsed in their favour. Pending payment of the bills, parcels received should be entered in the Parcels Register PNB – 195 and should remain in the strong room or in a separate godown under the control of an officer, and be fully insured. Parcels should be released only after signatures of the customer being obtained in the parcel register and against full payment of the bill amount (including charges). Page 33 of 39    77. DELIVERY/DESPATCH OF DOCUMENTS The documents in case of sight bills will be handed over to the importer after recovery of all bank’s dues, unless and until sanction to the contrary is held by the branch from the competent authority. In case of usance bills, the same shall be released after obtaining proper receipt on FEX 109(II) from the importer. Memorandum of cost on form FEX – 7 will be attached with the documents. The second copy of this form (meant for duplicate documents) will not be used if customer collects documents personally and all the documents are delivered to him at that time. If the documents are delivered to the customer at his premises, an officer must examine the signatures in the peon book or delivery sheet in order to verify that the documents have been received by the person authorised by the importer customer. All documents should be detailed in the memorandum of cost in the blank space left for the purpose. 78. FOLLOW UP FOR SUBMISSION OF EVIDENCE OF IMPORT BILL OF ENTRY Authorised branches must keep a proper watch over the receipt of documentary evidence of import and follow up the same as per prevalent FEMA guidelines. They should also record in CBS (Menu – INBOEM), details such as: (a) Due date for submission of evidence (b) Date of issue of reminders to importer (c) Date of submission of documentary evidence (d) Date of verification of documentary evidence by bank’s internal inspectors/auditors. On receipt of documentary evidence required under prevalent FEMA guidelines, authorised branch must scrutinize it with reference to corresponding remittance so that details such as description of goods, quantity, value of goods, invoice number and date, details of import licence (where applicable) agree with the details furnished by importer at the time of remittance. If the details agree, necessary remarks/notings can be made in CBS. Authorised branches must acknowledge receipt of the Exchange Control Copy of the Bill of Entry. The acknowledgement should contain the name, the full address of the importer, Code Number of the importer, Number and date of import licence, if any, particulars of reference number of the bank’s letter of credits (if any) Number and Date of the Exchange Control Copy of the Bill of Entry ,particulars and value of the imported goods. Page 34 of 39    The bank’s internal auditors must carry out a 100% check of the evidence and the bank has to submit to RBI half yearly certificates. Authorised branches should preserve documents evidencing import into India for a period of one year from the date of its verification. However, in respect of cases, which are under investigation agencies, the documents may be destroyed only after obtaining clearance from the investigating agency concerned. A half yearly statement in form BEF, furnishing details of import transactions, in terms of prevalent FEMA guidelines should be forwarded by the authorised branches to the regional office of Reserve Bank of India under whose jurisdiction the authorised branch is functioning, within the prescribed time period. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION 79. All officers and other staff handling foreign exchange business at branches without direct authorisation should make themselves familiar with the general provisions relating to imports credits. 80. APPLICATION FORM FOR OPENING OF CREDIT The application for the opening of documentary credits should only be accepted on the prescribed form FEX – 1. The application form is in triplicate and after completion the three copies should be used as under: - First copy To be sent to the respective Position Maintaining Office / authorised branch through which it is desired to open the letter of credit. To be returned to the customer after the authorised branch opening the letter of credit confirms that the letter of credit has actually been opened. To be filed as a security document under the control of a responsible officer as this contains the agreement with the customer. Second copy Third copy Page 35 of 39    The customer’s signature on the agreement and the application form must be obtained at appropriate place and no application should be forwarded to an authorised branch until the customer has signed agreement. The signatures of the customer on the agreement and the application form must be verified with those available on the record. The branches should also append a certificate in the bottom, left hand corner, of the top copy of the Form FEX – 1, in respect of the agreement having been signed by the customer and that the application is covered by appropriate sanction. Before execution, the form must be stamped in accordance with the Stamp Act of the state in which the form is executed. In case of customers signing in vernacular languages, the relevant provisions of paragraph 23 will apply. 81. IMPORT LICENCES Import Licence should be sent with the application form FEX – 1 to the Position Maintaining Office/Authorised branch through which Letter of Credit is opened, who will retain the same with them after necessary endorsement. 82. LIABILITY ON FOREIGN LETTERS OF CREDIT REGISTER-CONTRA ACCOUNTS Provisions of para 31 will apply. 83. RECORDS A separate file is to be maintained for each Credit and all the relative correspondence will be placed in this file. Details of the Credit will be recorded in CBS. Provisions of para 32 will also apply. The authorised branch opening the Credit will send to the branch without direct authorisation the third and fourth copies of the Credit as advised to the correspondent on Form FEX – 41. The third copy will be placed in the file, and the fourth copy passed to the customer for his records. Page 36 of 39    84. AMENDMENTS All amendments will be advised through the office, through which the credit had been opened. Provisions of paras 46 to 51 should be kept in mind while branches without direct authorisation forward the request to authorised branch. 85. EXAMINATION AND PAYMENT OF DOCUMENTS Documents presented under import credits would already have been examined by our overseas correspondents and by authorised branch before they come in the hands of the branch without direct authorisation. The branch without direct authorisation should compare the documents received with forwarding letter to ensure that all documents as listed by the authorised branch have been received. On receipt of documents from authorised branch, the following accounting procedure will be followed: Reverse the contra entries passed when the credit was opened: Debit Import Credits – Bankers Credit Import Credits – Customers On payment of the bill: Debit – Party FOR a)         Amount of bill at contract rate or current selling rate as advised by authorised branch. b)        Correspondent’s charges Page 37 of 39    c)         Commission charges in terms of FEDAI rules. d)        Interest from the date of negotiation upto date of final payment. e)         Postage and other expenses etc. Credit – Authorised Branch: For (a), (b) and (d) Commission on Foreign Documentary Credits for ( c ) Appropriate heads for (e) In case of usance bills, provisions of para – 64 will apply. 86. PRESENTATION OF DOCUMENTS TO CUSTOMERS Provisions of para – 57 will apply. 87. NON-PAYMENT/NON-ACCEPTANCE OF BILLS Provisions of para – 60 will apply. All communications with foreign correspondents must, however, be through the authorised branch from whom the documents were received. 88. BILLS NEGOTIATED UNDER RESERVE OR GUARANTEE Provisions of para – 59 will apply. All communications with foreign correspondents must, however, be through the authorised branch from whom the documents were received. 89. CONTROL OF BILLS AND DOCUMENTS Provisions of para – 61 will apply. 90. PAYMENT OF BILLS BY CUSTOMERS Provisions of para – 69 will apply. 91. CLEARANCE OF GOODS AND PAYMENT OF CUSTOMS DUTY Provisions of para – 70 & 72 will apply. 92. MISCELLANEOUS CHARGES INCURRED Provisions of para – 62 will apply. Page 38 of 39    93. MISCELLANEOUS GUIDELINES FOR COMPLIANCE: i) Compliance with the provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and designs. ii) AD Category -1 banks may also advise importers to ensure compliance with the provisions of Income Tax Act, wherever applicable. iii) Applications by persons, firms and companies for making payments, exceeding USD 500 (at present) or its equivalent, towards imports in India must be made in Form A-1 iv) In addition to the permitted methods of payments for imports laid down in Notification No. FEMA 14/2000-RB dtd 3.5.200, payment for imports can also be made by way of credit to non-resident account of the overseas exporter maintained with a bank in India. In such cases also AD Category-1 banks should ensure compliance with the instructions as under: a) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorised Dealer Category – I bank under Section 10(5) of the Act or to use it for any other purpose for which acquisition of foreign exchange is permissible under the said Act or Rules or Regulations framed there under. b) Where foreign exchange acquired has been utilised for import of goods into India, the AD Category – I bank should ensure that the importer furnishes evidence of import viz., Exchange Control copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., and satisfy himself that goods equivalent to the value of remittance have been imported. ***************   Page 39 of 39                                2. INWARD BILLS    CHAPTER 2: 1. GENERAL INWARD BILLS This chapter deals with the handling of inward bills received for collection from our foreign correspondents. All imports into India are subject to compliance of Foreign Trade Policy. All remittances towards payment of import bills and Cheques / Drafts drawn on Banks in India are subject to compliance of FEMA Regulations in force from time to time. Bills received directly from the drawer of the bills should be entertained in terms of FEMA/bank guidelines. All the collection bills should be dealt under uniform rules for collection (URC) ICC publication No. 522. PROCEDURE FOR AUTHORISED BRANCHES 2. BILLS RECEIVED FROM ABROAD Import bills and documents should be received from the bank of the supplier by the bank of the importer in India. Therefore, branches should not make remittances where import bills have been received directly by the importers from the overseas seller except to the extent specifically permitted as per prevailing FEMA regulations. Branches should ensure to comply with the procedural precautions laid down in the FEMA in handling inward bills on collection basis. On receipt of inward bills all items will be entered in FBM menu. Sight bills and usance bills shall be entered separately. Usance bills i.e. bills payable otherwise than on sight or on demand, must on arrival be stamped ad-valorem with Indian Foreign Bill Stamps in accordance with the stamp duty in force. The cost of stamps should be debited to “Suspense-Foreign Bills Stamps Account”. The stamps must be defaced with the Bank’s round stamp before presentation of documents to customer, to prevent their re-use. All documents including the draft will be marked with the bank’s stamp and FIBC serial number from the series allotted for the purpose. The documents shall be carefully checked as per the instructions of the remitter’s covering letter. All bills drawn on outstation drawees shall be sent to another branch, preferably an authorized branch, for presentation of the same to the drawees. The bills may be forwarded to a branch without direct authorization, if there is no authorised branch at the drawee’s station. All bills drawn on our own customers or drawees at the same station should be presented to the drawee direct. Page 1 of 18 3 ADVANCE REMITTANCES Branches shall allow advance remittances in accordance with FEMA/bank guidelines, issued from time to time. All advance remittances should be entered separately in FBM then in sub type to select advance remittance so as to follow up receipt of documents/documentary evidence of import. Copy of invoice and shipping documents must be obtained from the importer customer if directly received by him and placed on bank record. 4. DESPATCH OF BILLS TO BRANCHES In case of bills, which are to be presented to the drawee through another authorised branch, the remittance schedule together with all documents shall be listed in a covering letter (in duplicate), and sent to the authorised branch concerned, which shall return the 2nd copy of the letter duly signed in token of having received the documents. In case of bills to be presented to the drawee through a branch without direct authorization, the remitter’s instructions shall be carefully typed on the Foreign Inward Bills manifold (form FEX-20). This form is in quadruplicate and the four copies are to be used as follows: 1st copy: This acts as a covering letter to the branch without direct authorization and shall mention the Rupee amount at the provisional rates of exchange. As exchange rate is subject to fluctuation, all payments made will be provisional. The actual rate to be applied shall be that ruling on the day of remittance of the proceeds abroad by the authorised branch. This shall be dispatched to the branch with the first copy and must be returned by them as an acknowledgement. It must be signed at the foot by an officer of the branch without direct authorization. This shall be sent as an acknowledgement to the overseas remitter 2nd copy: 3rd copy: 4th copy: This shall be retained at the authorised branch as an office copy. After the manifold has been typed, the same will be checked and passed on to the officer who will staple the draft and other documents to the first two copies of the manifold. The officer must satisfy himself that the covering letter to the branch lists all the documents and that the remitter’s instructions have been correctly copied. The officer Page 2 of 18 will also ensure that the covering letter contains necessary instructions relating to FEMA and Foreign Trade policy to be followed by the branch without direct authorization. The officer will then sign the covering letter and hand it over to the dispatch section against the initials of the dispatch clerk in the register. All bills must be dispatched under registered cover/courier without any delay. 5. PRESENTATION OF THE BILLS TO CUSTOMERS In the case of bills which are to be presented by the branch to the drawee, a memorandum of presentation on form FEX-4(I) & (II) shall be used for presenting/accepting documents received for collection where the draft accompanying such documents is drawn on the importer. The draft with the memorandum of presentation shall be presented to the drawee without delay for “Sighting” in the case of sight and demand bills and for “Acceptance” in case of usance bills. Before presentation the bills should be stamped as follows: “Accepted payable at Punjab National Bank______________________Branch Date: _________________ _____________________ (Authorised signature) Every care must be taken not to present bills to a wrong drawee of Identical or Similar name. Drawee should be allowed to retain the usance draft maximum upto 48 hours pending acceptance but no other documents should be released to them. The drawee should honour the sight bills within 24 hours of presentation. If the drawee does not honour the sight bill within 24 hours and does not accept the usance draft within 48 hours (excluding transit period) it will be deemed to have been dishonoured by non-acceptance/ non-payment. 6. ACCOUNTING PROCEDURE The following entries shall be passed in respect of bills received from abroad and presented to drawees direct or sent to branches without direct authorization. Dr. Cr. Foreign Inward Bills lodged Foreign Inward Bills for collection (at the prevailing bills selling rate) No contra entries shall be passed in respect of bills forwarded to other authorised branches. A note however should be given in Foreign Inward Bills for Collection register mentioning, “Bill sent to ____________________”. The contra accounts mentioned above will be opened in Subsidiary General Ledger of authorized branches. In the Weekly Page 3 of 18 Statement of Affairs, the balance of these accounts will be shown under the sub head “Bills for collection”(Code No. 32312) at serial no. 11.02, of main head “Contra items” on the liability side and under main head contra items (code No. 53999) at serial No. 12 on the assets side. Acknowledgement of bills sent to authorised branches must be carefully checked and if an acknowledgement is not received a reminder must be sent. 7. DUE DATE OF USANCE BILLS To calculate the due date of a usance bill, 3 days of grace must be allowed. The due date of a usance bill payable after sight is normally calculated from the date of acceptance, but if the bill is expressed to be payable “after date of draft”, the due date is calculated from the date of draft. The overseas remitter must be advised of the due date of the usance bill, which must be written on the face of the bill in “RED INK’ and entered in FBM menu. A due date diary must also be maintained and drawee should be reminded of the due date of the bill one week before they fall due for payment. Non-payment of the bill on due date, if any, must be informed to the correspondent bank expeditiously seeking disposal instructions. 8. TIME LIMIT FOR SETTLEMENT OF IMPORT PAYMENT The remittances against imports should be completed within six months from the date of shipment except otherwise provided under FEMA/RBI guidelines, issued from time to time. 9. PAYMENT OF INTEREST ON IMPORTS Branches shall allow payment of interest on usance bills or overdue interest for a period of less than three years from the date of shipment at the rates prescribed in the FEMA Regulations issued from time to time. 10. CUSTODY OF BILLS AND DOCUMENTS All bills and documents must be kept in the safe, under dual control. The bills shall be arranged according to their serial order in the Foreign Inward Bills Register so as to facilitate reference and the Bank’s instructions relating to inland bills should be complied with as and where appropriate. A Bill Control Sheet duly initialled by an officer giving full history of the bill as well as expenses incurred must be attached to each item. The accepted draft in case of usance bills should be returned / retained as per instructions of the foreign bank. Page 4 of 18 11. DEFERMENT OF PAYMENT UNTIL ARRIVAL OF CARRYING STEAMER Where the instructions of the remitter allow payment to be deferred until arrival of carrying steamer, branches must ascertain the date of arrival of the vessel from the local newspapers or alternatively obtain the information from the Bank’s clearing agents, through port branches and inform the same to remitting bank. Payment of bills should not be deferred unless specifically permitted by the remitter. 12. IMPORTER – EXPORTER CODE NUMBER (IEC) No Import shall be made by any person without an Importer-Exporter Code No. unless specifically exempted. Any person/organization importing goods, whether against a specific license or otherwise is required to obtain code number from DGFT. The customs authorities do not allow clearance of goods to an importer who does not possess a valid Importer-Exporter Code number. Branches must ensure that the importer is in possession of a valid Importer-Exporter code number. 13. GOODS FORWARDED BY PARCEL POST Where the bills cover goods to be imported by parcel post, drawee must be informed as soon as the intimation of arrival of parcel is received from the Post Office. If the bills have not been paid before the parcels arrive, and are not paid immediately on arrival, the postal authorities should be advised to hold the parcel and not to return the same without reference to the Bank. On retirement of the bill, the postal authorization should be endorsed in the favour of the drawee. If the bills remain unpaid, the Post Office should be allowed to return the parcel to the sender unless the remitter has given specific instructions for disposal of the parcel. Drawee should, however, be advised before allowing Post Office to return the parcels. If, however, the remitter has given specific instructions regarding storage of goods they may be complied with. All parcels received from the Post Office should be recorded in the Parcels Register and remain in the strong room or in a separate godown under the control of an officer and be fully insured against fire risk. No parcels should be released without a proper receipt being obtained from the drawees. Charges for keeping the parcels in safe or godown plus other out-ofpocket expenses, if any, should be recovered from the drawee / remitter as per instructions. Page 5 of 18 14. GOODS FORWARDED BY AIR Where goods are forwarded by air, it must be remembered that the goods often arrive before the relevant documents are received and that it may be necessary for the importer to take delivery of the goods against delivery order from the bank. Delivery orders may be issued after receiving full payment of the bill and charges, and against submission of exchange control copy of import licence by the customer. The customer should also give an undertaking to the branch for payment of any difference in amount deposited and the amount recoverable at rates prevailing on the date of retirement of the bill. 15. NON-PAYMENT/NON ACCEPTANCE In case of non-payment or non-acceptance, the instructions given by the Sender (overseas bank / party) in the covering letter must be strictly followed. “Drawee in case of need”, if there is any, should be consulted and if the sender’s instructions state that he is empowered to give instructions, these must be followed exactly. The sender should be advised that the bill has been dishonoured and in case where there are instructions to get the bill noted for non-acceptance or for nonpayment, the needful be done immediately. The sender must be asked to reimburse the Bank for the expenses incurred. Instructions, in case of non-payment/non-acceptance, if not available, should be sought from the sender. 16. STORAGE/CLEARANCE OF GOODS Instructions for the goods to be cleared, warehoused, insured or railed to an up-country destination can only be accepted from: a) Sender, if it is a foreign bank on our approved list; or b) From the drawee after retirement of the bill. 17. STORAGE/CLEARANCE AT THE REQUEST OF OVERSEAS REMITTER If the sender (i.e. Overseas Bank provided on our approved list) has given specific instructions for storage of the goods, in the event of nonpayment/non-acceptance, the same may be acceded to, at the cost of the sender and subject to availability of warehouse facilities, to avoid demurrage charges. Expenses incurred in this connection should be simultaneously claimed from the Sender. We do not normally undertake to get the goods cleared from the customs by completing clearance formalities and payment of customs duty. However, we may agree in exceptional cases where the drawee’s cooperation is forthcoming in the shape of production of Page 6 of 18 custom’s copy of import licence etc. and the Sender has unconditionally agreed to pay the customs duty irrespective of amount involved. In the interest of Sender, approximate amount of customs duty should be advised to Sender. Sender bank must be a bank on our approved list. Expenses incurred should be simultaneously claimed from the Sender bank. Branches should closely watch the position and keep the Sender informed of developments. 18. STORAGE/CLEARANCE AT THE REQUEST OF IMPORTER CUSTOMER Requests from importer customers should be accepted only after retirement of bill and payment of all charges connected thereto. 19. PROCEDURE FOR CUSTOMS CLEARANCE For the purpose of clearing the goods, the documents should be forwarded direct to the clearing agent under cover of form FEX-5 or through the main branch at the port town under cover of form FEX-6. When branches forward documents direct to clearing agents, only those clearing agents, who are approved for unlimited amounts, should be employed. Customer must deposit clearing agent’s charges and customs duty at the time of giving instructions for clearance, unless arrangements have been made by the bank or the overseas remitter to pay them. The top two copies of Form FEX-5 and FEX-6 should be forwarded with documents, the 2nd copy being returned as an acknowledgement, while the 3rd copy forms the office records. All details must be recorded in the clearing agent’s register (FEX-46), and the customs purpose copy of the import license obtained before the instructions to the clearing agents are issued. 20. CHARGES Collection commission on all Foreign Inward Bills received, whether in Indian Rupees or foreign currency will be charged at the rates fixed by bank. Commission must be charged even though the item is subsequently returned unpaid to the Sender. On specific instructions, the charges and out of pocket expenses should be collected from the drawee of the bill, but in the absence of such instructions or if charges are refused by the drawee, they will be deducted from the proceeds of the bill. Provisions of Uniform rules for Collection (URC), ICC Publication No. 522 must be kept in view and it may be ensured if the bank is authorized to retire documents even if charges are refused by the drawee. Bill stamps, postage, Swift charges, clearing agent’s charges and other out-of-pocket expenses will be charged in like manner in addition to the above. Page 7 of 18 All charges incurred in handling the goods or documents should be debited to customer’s account or deducted from the proceeds, if so authorized by the remitter. The cost of Indian bill stamps affixed to usance drafts may be debited to Suspense Account- Foreign Bills Stamps. The number of foreign bill and the amount of the foreign bill stamps affixed thereon will be detailed on the back of the voucher to facilitate checking and verification of the same. On recovery of the amount, suspense account entries will be adjusted. 21. VERIFICATION OF LICENCE Before the drawee can be allowed to retire a bill, he must produce a valid import license marked “For exchange control purpose” or show that goods are freely importable under Foreign Trade Policy. In case of imports under specific license, endorsement on license made by DGFT stipulating special instructions regarding manner of payment etc. must be strictly adhered to while making payments. Where the goods to be imported are not subject to license, the particulars of the goods should be verified from the description in the Import Trade Control (H.S.) classification number together with the serial number allotted to commodity there-under and should be placed on bank records. 22. EXCHANGE CONTROL FORM The customer should complete the application on exchange control form A-1 for imports and A-2 for charges. The serial no. allotted to commodity imported should be mentioned on the form A-1. 23. PAYMENT OF BILLS Payment in respect of bills must be received by debit to drawee’s account or by a cheque/draft drawn on his bankers. Payment against import bills should not be accepted in cash. The officer must carefully check the following points: i) The drawee must be a person in whose favour the license has been issued or his agent with a letter of authority granted by the license holder in his favour to make remittance in payment for imports. The spelling on the bill and license/letter of authority must be identical. Branches must satisfy themselves by reference to the Foreign Trade Policy in force that the importer is permitted to utilize agent for the particular imports. Page 8 of 18 ii) iii) iv) The description of the goods in the documents must be exactly same as in the Import License. The quantity of goods must not exceed the limit specified in the license, if the quantity is a limiting factor as per the license. The balance of the license must cover the c.i.f. value of the import. This means that if the import is on f.o.b. or c & f basis, the amount of the bill plus insurance and freight in the case of f.o.b. transaction, and the amount of the bill plus insurance in the case of c & f transactions must not exceed the license value. It should be noted that where goods are being imported on “f.o.b. plus freight” basis, the original freight bill or memorandum issued by the steamship company must be produced so as to ensure that the amount of freight claimed does not exceed the amount actually paid to the shipping company. Alternatively, the Bill of Lading/Air-way Bill must show the amount of freight payable. If the bill is for a greater amount than the balance available according to the Exchange Control copy of the import licence (even though there may be sufficient balance according to the customs purpose copy), it will be necessary for the importer to have the exchange control copy of import licence duly enhanced for excess amount from the DGFT, before the bill can be retired and the funds remitted. The Bill of Lading must be dated not earlier than the date of the license and not later than the expiry date thereof as per Foreign Trade Policy. Any alterations in the license must be authenticated under authorized signatures (and embossing seal where appropriate) of DGFT. While effecting remittance in payment of the bills, it must be ensured that the same is within “permitted methods of payment” in terms of FEMA Regulations. Remittances in respect of imports by post parcel may be made by authorized branches provided the goods imported are such as are normally shipped by post parcel (e.g. watch parts). Remittances of foreign exchange against bills received for collection may be made provided the bills are accompanied by shipping documents. In the case of clean bills, however, the importer must produce the Exchange Control copy of the Customs Bill of Entry showing that the goods have already been imported into India. Where the goods have not arrived, v) vi) vii) viii) ix) Page 9 of 18 evidence of shipment must be inspected and an undertaking to submit the Customs Bill of Entry within three months must be taken from the importer. In the case of goods received or to be received by post parcel, the relative postal appraisal form must be inspected. 24. RBI GUIDELINES: Branches must strictly follow the guidelines/procedures stipulated by RBI /Bank, in respect of operative procedure relating to handling of import bills. Special care may be taken to keep track of various changes, which may take place from time to time. In case of Import Bills received on collection basis, particularly those relating to new/relatively new customers or customers who do not avail of any credit facility from the authorized dealer or customers whose business-relation ship with the bank is by and large restricted only to the retiring of import bills, the business bona fides of importercustomers should be carefully verified. Branches should not make remittances where the import bills have been received directly by the importers from the overseas supplier except as permitted under FEMA. At the request of importer clients, authorized branches may receive import bills direct from the overseas supplier as above provided the Competent Officer, i.e. Branch Manager or Senior Officer in Scale IV is fully satisfied about the financial standing/status and track record of the importer customer. Before extending the facility, branches should obtain report on each individual overseas seller from the overseas banker or reputed credit agency. (like, Dun and Brad street). The report from overseas bankers/reputed credit agency should, inter-alia, specifically comment on whether the seller-firm is ordinarily engaged in purchase/sale of goods sought to be exported to India and whether the seller is good for ordinary business engagements. As stated above, instructions on the disposal/payment of import bills should be given at the level of Branch Manager or a Senior Officer in Scale IV taking into consideration the guidelines issued by the bank in this regard. These instructions should be given in writing in the Import Bills Register and the reasons for the decision should be clearly recorded. Branches should maintain a separate Import Bills Register in CBS to record full particulars in Chronological Order of import bills received direct from the sellers. Brief comments covering these points must be given in the Import Bills Register maintained in CBS so that Inspecting Officials are in a position to suitably cross check at a later date. The Page 10 of 18 internal auditors should scrutinize the Register during the audit and adverse features, if any, noticed should be incorporated in their Report. Based on the above, and taking into account, the track record and financial position of the importer, the competent officer of the bank should take a decision on the handling/retirement of the import bills. In case of doubt, the authorized dealer should, inter-alia, insist on: i) Detailed verification of the importer's books of accounts. ii) Inspection of importer's place of work. iii) Enquiries with some of the leading customers of the importer for establishing his business bonafides. iv) A comprehensive and wholly satisfactory Opinion Report from the bankers of the overseas seller. Branches should not view the above procedural precautions as being relevant only to import bills received on collection basis. Since fraudulent import bills can be the handiwork of cash-rich-persons and their front-firms, it is not difficult for such firms to open Letters of Credit favouring overseas nominees with cash margin even upto 100%. In all such cases, authorized dealers must note to follow the procedural drill detailed above so that the financial antecedents of the Indian importer and the overseas seller are clearly established. Branches must scrutinize the Bills of Entry submitted by importers with particular care. Though it is unlikely that a prima-facie scrutiny can reveal the authenticity or otherwise of a Bill of Entry, yet on occasions obvious inconsistencies/inaccuracies can be noticed which should put the bank-staff on further enquiry. Branch Manager/Senior Officer in Scale IV may also, at his discretion and particularly in respect of new/relatively new accounts through which import bills are being routed, send copies of a few Bills of Entry selected at random basis, more particularly where they have any doubt about the authenticity of transactions, for verification to the concerned office of Customs and follow up promptly for confirmation or report from them. Branches should preferably prepare and forward a list containing details of the Bill of Entry such as serial number, date, amount, importer's name, item of import and Tariff Heading to facilitate checking by the Customs office in such cases to get the Bill of Entry verified to ensure prompt follow-up. All such correspondence should be kept on records for verification by the internal auditors and inspecting officials of Reserve Bank 25. IMPORT OF GOODS UNDER FOREIGN LOANS/CREDITS Page 11 of 18 Payment of import bills may be settled against foreign loans/credits arranged by the importer/bank, in compliance with FEMA guidelines. 26. EXCHANGE RATE Bills expressed in currency other than Indian rupees will be retired at the current selling rate of exchange for bills unless a forward contract has been booked in which case the contract rate will apply. 27. ACCOUNTING PROCEDURE The following accounting entries shall be passed: i) Debit Party For a) face amount of bill at current selling rate of Exchange for bills or forward contract rate, as applicable. b) Interest due (if any) as per instructions of the remitter) c) Foreign bills stamps (For usance bills) d) Correspondent’s charges ] e) Commission ] if payable f) Postage ] by drawee g) Other expenses ] Credit Position Maintaining Office for (a), (b) and (d) Less Commission, postage & other expenses (If Payable by remitter) Commission on Foreign Bills For Commission (Inward & Outward) Postage For actual postage Incurred Suspense Account-Foreign For foreign bill Bills stamps Stamps (if any) Other appropriate heads For other Credit Credit Credit Credit charges. ii) Reverse contra account entries passed at the time of receipt of bill. 28. REMITTANCE OF PROCEEDS The amount towards realization of bill shall be remitted in accordance with the instructions, to the overseas remitter (Remitting bank/Drawer) i.e. by means of a draft/SWIFT. Page 12 of 18 The advice of realization should be sent to overseas remitter (FEX-26) by SWIFT message. In case of bills forwarded to a branch without direct authorization, the Rupee equivalent of the bill will be received by authorized branch from the concerned branch without direct authorization. The amount in turn will be credited to concerned Position Maintaining Office, and at the same time proceeds will be remitted in accordance with the instructions of overseas remitter. 29. ENDORSEMENT OF LICENCE After payment of the bill, the exchange control copy of the import license must be endorsed with the equivalent in Rupees with bill amount, at the rate of exchange at which the bill has been retired, in terms of FEMA Regulations. Import licenses are issued for the c.i.f. value of the goods to be imported, which includes commission allowed by supplier/manufacturer to importer or agent. Import license cannot be used to the full amount of f.o.b. cost of the goods alone, leaving insurance, freight and commission as additional charges to be paid in Rupees over the amount specified in import license. The full c.i.f. value and any commission paid in Rupees to a local agent by importer on behalf of overseas supplier should be endorsed on exchange control copy of relative import license. In case of sight bills received for collection, endorsement should be made simultaneously under columns 3 and 4 of import licence. In case of usance bills received for collection the amount should be endorsed in column 3 at the time of acceptance of documents by the customer and in column 4 at the time of realization of bill and remittance. In case of import license issued for capital goods and heavy electrical plant with a pre-designated exchange rate specified thereon, the Rupee equivalent at the pre-designated exchange rate and not the actual rate should be endorsed on the license. 30. DELIVERY OF DOCUMENTS When the bill is paid, the documents and the discharged drafts should be handed over to the drawee with a memorandum of cost (FEX-7). All documents should be detailed in the memorandum of cost in the blank space left for the purpose. If the bill is retired to the debit of drawee’s loan account and documents are to be held as security, the original as well as the duplicate documents should be handed over to the Loans Page 13 of 18 Section against acknowledgement on the Bill Control Sheet. In case of outstation parties, clear instructions should be given for delivery of documents on the remittance schedule, if the documents are forwarded to a branch without direct authorization. If a bill is on D/P (Documents against payment) basis, the documents must not be released to the drawee until payment has been effected. In case of D/A (Documents against acceptance) bills, the documents can be released to the drawee as soon as he has accepted the bill unconditionally and gives the Bank an acknowledgement for receipt of the documents. The instructions given on the remitter’s (Overseas bank/Drawer) covering letter should, however, always be consulted in this regard, as there may be special instructions. In case of usance bills, customer must produce a valid Import License in which amount required to be remitted should be ear-marked, by making an endorsement in Column 3 at the back of Import License, in terms of para 29 above. The documents must be delivered to drawee of the bill, who should be the holder of import license or of the letter of authority in his favour, in terms of FEMA Regulations. 31. REPORT TO CONCERNED POSITION MAINTAINING OFFICE While effecting payment the authorised branch shall instruct foreign correspondent to debit our foreign currency account and they must simultaneously advise the necessary particulars by sending relative credit advice to Position Maintaining Office whose Nostro account is to be debited by the foreign correspondent. In case the transaction exceeds the prescribed amount (presently equivalent of Rs. 2,50,000/-) the reporting shall be done on the same day through RETAD/fax/telephone. The foreign currency amount shall be communicated both in words and figures to avoid any discrepancy as it involves exchange risk. The exchange rate applicable shall be ascertained/confirmed from the Position Maintaining Office. The relative credit advice shall be sent to Position Maintaining Office irrespective of the amount of the transaction. In case forward contract has been booked for the transaction, the intimation for the utilization of the contract shall be reported on the same day to the concerned Position Maintaining Office and the advice to this effect shall be marked in red ink giving the details of the forward contract utilized. Cancellation of left over unutilized balance amount if any shall be done on the same day. In case the foreign currency amount of transaction exceeds the amount of forward contract booked, the excess amount shall be transacted at the prevailing exchange rate. Page 14 of 18 32. FOLLOW UP FOR SUBMISSION OF EVIDENCE OF IMPORT BILL OF ENTRY Authorized branches must keep a proper watch over the receipt of documentary evidence of import and follow up the same as per prevalent FEMA guidelines. They should also record in their Import Bill registers in CBS, details such as: (a) Due date for submission of evidence (b) Date of issue of reminders to importer (c) Date of submission of documentary evidence (d) Date of verification of documentary evidence by bank’s internal inspectors/auditors. On receipt of documentary evidence required under prevalent FEMA guidelines, authorized dealer must scrutinize it with reference to corresponding remittance so that details such as description of goods, quantity, value of goods, invoice number and date, details of import license (where applicable) agree with the details furnished by importer at the time of remittance. If the details agree, necessary remarks/notings can be made in Bills register in CBS. Authorized branches must acknowledge receipt of the Exchange Control Copy of the Bill of Entry. The acknowledgement should contain the name, the full address of the importer, Code Number of the importer, Number and date of import license, if any, particulars of reference number of the bank’s letter of credits (if any) Number and Date of the Exchange Control Copy of the Bill of Entry and particulars and value of the imported goods. The bank’s internal auditors must carry out a 100% check of the evidence as the bank has to submit to RBI half yearly certificates. Authorized branches should preserve documents evidencing import into India as per prevailing prescribed guidelines of FEMA/RBI. . However, in respect of cases, which are under investigation agencies, the documents may be destroyed only after obtaining clearance from the investigating agency concerned. A half yearly statement in form BEF, furnishing details of import transactions, in terms of prevalent FEMA guidelines should be forwarded by the authorized branches to the regional office of Reserve Bank of India under whose jurisdiction the authorized branch is functioning, within the prescribed time period. 33. CHEQUES/DRAFTS DRAWN ON BANKS IN INDIA Cheques/drafts drawn on banks in India received for collection from foreign banks, for credit to their Non-resident Rupee account (Vostro) with the bank or remittance abroad will be entered in the IRM menu. Page 15 of 18 All credits to Non-resident Rupee accounts of foreign banks or outward remittances are subject to compliance of FEMA Regulations. Transfer of Rupees to credit of account of a non-resident branch or correspondent is similar, under FEMA Regulations, to the remittance of foreign currency from India to the country in which the branch or correspondent is situated. The related provisions of para 2, 6 & 28 for allotment of FIBC serial number, passing contra entries and remittance of proceeds will also apply. 34. OUTSTANDING BILLS The out standings in the Foreign Inward Bills Register should be taken under Menu Option – ‘FBBR’ and should be tallied with Foreign Inward Bills for Collection account in Subsidiary General Ledger, once in a month. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION 35. GENERAL Branches without direct authorization will receive foreign bills through authorized branches and all communications with the overseas remitter will be conducted through those channels. Foreign Inward Bills will be accompanied by form FEX -20 in duplicate. This manifold form will give instructions for dealing with the bill. Duplicate copy of the form will be signed at the foot and returned to the authorized branch as an acknowledgement. Sometimes, branches without direct authorization may receive a bill direct from a foreign bank. In such cases, after verifying that all the documents listed in the remittance schedule have been received, they should send the original remittance schedule to the nearest authorized branch confirming to them that all the relative documents have been received. The authorized branch will retain the schedule and make the necessary entries in their books and will send detailed instructions to the concerned branch on form FEX-20 regarding collection of the bill. 36. RECORDS On receipt, all items will be entered through FBM Menu in Foreign Inward Bills Register (FEX-57), sight bills and usance bill being entered separately. 37. PRESENTATION OF BILLS TO CUSTOMERS Page 16 of 18 Paragraph 5 applies. 38. CUSTODY OF BILLS AND DOCUMENTS Paragraph 10 applies. 39. DEFERMENT OF PAYMENT UNTIL ARRIVAL OF CARRYING STEAMER Paragraph 11 applies. 40. CLEARANCE OF GOODS Paragraphs 16 to 19 apply. 41. GOODS FORWARDED BY PARCEL POST Paragraph 13 applies. 42. GOODS FORWARDED BY AIR Paragraph 14 applies. 43. NON-PAYMENT/NON-ACCEPTANCE Paragraph 15 applies. 44. CHARGES Paragraph 20 applies. 45. PAYMENT OF BILLS Branches without direct authorization should keep provisions of Paragraph 23 in mind. An irrevocable letter of undertaking should be obtained from the customer that the payment is being made at the provisional rate of exchange and he will make good the difference, if any, between the provisional rate of exchange and the prevalent exchange rate on the day of remittance. 46. ACCOUNTING PROCEDURE The following entries will be passed in respect of bills received from an authorised branch: Debit Foreign Inward Bills lodged ] The amount will be ] as mentioned in the ] covering schedule of the AD Page 17 of 18 Credit Foreign Inward ] branch Bills for collection ] At the time of realisation of the bill and remittance, the provisions of paragraph 27 will apply, but the authorised branch forwarding the bill will be credited instead of Position Maintaining Office. Page 18 of 18                             3. EXPORT LETTERS  OF CREDIT    CHAPTER 3 : EXPORT LETTERS OF CREDIT & NEGOTIATION OF BILLS 1. GENERAL 1. This Chapter deals with the letters of credit opened by importers in the foreign countries in favour of Indian exporters and the documents tendered by the exporters under letters of credit to the bank for the purpose of negotiation. Branches will be guided by the general provision and definitions contained in the Uniform Customs and Practice for Documentary Credits (UCPDC) which is a set of standard rules governing Letters of Credit codified by ICC. (Currently ICC Broucher No. 600). Besides these instructions, branches should also keep in mind the prevailing FEMA regulations relating to exports, Foreign Trade Policy, provisions of Uniform Rules for Reimbursement (URR), ICC Publication No. 725, FEDAI Rules etc. while dealing with the export letters of credit and documents under the same. 2. The overseas bank, while opening a credit in favour of an Indian exporter will normally adopt one of the following methods: (a) It may send its own credit typed ready for handing over to the beneficiary through a correspondent bank. Such credits are called “Hand-on Credits”. (b) It may instruct its Indian correspondent by mail or SWIFT to advise the exporter of the issue of credit. Where the credit is advised without the correspondent bank in India adding its confirmation, it is termed as “Advised Credit” and, in cases of such credits; the advising bank does not assume any liability. Unlike “Hand-on Credits”, the Indian correspondents will forward to beneficiary an “Advised Credits” on its own forms. 3. The overseas bank may act as under (a) or (b) above, and request the correspondent bank to add its confirmation. In such cases, the advising bank assumes a definite obligation and such credits are called “Confirmed Credits”. PROCEDURE FOR AUTHORISED BRANCHES 3. ADVISING OF CREDIT Page 1 of 39 On receipt of instructions from the foreign correspondent by mail or SWIFT to deliver or advise a credit in favour of the beneficiary, the authorized officials will ensure that the following points have been examined: (a) Credits must be authenticated (including verification of signatures in case of mail), before being advised to the beneficiary, directly or through branches of another bank. (b) The credit must provide clear instructions for reimbursement by the overseas bank in an approved manner, in terms of Uniform Rules for Bank to Bank Reimbursement under Documentary Credits (URR) – ICC Broucher No. 725. Where reimbursement under a credit is available in a manner other than that permitted under FEMA, the customer should be advised to get the clause suitably amended. The credit should preferably provide for reimbursement at the time of negotiation itself although there is no compulsory requirement for the reimbursement clause as per UCPDC other than a statement from the issuing bank that they will remit proceeds on receipt of confirming documents. In case the credit does not provide any reimbursement instructions or is available with the issuing bank, the LC issuing bank will normally remit the funds after the receipt of credit confirming documents. An element of risk is involved in case such documents are negotiated and the issuing bank goes into liquidation after receipt of documents. (c) (i) The credit must not contain clauses of the following nature: “Negotiating bank’s certificate that it has satisfied itself by independent checking with shipping company’s agents that bills of lading are genuine” required. “Negotiating bank’s guarantee in respect of goods” required. “Negotiating bank’s certificate regarding checking of technical details of the goods” required. Clauses placing onus on the negotiating banks which are inconsistent with the responsibilities usually assumed by banks negotiating under the credits. Vague clauses calling for insurance covering “all marine risks, “all marine and war risks”, “all risks”, “full insurance”, or “W.P.A. Page 2 of 39 (ii) (iii) (iv) (v) Comprehensive”. (All risks “Institute cargo clause”, do not, however, fall under this category.) (vi) (vii) Reimbursement available on receipt of documents at the counters of issuing bank. Any other clauses contravening provisions under FEMA or credit not subject to Uniform Customs and Practice for Documentary Credits. Difficulties may arise at the time of negotiation of documents under letters of credit containing such clauses. If a credit contains any such clause or similar clause, the credit may be advised to the beneficiary, but the beneficiary should be advised to get the onerous clause/s amended/deleted, in his own interest, to avoid any problem at the time of negotiation. Branches must not add our bank’s confirmation to credits containing onerous clause/s until such clause/s are amended/ removed and specific prior approval for adding confirmation is obtained from International Banking Division, Head Office. 4. HAND ON CREDITS These credits will be passed on to the beneficiary accompanied by a covering letter typed on form FEX-11. The four copies of the form will be used as under: 1st copy 2nd copy 3rd copy 4th copy covering letter to the beneficiary file copy for authorized branch acknowledgement to the issuing bank accompanies the 1st copy and is to be returned by the beneficiary to the Bank duly signed as an acknowledgement. Hand on credits received from overseas banks with whom agency arrangements exist should be passed on to the beneficiary after verification of signatures of issuing bank. However for those overseas banks with whom no arrangement exist and message is unauthenticated, it should be passed on to the beneficiary under cover of a letter on bank’s letter head with the following wording: Page 3 of 39 “We enclose an irrevocable credit number ___________ dated __________ for _____________________ issued by________________________________ in your favour without any responsibility or engagement on the part of our bank. We have no arrangement with the issuing bank and, therefore, have not been able to verify the signatures on the letter of credit”. The letter of credit should not contain bank’s stamp, signatures or any other indication involving bank’s name. Copy of the letter, addressed to the beneficiary, should be endorsed to the issuing bank also. In case of any difficulty, the matter should be referred to International Banking Division, Head Office for instructions. It should be ensured that all letters of credit advised are subject to Uniform Customs and Practice for Documentary Credits. 5. ADVISED CREDITS Advised credits will be communicated to the beneficiary on form FEX-10 giving full details. Form FEX-10 is in a set of four and copies will be used as under: 1st copy 2nd copy 3rd copy 4th copy original for the beneficiary file copy for authorized branch acknowledgement to the issuing bank acknowledgement to be returned by the beneficiary It should be ensured that all letters of credit advised are subject to Uniform Customs and Practice for Documentary Credits. 6. STAMP DUTY: All outgoing Exports letters of credit must be stamped for the amount of stamp duty in force, before they are sent for dispatch or delivered to the beneficiary. The stamps affixed should be defaced with the bank’s round stamp to prevent their reuse. The amount of stamps affixed should be debited to revenue under the head “ Expenditure – Other Stamps” and recovered from beneficiary alongwith other charges. Page 4 of 39 7. RESTRICTED LETTERS OF CREDIT Where the export letter of credit is restricted for negotiation to our Bank, branches may advise such credits provided the issuing banks is our correspondent/approved bank . When negotiations are restricted to our Bank, the form FEX-10 or 11, as is the case, must be marked as under: “Negotiations under this credit are restricted to Punjab National Bank _____________________ Branch.” Note: Restricting negotiations to our Bank does not necessarily mean that we are obliged to negotiate bills drawn thereunder, as in the case of credits confirmed by us. 8. ADDING CONFIRMATION TO A LETTER OF CREDIT Authorized branches may add our bank’s confirmation to export credits at the specific request of the LC issuing bank provided: 1. 2. the issuing bank is our correspondent/approved bank, and prior permission to add confirmation has been obtained from International Banking Division(IBD), Head Office. However, pending approval from IBD, branch shall advise the LC to beneficiary, incorporating the following clause on the covering schedule: “Please note that we have not added confirmation and shall revert in this connection shortly” In case confirmation charges are for account of beneficiary, his consent for the same may also be ascertained simultaneously clearly informing to him that it does not tantamount to our bank’s consent for adding confirmation for which the matter is under reference to higher authorities for necessary approval. In case of beneficiary’s non-acceptance for the same confirmation should not be added and position be intimated to overseas bank. Where the LC opening bank has not requested for adding confirmation to the LCs and the beneficiary has requested us to do so, the beneficiary should be advised that the confirmation will be added only on receipt of request from the LC opening bank. Charges are to be recovered as per bank rules Page 5 of 39 9. The proposal for adding confirmation shall be referred to International Banking Division, Head Office for consideration of the competent authority on the prescribed format ( See Annexure-I). The confirmation charges are to be recovered from the opening bank/beneficiary in terms of the LC. In case the beneficiary is not our customer, branch may advise the beneficiary giving reference of LC earlier advised as under: “We are prepared to add confirmation to the LC and the same will be added after receipt of our charges i.e. Rs. ______.” Upon receipt of approval from IBD, HO, the beneficiary should be advised suitably in this regard. 10. RECORDS AND ACCOUNTING PROCEDURE All export credits whether “hand on”, “advised” or “confirmed”, will be recorded in chronological order in the Export Credits Register (CBS Menu – IDCM ). Credits advised direct to the beneficiaries by the foreign correspondent are not to be entered in this register. The rupee equivalent in the register should be calculated at the current bills buying rate. A file number in serial order will be given to each credit for identification purposes. A separate file shall be opened for each credit and all related correspondence/advices shall be kept in the file, to be maintained in numerical order. The Officer concerned should examine these files at fortnightly intervals and the files of expired credits should be consigned to the old record after a lapse of three months. 11. CHARGES Charges will be recovered in respect of all credits in terms of bank rules. In cases where advising charges, postage and other expenses are recoverable from the beneficiary, who is not a customer of the branch, the charges should be followed up with the beneficiaries for recoverable amount. For our own customers, recovery of such charges should be made at the time of advising of credits by debiting to their account. Such charges are to be credited to the revenue head “Miscellaneous Income on foreign exchange business”. 12. DELIVERY/DESPATCH OF CREDITS: Page 6 of 39 The instructions of issuing bank, if any, in respect of mode of communication must be followed. Two officers, one of whom must be Manager or Deputy Manager, should duly sign the covering schedule. The credit should be delivered to the beneficiary by hand or should be dispatched by Registered AD Post or courier. All advices of credits in favour of local parties must be delivered latest by the day following receipt and their signatures obtained in the Peon Book as an acknowledgement. In case of big cities, the credit should be sent by Registered Post/courier. Branches should ensure that credits are delivered / dispatched to the concerned party at the correct address. If the beneficiary’s full address is not indicated in the issuing bank’s advice, branch shall ensure that our advice does not fall into the hands of another party of similar or identical name. In case of any doubt, instructions must be sought from the issuing bank promptly. Credits in favour of outstation parties should be sent to the beneficiaries by Registered AD Post/approved courier. 13. AMENDMENTS Amendments to the credits should be advised to the beneficiary on form FEX 14, which is in a set of four, and the copies should be used as in the case of form FEX 10 for advising credits. The amendments in respect of a credit should be scrutinized with the same care as in case of original letter of credit (refer para 3). When the amount of the letter of credit is enhanced through an amendment and where our bank has added its confirmation, a corresponding recording through CBS Menu – IDCM, at the time of advising the credit. Charges must be recovered at the prescribed rates in terms of bank guidelines. 14. TRANSFERS A credit should be transferred in accordance with Uniform Customs and Practices for Documentary Credits. A credit can be transferred only if it is expressly designated as “transferable” by the issuing bank. However, unless this is specifically mentioned, all credits must be regarded as non transferable. The Bank should comply with the beneficiary’s written Page 7 of 39 instructions to transfer the credit as a whole or in part, if the text of the credit permits this. Before entertaining any such request, the following points must be kept in view: 1. Transfer can be made on instructions only from the original beneficiary (also called First Beneficiary). It can be transferred once only which means that a transferee (known as Second Beneficiary) is not entitled to ask for a further transfer in favour of another party. Unless otherwise stipulated in the LC, bank charges for transfer of LCs must be paid by the First Beneficiary. Transferring bank can refuse to transfer LC unless such charges are paid. The transfer must be on the terms and conditions specified in the original credit. However, one or more of the following terms can be reduced or curtailed while transferring the credit: 1. Amount of Credit 2. Unit price 3. Period of validity of LC 4. Period of shipment 5. Last date for presentation of documents. 2. 3. Further, the beneficiary can request/ stipulate for an increased percentage of insurance cover. 4. A credit can be transferred in part, only if part shipments are allowed. 5. The language of the original credit must be strictly followed, and nothing should be added or substituted which might disturb the original terms and conditions. 6. All amendments should be passed on to the original beneficiary, in the absence of any contrary instructions from him. 15. FORM FOR TRANSFER OF A DOCUMENTARY CREDIT Application for the transfer of a documentary credit as a whole must be taken on the form FEX-12. Page 8 of 39 This form includes instructions to the bank to advise future amendments direct to the transferee. Form FEX-12 is to be typed in triplicate and will be used as under: 1st copy 2nd copy to the Original to be retained by the bank. This will be sent to the opening bank with a copy of our letter transferee. 3rd copy transferor This will be retained by the original beneficiary i.e. the The authorized official will verify the signature of the original beneficiary, and where the original beneficiary is not a customer of the bank, his signatures must be verified by his own bank. An endorsement in the following form should then be made on all the copies of the original credit in the hands of the bank, and be signed by two authorized officers: “As per instructions by letter No. _____________ dated ___________________ from __________________________, this credit is wholly transferred in favour of _____________________________ “. The original credit with the above endorsement, and a covering letter worded as under, will be sent to the transferee: “Reg: Credit No. _______________for ______________opened by ________________________________________ in favour of ________________________________________. We attach herewith advice of the above credit which has been irrevocably transferred to you”. 16. Where the credit is to be transferred in part, the authority of the original beneficiary should be obtained on form FEX 13 which is also in triplicate, the copies being disposed of as in the case of form FEX-12. Photocopies of letter of credit should be taken out for each transferee. The amount transferred should be endorsed on the original letter of credit at the back. The photocopy of the letter of credit with endorsement on back for the amount transferred will be marked on the face as under: Page 9 of 39 “This is in part transfer of Irrevocable Credit No. _____________ of __________________(name of Bank) dated ________________”. 17. Charges for transfer of credit will be levied in terms of bank guidelines. Charges will be recovered for each transfer of credit, part transfers being charged as separate transactions. Charges are to be recovered from transferor unless specified otherwise in the credit. 18. RED CLAUSE CREDITS A documentary credit containing the so-called “ Red Clause” is in fact an authorization from the opening bank to the advising bank to make advance to the beneficiary for the purpose of financing shipment. In other words, the beneficiary is able to obtain (on the strength of Red Clause credit), a packing credit advance from the advising bank. The proceeds of any bill subsequently negotiated, will be used to adjust the bank’s advances, which have not been repaid by the time the credit expires. Any request for an advance under a Red Clause credit should be referred to International Banking Division, Head Office for prior approval. Branches should make the advance against Red Clause letters of credit on the basis of a receipt and an undertaking from the beneficiary and/or in compliance with any requirements stipulated by the issuing bank. The amount may be paid to the debit of Suspense Account, which will be adjusted by proceeds of the bill subsequently negotiated or by a remittance from issuing bank, if no bill is negotiated. 19. GREEN CLAUSE CREDITS A documentary credit containing the so-called Green Clause is in fact just an extension of Red Clause where the opening bank authorizes the advising bank to make advances to the beneficiary not only for the purpose of financing shipment but also towards warehousing and insurance charges. The other provisions of Red Clause credits (Paragraph No.18) will also be applicable to these credits. NEGOTIATION OF DOCUMENTS UNDER LETTERS OF CREDIT 20. GENERAL Branches may negotiate foreign outward bills under and in conformity with the terms of Letters of Credit of approved banks (list Page 10 of 39 circulated by International Banking Division, H.O. from time to time). It must be ensured that all negotiations are covered by sanction from appropriate authority or are within the vested powers of the Incumbentin-Charge. In case, where a branch has added confirmation and documents are presented to that branch for negotiation through another bank, the branch may negotiate documents even though beyond their vested powers, as branch would have already obtained approval from International Banking Division, Head Office before adding confirmation to a letter of credit. Branches shall receive documents from their clients for payment or negotiation not only under credits advised through our bank but also under credits advised/established or confirmed by other banks. Branches may also receive documents from other banks for payment or negotiation where Letters of Credit are restricted to our bank for negotiation. Branches should note that restriction of Letters of Credit to our bank does not necessarily mean that we are under obligation to negotiate documents under such Letters of Credit. Documents may, however, be negotiated under such Letters of Credit subject to completion of all formalities as per procedure for negotiation of documents laid down in this chapter. On receipt, all items will be entered in Export Credits-Documents Paid Register (CBS Menu – FBM). The documents must be marked with the bank’s stamp and bill number from the series allotted for the purpose. Branches should not negotiate any documents unless the beneficiary is enjoying the credit facilities with the branch concerned or Letter of Credit advised through that branch is restricted to them for negotiation, and documents are presented through another bank (also refer Para 44). Documents drawn under Letters of Credit, under which negotiations are restricted to another bank in India, should be accepted only on collection basis (also refer Paras 39 to 43). 21. BILLS RECEIVED FROM BRANCHES WITHOUT DIRECT AUTHORISATION Authorized branches shall receive bills from sister branches without direct authorization, for examination and approval, as to whether the bills may be negotiated by them. Such documents will be handled in the CBS (Menu - FBM: Export Credits – Documents Paid Register). For the sake of convenience, separate menu (XAUTH) is provided for entering the particulars of the bills (emanated from non-authorized branches), in the Page 11 of 39 Export Credits – Documents Paid Register (Menu: FBM – XAUTH) in the CBS, for entering particulars of such bills, by the authorized branches. 22. SUBMISSION OF DOCUMENTS The documents must be presented within the time limit stipulated in the Letter of Credit. As per FEMA Regulations, in cases where exporters present documents pertaining to exports after the prescribed period of twenty-one days from date of export, authorised branches may handle them without prior approval of Reserve Bank, provided they are satisfied with the reasons for delay. Accordingly, the documents must be presented for negotiation within the period stipulated in the letter of credit or 21 days, whichever is earlier. In case the documents are tendered after 21 days and negotiation is permitted under letter of credit beyond 21 days, the documents may be negotiated as per terms of credit, provided the Incumbent is satisfied about reasons for the delay, which, may be placed on record. 23. (i) AUTHENTICITY OF LETTERS OF CREDIT LETTERS OF CREDIT ADVISED BY OUR BRANCHES Branches must ensure that the signatures / authenticity of the credit are verified by the advising branch, before advising the letter of credit to the beneficiary. The signatures of the officer verifying the signature/test should be verified from those available on records. The covering letter of the advising branch must be examined with the same care as the original letter of credit for any clauses such as credits advised “without verification of signatures of issuing banks”, “without any engagement or responsibility on the part of the advising branch”, or any other clause affecting our position as negotiating bank. (ii) LETTERS OF CREDIT ADVISED BY ANOTHER BANK In the case of credits advised by another bank for and on behalf of a foreign bank, it must be ensured that the advising bank has verified authenticity of the credit. The covering letter of the advising bank must be examined with the same care as the original letter of credit for any Page 12 of 39 clauses restricting negotiation to themselves, or advising credit without verification of signatures of issuing bank or without any engagement or responsibility on the part of advising bank, or any other clause affecting our position as negotiating bank. (iii) LETTERS OF BENEFICIARY CREDIT ADVISED BY FOREIGN BANK DIRECT TO Where the credit has been advised direct to beneficiary by a foreign bank and the beneficiary happens to be our customer, the signatures of the foreign bank must be verified with those on record. Where verification of signatures is not possible, bills drawn under credits must not be negotiated. However, a reference may be made preferably by SWIFT, at the cost of beneficiary, to the issuing bank, if requested by beneficiary. 24. EXAMINATION OF LETTER OF CREDIT 1. Branches should ensure that the letter of credit is that of an approved bank. If the name of the issuing bank does not appear in the list of approved banks, branches should refer the matter to International Banking Division, HO for approval of the bank for the specific case. To expedite, request for approval should be sent by fax. 2. In case of a revocable letter of credit, branches must ensure that the same has not already been amended or cancelled at the time of negotiation of documents, by getting a confirmation from the issuing bank. 3. The credit must provide for reimbursement by the overseas bank in an approved manner in accordance with the “permitted methods of receipt” under FEMA. The credit must provide for reimbursement under the credit at the time of negotiation of documents and not after the documents reach the counters of issuing bank. The date of expiry of the credit should be related to presentation of documents for negotiation in India and not at the foreign centers. Page 13 of 39 4. The credit should not contain any clause contravening the provisions of FEMA and should be subject to Uniform Customs and Practice for Documentary Credits. 5. The credit should not contain any clause placing an onus on the negotiating bank not consistent with the responsibilities usually assumed by banks negotiating documents under credits. (Also refer paragraph 3.) 25. CHECKING OF DOCUMENTS When the authorized branch is satisfied that the credit is genuine and the letter of credit is in accordance with our requirements, the documents will be examined to ensure that they are drawn and presented strictly in accordance with the terms & conditions of the credit. Branches should be guided by the provisions of Uniform Customs and Practice for Documentary Credits, while examining the documents. If the documents do not conform exactly to the credit in all respects, the issuing bank may refuse to reimburse the negotiating bank. It is, therefore, obvious that the checking of documents is a job of responsibility and it must be entrusted to experienced officers only. All documents shall be checked by two officers independently one of whom must be Manager or Deputy Manager, before the negotiation is made. The following important points and provisions of Uniform Customs and Practice for Documentary Credits must be carefully observed: (i) DRAFT/BILL OF EXCHANGE 1. 1. 2. The draft/bill of exchange must be drawn by the beneficiary of the credit /any other person authorized in this regard and properly signed. The draft/bill of exchange should be drawn on the bank, stipulated in the credit. The amount of bill of exchange/draft should be for 100% of invoice value, or if otherwise specified in letter of credit, according to the terms specified. The amount must not exceed the amount available under the credit. The amount in words and figures must agree. The required set of draft/bill of exchange (e.g. first and second of exchange) should be submitted. The tenor of the bill of exchange must be as stipulated in the credit. Page 14 of 39 3. 4. 5. The draft/bill of exchange must bear the reference to the credit under which it is drawn mentioning the name of the issuing bank’s branch, credit number, date and such other particulars as required in the letter of credit. 6. The draft/bill of exchange should be drawn or endorsed in favour of the bank. 7. The draft/bill of exchange must bear a date. 8. The draft/bill of exchange must not be dated after the latest date for negotiation permitted under the credit. 9. The draft/bill of exchange should be signed by the drawer. 10. The draft/bill of exchange should be drawn unconditionally and should be free from any extraneous conditions. 11. The draft/bill of exchange should be drawn for a specified amount and should be consistent with the terms of drawing permitted in the credit. 12. The draft/bill of exchange should, unless otherwise specified , be drawn in the same currency as invoice/LC. (ii) COMMERCIAL INVOICE 1. The invoice should be addressed to the party mentioned in the credit. 2. The invoice should be made out by the beneficiary or other authorized person(s) as stipulated in the LC . 3. The invoice need not be signed. 4. The required number of copies should be submitted. 5. The invoice should be in the prescribed form and certified/ attested by Chambers of Commerce or the Representative Authority of the Government of the importing country, in the exporting country, wherever required in terms of credit. 6. The goods must be described exactly as in the credit and the terms of sale i.e. f. o. b., c & f, c. i. f. etc., quality, quantity, grade, packing, cost, must be precisely the same as required in the credit. 7. The number of packages shipped, gross and net weights, shipping marks mentioned in invoice must tally with those on the shipping documents. 8. Bill of lading number and date, order number, import licence number and date, if any, should be given on the invoice, wherever required in credit. Particulars must tally with those stated in shipping documents. 9. The amount of the invoice must be within the amount authorized in the letter of credit. Page 15 of 39 The invoice must be dated not later than the expiry date of the credit. 11. Any discount/commission shown in the invoice must be in terms of credit and subject to compliance of FEMA Regulations. 12. The invoice should be drawn in the same currency as LC unless otherwise specified. 13. Arithmetic calculations should be accurate. 14. It should not include any charges, which are not permitted by LC. As per stipulations of LC, the gross value of invoice should not exceed the credit amount. (iii) INSURANCE DOCUMENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. The documents presented must be that as called for in the credit. A certificate or cover note cannot be accepted unless specifically authorized in the credit. It must be issued only by Insurance Company or underwriters or their agents. It should not be issued by brokers. It must be signed by the issuer. It must bear the date of issuance. It must indicate the name of the assured. It must indicate the mode of conveyance (Air, Sea, Road etc.) and if possible the name of the vessel, voyage number etc. All the risks required to be covered in the credit should have been covered. The value of the insurance policy/certificate must be as per requirements of the credit but in any case not less than invoice value of the goods. Unless otherwise specified, it should be issued for an amount equivalent of 110% of CIF/CIP value of the goods. If such value is not determinable from the documents on their face, it should be for the minimum amount of the negotiation requested for or the amount of invoice value whichever is greater. Insurance policy/certificate must be in the same currency as in the letter of credit but in any case not less than invoice value of the goods and the claims should be payable at the centre stipulated in the credit. The insurance policy/certificate must not be dated later than the date of the bill of lading or date of shipment unless the insurance documents presented establish that the cover is effective at the latest from the date of shipment or dispatch. Insurance policy/certificate should be in negotiable form and should be properly endorsed. The insurance policy must be properly stamped. Page 16 of 39 10. 11. 12. 13. 14. 15. If the name of the steamer is mentioned in the insurance policy, it must agree with the name given in the bill of lading. 16. The insurance policy/certificate must bear a description of merchandise which conforms to the terms of the credit and allows identification with the other documents presented. 17. If transshipment is to take place, the insurance documents must cover transshipment. (It may be noted that the normal “Institute warehouse to warehouse clause” covers customary transshipment). 18. If the credit permits shipping on deck and bill of lading indicates shipment of goods on deck, the insurance policy must cover the risk. 19. In case of exports contracted on f.o.b. or c & f terms, it should be ensured that the shipment has been adequately insured against all risks of loss or damage during the entire course of transit and that such insurance cover incorporates “Seller’s interest clause” in the relative policy, permitting claims being paid to exporter in India, in the event of loss/damage to the shipment before ownership of goods passes to the buyer. 20. If it is issued in more than one original, all originals must be submitted (no. of negotiable copies issued are indicated in the insurance policy / certificate). 21. It should be endorsed in blank by the assured, if required as per terms of LC. 22. It should indicate the port of shipment and destination or point of insurance coverage and point of termination of insurance coverage. 23. It should not contain any clause affecting the interest of the assured/assignees. (iv) BILL OF LADING 1. The complete set of bills of lading i.e. all the original negotiable copies must be submitted unless the credit provides otherwise. It should be noted that a shipping company would deliver the goods against the first presented and correctly endorsed negotiable copy. 2. The bill of lading should have been manually signed. (Signatures by rubber stamp are not acceptable.) Bill of lading should normally be signed by the master of the ship or on his behalf by the authorized agent. The bill of lading must be clean i.e. it should not contain any super imposed clause indicating any defect in the goods or in their packing. Any such mention will render the bill of lading Page 17 of 39 3. “unclean”, “dirty”, “foul” which is not a good tender under a credit, unless specifically authorized in the credit. 4. The bill of lading must indicate that the goods are shipped “on board” a named vessel, “Received for shipment” bills of lading should not be accepted unless specifically provided for in the credit. If “received for shipment” bill of lading is over-stamped “on board”, the bill of lading is acceptable, as being “on board” bill of lading, provided the over-stamping is authenticated and dated. The date so indicated should be within the latest date of shipment stipulated under the credit. The date of bill of lading should not be after the stipulated last date of shipment in the credit. It should also not be prior to the date of issuance of letter of credit. The shipping marks in the bill of lading should be identical with those on other documents. The general description of the goods in the bill of lading must be in accordance with that called for in the credit. Number of packages and weight in the bill of lading should be the same as shown in commercial invoice and other documents. “Shipper”, “consignee” and “to be notified” parties in the bill of lading must be in accordance with the stipulations of the credit. Bill of lading must be made out to the order of the party named in the letter of credit. 5. 6. 7. 8. 9. 10. If the goods are being shipped on “c.i.f.” or “c&f” basis, the bill of lading must evidence “freight paid”. Where freight pre-paid bills of lading are required, clauses like “freight to be pre-paid” or “freight pre-payable” will not be accepted as constituting evidence of the payment of freight. 11. The port of shipment or the port of destination should be as required in the credit. 12. The bill of lading alongwith other documents must be presented within the time specified in the credit. 13. Bill of lading must; 1. Be issued by a named carrier or his agent. Page 18 of 39 2. 3. 4. 5. 6. 7. 8. Bear a distinct number. Indicate the place of issuance. Indicate the date of issuance. Indicate the name of consignor. Indicate the name of consignee. Indicate brief description of goods being carried. Must indicate whether “freight Prepaid” or “freight Payable”. 14. Unless specifically authorized in the credit, bills of lading of the following nature should not be accepted: 1. 2. 3. 4. 1. Bill of lading issued by forwarding agent. Bill of lading issued under and subject to the conditions of a charter party. Bill of lading covering shipment by sailing vessel. Bill of lading evidencing goods shipped “on deck”. Bill of Lading can (unless otherwise prohibited or is inconsistent with other terms of LC) Be a short form or Blank backed B/L. Indicate a place of taking in charge different from the port of loading and/or a place of final destination different from the port of discharge. Indicate that the goods are carried in containers trailers/or ‘LASH’ barges. Be issued by freight forwarder provided it is issued in his capacity as a carrier or his agent. Contain a notation that the goods may be carried on deck provided it does not specifically state that they are or will be loaded on deck. Indicate that the goods will be transshipped provided the same B/L covers the entire carriage. Be a “Freight Payable” B/L. - - Page 19 of 39 - Evidence freight prepayment by a stamp or otherwise on B/L to that effect like “Freight Prepaid. Bear reference by stamp or otherwise to costs additional to freight charges. Show clauses such as “Shippers load and count” or “said by shipper to contain” etc. with reference to goods covered by the B/L. Show shipper as a third party other than beneficiary. Be deemed as “Clean on Board” if it is an on board B/L without any super imposed clauses or notations expressly declaring the defective condition of the goods and or the packaging. - OTHER ASPECTS OF B/L 1. If a B/L is issued as “ON Board” B/L, it must indicate the name of the carrying vessel. 2. A Charter party B/L need not show the name of carrier. 3. A transport document issued by a freight forwarder can be accepted provided freight forwarder has issued the same in his capacity as a carrier or his agent and all other requirements are met with. 4. A B/L received for shipment can be treated as an “On Board” B/L if received for shipment B/L is affixed with “On Board” notation duly signed or initialled and dated by the carrier or his agent. 5. If LC calls for a “Marine B/L” without specifying whether it should be “On Board” or “ Received for shipment”, only “ On Board” B/L will be accepted. 6. Date of issue of B/L or “ On Board” notation should be dated prior to the shipment date permitted under LC. 7. Shipping marks, Gross/net weight etc. specified on B/L must correspond to those specified in other documents. Page 20 of 39 v. AIRWAY BILL OR HOUSE AIRWAY BILL ( HAWB ) 1. It must show the name of the carrier. 2. It must be issued by a named carrier or his agent. 3. It must indicate the place of issuance. 4. It must indicate the date of issuance. 5. It must be signed by a named carrier or his agent (In case of HAWB by the Air Cargo consolidator himself ). 6. It must indicate the name of the consignor. 7. It must indicate the name of the consignee (and not that of the consignor or his order) 8. It must indicate port of loading and discharge. 9. It must give brief description of goods being carried and not inconsistent with other documents. 10. Must comply with all other specific requirements of LC. 11. Must indicate notify parties as stipulated in the LC. 12. It should not be a charter party AWB. 13. It should not be claused. Unless prohibited by the terms of LC. 14. It can be short form AWB or Blank backed AWB. 15. It can bear reference by stamps or otherwise to cost anything additional to freight charges. 16. It can contain words like “said by shipper to contain” or “shippers load and count” etc. 17. It can show the consignor as a third party other than beneficiary. Page 21 of 39 18. It must show the shipping marks of packages, number of packages, gross weight, net weight etc. 19. It must indicate whether freight is prepaid or payable at destination. 20. In case of HAWB ( if specified) it must show the name of Airlines, Master Airway Bill number, the flight number, consolidator’s IATA registration number. 21. It should be remembered that unless credit calls for flight date even if flight date is shown on AWB, the date of issue of AWB is considered as date of shipment. 26. OTHER DOCUMENTS A letter of credit may call for certain other documents like certificate of origin, packing lists, Health certificate, pre shipment inspection report, weight notes, test reports, warehouse receipts, delivery orders, consular invoice, certificate of quality or of analysis etc. Branches should ensure that all such documents required under the letter of credit have been presented and all the particulars stated therein are correct. If any particular document is required in a specified form, it should have been presented in that form only. Documents required to be attested by organizations specified in the credit should be presented after completion of all the requisite formalities. Whenever such documents are called for under L/C following aspects must be checked in the documents: 1. The documents are presented in requisite number of copies 2. It is issued by the person or authority specified in the credit. If no specific mention is made regarding issuer of the document, banks can accept document issued by any person provided their data content is not inconsistent with any other stipulated document presented. 3. It is dated and signed by the person/authority concerned. 4. Whether they relate to the goods/shipment covered by the documents or not. 5. Whether the document certifies the facts required as per LC or not. 6. Whether the details mentioned in such certificates/documents are consistent with other documents or not. Page 22 of 39 27. EXPORT DECLARATION FORMS should always be accompanied by the appropriate forms (SDF/GR/PP/SOFTEX etc.), unless provided guidelines. The export declaration forms should be Some of the important points are given hereunder: The export bills export declaration otherwise under the carefully scrutinized. 1. 2. 3. 4. 5. 6. 7. 8. 9. All columns of the Export Declaration Form should have been completed fully and properly by exporters. The number of the duplicate copy should be same as that of the original, which is usually recorded on the bill of lading. All the GR,PP and SOFTEX forms bear specific identification numbers. In case of declarations made on SDF form, the port code number and shipping bill numbers should be cited. The number of the duplicate copy should be same as that of the original, which is usually recorded on the bill of lading. The GR form should also have 10-digit number allotted by customs. Duplicate form should have been duly verified and authenticated by appropriate customs authorities under their stamp. Material alterations or additions should also be authenticated by customs authorities. Exporter should have correctly completed the declaration given in the form. Amount for which the bill is drawn and the invoice is made out should be the same as the value declared on the export declaration form. There should be no violation of FEMA guidelines regarding permitted methods of payment. Under the item “analysis of full export value”, the break-up of the full export value of goods under f.o.b. value, freight and insurance should be furnished in all cases, irrespective of the terms of the contract. The essential particulars of letter of credit viz. description, quantity and value (including unit price wherever applicable) should tally with the declaration on the export declaration forms. ELECTRONIC DATA INTERCHANGE (EDI) SYSTEM 28. On account of introduction of Electronic Data Interchange (EDI) system for processing shipping bills etc. by the customs authorities at certain custom offices, the GR form stands replaced by a declaration in form SDF (Statutory Declaration Form). The declaration in form SDF is appended by the exporter in the shipping bill in duplicate while submitting to the customs authorities. The Commissioner of Customs shall hand over to the Page 23 of 39 exporter one copy of such shipping bill marked “Exchange Control Copy” in which form SDF had been appended for submission to the banks. The branches should accept the Exchange Control (EC) copy of the shipping bill and the form SDF appended thereto alongwith shipping documents. The manner of disposal of SDF form is the same as in case of GR Form. 29. DECLARATION OF SOFTWARE EXPORT While the export of software in physical form is subject to declaration on usual GR/PP forms, the export of software and all other type of software products/packages are to be declared on SOFTEX form, which comprises of 3 (three) copies marked original, duplicate and triplicate and carries an identical pre-printed serial number. FEMA regulations provide that the entire set of SOFTEX form is to be submitted to the concerned designated official of Ministry of Information Technology, Govt. of India at Software Technology Parks of India (STPI) /Export Processing Zone (EPZ)/Free Trade Zone(FTZ)/Special Economic Zone(SEZ), for the purpose of valuation /certification together with relevant documents, not later than 30 days from the date of invoice/the date of last invoice raised in a month as the case may be. The exporter is to submit duplicate copy alongwith supporting document to the bank based on which branches should report the transaction to RBI in form ENC under the cover of appropriate R-Return in the usual manner. Branches should retain the duplicate copy of the form till full export value declared on the form or as certified by the designated officials are realized. Prevalent FEMA regulations provide that even after the realization of export proceeds the duplicate copy of SOFTEX form and Exchange Control copies of shipping bills together with statutory declaration forms shall be retained by authorized dealer. 30. LOSS OF GR FORM/EC COPY OF SHIPPING BILL In cases where the duplicate copy of the GR form/Exchange Control Copy of the shipping bill to which the form SDF is appended is misplaced, lost by the exporter, branches may accept another copy of duplicate GR form or EC copy of shipping bill together with the SDF as the case may be duly certified by the customs authorities prepared by the exporter for collection/registration of documents. 31. COUNTER SIGNING OF PP FORMS PP forms will be presented by the exporter to an authorised branch for counter signature. Authorized branch should countersign the PP forms after ensuring that the parcel is being addressed to their branch or correspondent bank in the country of import. The concerned overseas branch or correspondent should be instructed to deliver the parcel to Page 24 of 39 consignee against payment or acceptance of relative bill. Authorized branches may, however, countersign PP forms covering parcels addressed direct to the consignees, provided: — 1. an irrevocable letter of credit for the full value of the export has been opened in favour of exporter and has been advised through authorized branch concerned; or the full value of the shipment has been received in advance by the exporter through an authorized dealer; or 1. the authorized branch is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realization of the export proceeds, that he could do so. In such cases, particulars of, advance payment/letter of credit/authorized dealer’s certification of standing, etc., of the exporter should be furnished on the form under proper authentication. Any alteration in the name and address of consignee on the PP form should also be authenticated by the authorized branch under their stamp and signature 32. PAYMENT OF FREIGHT AND INSURANCE For letters of credit on terms under which freight would be to the account of overseas buyer, it should be ensured that either the exporter has not paid the freight on exports in India or the actual amount of freight paid has been included in the invoice to be recovered from the overseas buyer in an approved manner. If liability on account of marine insurance of the shipment is to be borne by overseas buyer under letter of credit and insurance is taken by exporter on buyer’s account, branches should verify that the actual amount of insurance premium paid by exporter has been included in the invoice to be recovered from the buyer in an approved manner. 33. GENERAL INDEMNITY FOR NEGOTIATION OF DOCUMENTS Whenever regular FOBNLC/FOUBNLC limits are sanctioned in favour of a client, general indemnity form (duly stamped) of the bank (FEX 110) should be obtained for the total limit and placed in bank record alongwith other documents related to credit facilities. However, the letter of request enclosed with FEX 110 shall be obtained with each negotiation of documents. 34. DISCREPANCIES IN DOCUMENTS Page 25 of 39 On examination of the documents, if any discrepancies are observed, branch should get the same removed. In case the discrepancies cannot be easily got removed, the beneficiary should be requested to arrange with the buyers to get the letter of credit suitably amended. Alternatively, if the beneficiary so desires and at his expense, the branch could advise the opening bank promptly of the irregularities and seek their authority to negotiate the documents notwithstanding the discrepancies. 35. In case of discrepancies, however, which do not render the documents materially defective or which may not be considered so vitally important as to be objected by the issuing bank and which cannot be easily removed, the Branch Manager may use his discretion and negotiate the documents. The Branch Manager must consider each case on its merits and take judicious decision safeguarding the interest of the bank. As the indemnity obtained from the beneficiary is purely an agreement between negotiating bank and the beneficiary, and has nothing to do with issuing bank, it is necessary to consider whether the beneficiary would be in a position to refund the amount paid by the banks in the event of the payment being refused by the issuing bank on account of discrepancies in the documents. 36. In all such cases where documents are negotiated under reserve and indemnity/guarantee is taken from the customer, the limits sanctioned in favour of the customer to the extent of negotiation under reserve, must not be released unless documents have been finally accepted by the opening bank and reserve lifted. If the drawers are unable to offer a satisfactory indemnity/guarantee for discrepant documents, they should be accepted only on collection basis. 37. If a packing credit advance was granted against Letter of Credit, the branch has the option to adjust the same either by negotiating the documents under reserve or making advance against bills sent for collection, subject to sanction of post-shipment credit facility in favour of the beneficiary. Note: The pre-shipment credit is to be converted into post-shipment credit on receipt of shipping documents. 38. All discrepancies observed in the documents negotiated under customer’s indemnity should be suitably recorded and diarized for followup with the issuing bank to ensure payment by them. Page 26 of 39 CREDITS UNDER WHICH NEGOTIATIONS ARE RESTRICTED TO OTHER BANKS 39. Occasionally, branches may receive documents drawn under foreign bank’s letter of credit under which negotiations are restricted to another bank in India. In such cases, the documents shall be accepted for collection only. The documents should be entered in the Foreign Outward Bills for Collection Register (CBS Menu – FBM) and should be given FOBC serial number from the series allotted for the purpose. After examination, the documents should be forwarded for payment with a covering schedule (FEX-16) to the bank to which negotiations are restricted under the credit. In case forward contract has been booked against the letter of credit, the negotiating bank should be advised of the same and payment should be obtained in foreign currency by negotiating bank’s draft/credit to nostro account. 40. In case of packing credit advance allowed to the customer against such letter of credit, the same should be adjusted at the time of sending documents, by making advance against the bill sent for collection to the negotiating bank. 41. On receipt of proceeds, the advance, if any, will be adjusted and balance amount should be paid to the beneficiary by credit to their account after deducting charges in terms of bank rules. 42. In case of discrepancies advised by negotiating bank in the documents, the beneficiary must be asked to remove the discrepancies and in cases where discrepancies cannot be rectified, payment may be accepted from the negotiating bank under “Reserve” for adjustment of our advance/payment to the beneficiary. In case of known beneficiaries, who are considered good for the amount, payment in part or full may be made under proper sanction, depending upon the nature of discrepancies and the report on the party. The payment to the beneficiary should be released in shape of advance against bill for collection. The amount advanced will be adjusted from the proceeds received under reserve from the negotiating bank. The limits sanctioned in favour of the customer to the extent of payment made under reserve must not be released unless documents have been finally accepted by opening bank and reserve is lifted. Page 27 of 39 43. A proper record of all payments received under reserve should be maintained. All discrepancies observed in the documents should be recorded in a separate register. The same should be diarized for follow-up with the negotiating bank for lifting of the reserve. 44. DOCUMENTS RECEIVED FROM OTHER BANKS At times documents drawn under letters of credit, which are either confirmed by our bank or are restricted for negotiation to our bank, are presented for negotiation by other banks. In case of discrepancies, the sending bank usually offers its guarantee for discrepancies and asks for payment under reserve. Branches may accept such guarantees, issued by other authorized dealers, after ensuring the same has been signed under authorized signatures of the concerned bank, and the guarantees are specific as to the amount, period and discrepancies in the documents. The details of discrepancies observed in the documents negotiated under guarantee of the sending bank, should be recorded in a separate register. The same should be diarized for follow-up with the issuing bank for their authority to lift the reserve. When the reserve is lifted, the same should be advised to the sending bank. 45. EXCHANGE RATES All bills in foreign currencies drawn under documentary letters of credit should be negotiated at the bank’s buying rate of exchange for the appropriate usance, ruling on the date of the negotiation unless a forward exchange contract has been booked in which case the contract rate will be applied. 46. INTEREST Interest for the Notional Transit period plus usance if any, is to be charged separately as per the banks guidelines. In case LC is restricted to us and documents are received for negotiation from other banks, it should be recovered from proceeds before remitting the amount to them. Overdue interest in all cases shall be recovered from the customer in case payment is not received on or before the expiry date of Normal Transit Period in case of demand bills, and on or before the notional due date/ actual due date as the case may be in case of usance bills as per banks’ guidelines. Page 28 of 39 In case of early realization of export bill proportionate interest shall be refunded from the date of realization i.e. value date of credit to nostro account in case of a foreign currency bill, and by debit to Vostro account incase of a Rupee bill, upto the last date of normal transit period in the case of demand bill and upto the notional due date in case of usance bill. Such a refund shall become payable only on receipt of relative credit advice from the concerned PMO. 47. CHARGES All charges should be recovered in accordance with the bank guidelines as issued from time to time. 48. ENDORSEMENT OF LETTERS OF CREDIT All negotiations made under any letter of credit must be duly endorsed on the letter of credit under bank’s stamp and authorized signatures. Letters of credit should normally be retained by the bank in its records for future reference. Nevertheless, if the beneficiary wishes to have the exhausted credit or partly utilized credit handed back to him, this may be done. However, a photocopy of the front and back of the letter of credit should be retained for future reference. It must be ensured that all negotiations under the credit have been duly endorsed before it is handed back to the customer. 49. APPROVAL OF BILLS RECEIVED FROM BRANCHES WITHOUT DIRECT AUTHORISATION If the documents received from branches without direct authorization are found to be in order, the authorized branch will approve them and will advise the branch without direct authorization that the documents are acceptable by sending them a copy of the Form FEX-16 on which the rate of exchange and the rupee equivalent will be indicated. DISPOSAL OF DOCUMENTS 50. Negotiated bills shall be forwarded to the drawee bank or issuing bank in accordance with the instructions given in the credit. Remittance schedule (Form FEX-16) shall accompany the documents. This form is in a set of six, and will be used as under:- Page 29 of 39 Top Copy letter Second Copy Third Copy Fourth Copy To be sent to the opening bank as a covering with the original set of documents. To be sent to the opening bank as a covering letter with the duplicate documents. To be sent to the concerned Position Maintaining Office. To be sent to the party presenting the documents (Through the branch without direct authorization, if documents were received through them.) To be sent to the branch without direct authorization (If applicable for their own records, indicating approval of documents, exchange rate to be applied and rupee equivalent). To be retained at the authorized branch as an office record, and placed in the separate file which is maintained for each credit advised through the branch. If the credit was not advised through the branch and no file exits, the sixth copy should be held in a pending file until the foreign correspondent advises us that the documents have been paid. Fifth Copy Sixth Copy 51. The remittance schedule must be carefully checked by the incharge who will satisfy himself that all the documents have been properly listed, and the reimbursement is claimed without delay strictly in terms of credit. In case of bills relating to branches without direct authorization, expenses incurred by authorized branches should be indicated on copy of the remittance schedule sent to concerned Position Maintaining Office to enable the concerned office to send a credit advice in respect of such charges to the authorized branch. The name of the concerned branch without direct authorization should also be indicated on the remittance schedule to enable the concerned position maintaining office to remit proceeds direct to the concerned branch without direct authorization. 52. Branches must scrupulously follow the instructions given in the credit regarding disposal of documents. In some cases the drafts will be sent to Page 30 of 39 one bank and the documents (original and duplicate) to another bank. In such cases, drafts should be sent to the drawee i.e. reimbursing bank under covering letter on Form FEX-17. A copy of this form should be sent to the concerned Position Maintaining Office . As far as possible reimbursement must be claimed promptly in terms of Uniform Rules for Reimbursement (ICC publication 725). 53. The original set of documents should be dispatched on the date of negotiation by registered airmail / approved courier and duplicate set by the next registered airmail/courier. 54. Branches should keep non-negotiable copies of invoice and bill of lading/Airway Bill/Post Parcel Receipt in records alongwith file copy of remittance schedule for future reference. 55. REPORT TO CONCERNED POSITION MAINTAINING OFFICE While negotiating the export bill the authorized branch shall instruct the foreign bank to credit our foreign currency account i.e Nostro Account. In case the transaction exceeds the amount equivalent of Rs. 2,50,000/-(Rs. two lakh fifty thousand)(prevalent prescribed limit) the branch shall report the necessary particulars of the transaction on the same day through telephone/fax/RET-AD to Position Maintaining Office whose Nostro account is to be credited by the foreign bank. The foreign currency amount shall be communicated both in words and figures to avoid any discrepancy as it involves exchange risk. The exchange rate applicable shall be ascertained/confirmed from the Position Maintaining Office. The exchange rate applied shall be mentioned on the third copy of remittance schedule (Form FEX-16), which is sent to Position Maintaining Office irrespective of the amount of the transaction. In case forward contract has been booked for the transaction, the intimation for the utilization of the contract shall be reported on the same day to the concerned Position Maintaining Office and the intimation to this effect shall be marked in red ink on the third copy of remittance schedule (Form FEX-16) which is sent to Position Maintaining Office giving the details of the forward contract utilized. Cancellation of left over unutilized balance amount if any, shall be done on the same day. In case the foreign currency amount of transaction exceeds the amount of forward contract booked, the excess amount shall be transacted at the prevailing exchange rate. 56. SUBMISSION OF EXPORT DECLARATION FORMS Page 31 of 39 All export declaration forms should be handled by the branch in terms of instructions given in FEMA. The export declaration form alongwith the copy of the invoice etc. shall be retained by the authorized branch and may not be submitted to Reserve bank. The authorized branches should ensure by random check of the relevant duplicate forms by their internal / concurrent auditors to confirm that nonrealization or short realization allowed, if any, is within the powers delegated to them or has been duly approved by Reserve Bank, wherever necessary. Where a part of export proceeds are credited to EEFC account, the export declaration (duplicate) form may be certified as under : "Proceeds amounting to....... representing......% of the export realization credited to EEFC account maintained by the exporter with......" 57. ADVICE OF PAYMENT Authorized branches must make sure that they receive advice of payment in case of sight bills, or acceptance in case of usance, from abroad, within a reasonable period. If no such advice is received within a period of one week from the due date, the branches must take up the matter with the issuing bank promptly. If no satisfactory reply is received, the matter should be referred to International Banking Division, Head Office giving the details to enable them to take up the matter appropriately with the concerned correspondent. In case of Usance Bills, the due date as advised by the drawee bank should be noted in the Export Credit- Documents Paid Register and advised to the concerned Position Maintaining Office . In respect of outstanding bills, the related report of the Export CreditsDocuments Paid bills should be examined by incumbents-incharge at least once a month for taking steps in respect of late receipt of payment advices and follow-up action where payment advices are delayed. 58. DISHONOURED BILLS When a bill is dishonored by non-acceptance or non-payment owing to discrepancies, the Circle Head should be advised immediately with full details and further instructions in the matter should be sought from them. In the meantime notice of dishonor should be served on all parties liable on the bill including the guarantor, if any. Page 32 of 39 59. OVERDUE BILLS (NOT REALISED WITHIN PRESCRIBED PERIOD UNDER FEMA REGULATIONS) Under prevalent FEMA Regulations, all export bills must be realized by the exporter within the due date for payment or within prevailing maximum permissible period (presently modified from 6 months to 12 months, subject to review after 31.03.2011, as per FEMA) from the date of export, whichever is earlier. In case of export bills not realized on the due date for payment, branches should take up the matter promptly with the concerned exporter. If the exporter fails to arrange for delivery of the proceeds, within the prevalent permissible period or seek extension of time beyond stipulated period, the matter should be reported to Reserve bank, stating where ever possible, the reason for the delay in realizing the proceeds. The branches should follow up overdue export bills with exporters systematically and vigorously. Any laxity in the follow up of realization of export proceeds by authorized dealers is viewed seriously by Reserve Bank, which may lead to the invocation of penal provisions under FEMA. However, all the export bills outstanding beyond six months from the date of export may be reported in XOS statement at the end of June & December every year and the statement shall be submitted in triplicate within 15 days from the close of the relative half year. Where authorized dealer has granted the extension of time, the date upto which extension has been granted may be indicated in the ‘Remarks’ column. 60. DELINKING OF EXPORT BILLS I) Foreign currency Export Bills are to be delinked / crystallized into rupee liability on the 30th day after the expiry of the normal transit period in case of unpaid demand bills and on the 30th day after notional due date in case of unpaid usance bills. In case the 30th day happens to be a holiday or Saturday, the export bill shall be delinked / crystallized on the next working day. Where the actual due date is advised by the foreign correspondent after the notional due date has been arrived at, the bill shall be delinked/crystallized on the30th day after the actual due date in the event of non-payment. As such, whenever the intimation about actual due date has been received by the branches, the same is to be informed to concerned Position Maintaining Office . However, export bills may be delinked by the branches before the said period of 30th day with specific understanding and written request from the exporter. For delinking, branches shall apply the current TT selling rate prevailing on the date of delinking or the original bill buying rate whichever is higher Page 33 of 39 ii) The Position Maintaining Office shall not delink the bill unless reported by the concerned branch as it is the responsibility of the branch to report delinking of bills to the Position Maintaining Offices on the due date. If the branch does not report the delinking, Position Maintaining Office shall follow up the same with the concerned branch/circle office. iii) The branches are required to report delinking to the concerned Position Maintaining Office on due date of delinking. The authorized branches, while submitting Manager’s Monthly Certificate (MMC) should confirm that unpaid bills under the head FOBP/FOBNLC have been transferred to “Advance against export bills realizable account” after the expiry of 30 days from the notional due date implying that relevant bills have been delinked. The unpaid bills transferred to realizable account shall continue to form part of total outstanding under the sanctioned limit of the customer with exchange risk open against him. iv) Failure on the part of the branches to report delinking of the bills on or by the due dates will result in violation of FEDAI guidelines and may also result in possible complaints from customers in case of adverse movements in exchange rates. v) The branches shall report the delinking of the export bills on the due dates to the concerned Position Maintaining Office over telephone/fax and shall recover the delinking charges from the customers immediately upon intimation /receipt of the claim from the Position Maintaining Office , by debiting the same to “advance against export bills realisable account” to which the amount has already been deposited at the time of delinking of the export bills. Where the total amount has been recovered from the party at the time of delinking and item has been transferred to collection head, it should be ensured that the delinking charges as advised by Position Maintaining Office are recovered immediately from the customer and remitted to concerned Position Maintaining Office .There should be no laxity in remitting delinking charges to concerned Position Maintaining Office as non recovery of these charges in time tantamount to giving undue benefit of the funds to the exporter at the cost of the bank. vi) Position Maintaining Offices upon receipt of reporting from the branches shall delink the bill from the currency position only after ascertaining that no credit entry is outstanding in their nostro accounts on account of the bills to be delinked. In order to help the Position Maintaining Office to link the items outstanding in their accounts for want of matching particulars, the branches shall ensure that any intimation of the payment of a bill received by them is forwarded to Position Maintaining Office promptly. The Position Maintaining Offices shall work Page 34 of 39 out the delinking charges at the time of delinking and claim the same from the branches. The authorized branches shall report delinking as notional sale (on account off reversal of purchase) in their R–Return under inflows and when the payment of the same is received subsequently, it shall be reported in R-Returns as outflows. 61. ISSUE OF EXPORT CERTIFICATE Authorized branches may issue export certificates to the exporters in terms of the Foreign Trade Policy . The certificate is issued in triplicate. The first copy marked 'Original' in bold letters is given to the exporter. 2nd copy marked 'Duplicate' in bold letters is forwarded to Directorate General of Foreign Trade . 3rd copy is kept as office copy by the issuing branch. The export certificate should invariably be issued by authorised branches only and full particulars should be noted in a separate register. The register should have columns for Sr. No., date of issue, bill number, name of exporter and the amount. The remarks "exports certificate issued on ___________________", should invariably be given against the original entry in the respective Export Credits- Documents Paid Register in order to avoid duplicate issuance of certificate. The Authorized Branch should issue only one copy of the original. In case the original is reported lost by the exporter an extra copy of the original may be issued with remarks in RED INK 'TRUE COPY OF THE ORIGINAL REPORTED LOST BY THE EXPORTER''. In case where full proceeds of any bill, for which certificate has been issued, are not received in India, the fact should be promptly reported to the office of the Directorate General of Foreign Trade giving reference of the serial number and date of the certificate. A suitable note should be given in the Export Credits- Documents Paid Register, as also against the entry in the certificates issued register. Whenever Bank Realization Certificate (BRC) is issued by the branch to the exporter, the BRC data shall be forwarded in the prescribed software to International Banking Division, Head Office through e-mail on daily basis, for onward submission to DGFT, New Delhi 62. ACCOUNTING PROCEDURE At the time of negotiation of documents, the following entries are passed: Dr. -Foreign Outward Bills Negotiated under Letters of Credit Page 35 of 39 (At appropriate bills rate ) Cr. -Party; Cr. - Postage; Cr. -Commission on Foreign Bills (Inward and Outward) (For Rupee Bills) The proceeds will be received from the correspondent banks, through the concerned Position Maintaining Office at the rates ruling on the day of the negotiation of the bill. The following entries are passed: Dr. -Concerned Position Maintaining Office Cr. -Foreign Outward Bills Negotiated under Letters of Credit. It may be noted carefully that short realization in foreign currency if any on account of foreign bank charges or otherwise, is to be recovered from the exporter at TT selling rate prevailing on the date of credit advice when the shortfall amount is accounted for in the books of concerned Position Maintaining Office. For Rupee bills reimbursement will be obtained by debit to a correspondent’s Non-Resident Rupee Account in India or by remittances from abroad. Entries will be passed accordingly. The date of realization of the bill should be marked in Export Credits – Documents Paid Register. The date of credit (value date) of amount to our foreign currency account should also be inserted in this Register. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION 63. Bills and documents presented under export letters of credit should be examined in the light of points set out in paragraphs 24 to 32 above. If they appear to be in order the customer should be asked to complete Form FEX –19 and the documents should then be entered in the foreign outwards bills for collection Register- (CBS Menu – FBM - XAUTH) and sent to the linked authorized branch. 64. If the documents are found to be in accordance with the terms of credit, branch without direct authorization will receive two copies of the remittance Schedule FEX-16, approving the negotiation and containing Page 36 of 39 the details of rupee amount, which may then be paid to the beneficiary. The details should be entered in Export Credits- Documents Paid Register (CBS Menu – FBM). It must be noted that no payment can be made to the customer until documents have been examined and approved by the authorized branch. After the documents have been paid abroad, the branch without direct authorization will receive reimbursement direct from the concerned Position Maintaining Office. 65. If the documents are found to be not in accordance with the terms of the credit, the discrepancies will be advised by the authorized branch to the branch without direct authorization. The branch without direct authorization will decide, keeping in view the nature of discrepancies, whether the documents should be negotiated against indemnity of the drawer ,as per para number 33 of this chapter , depending upon their credit worthiness and means and if the party is considered good for the amount. Instructions in paragraphs 34 to 38 in the heading “Documents with discrepancies” will also apply to branches without direct authorization. 66. CHARGES All charges recovered should be in accordance with the bank guidelines issued from time to time. 67. ACCOUNTING PROCEDURE Branches without direct authorization will enter the bills in the in the Export Credits – Documents Paid Register (Menu: FBM – XAUTH) in the CBS, at the time of forwarding documents to the authorized branch. On receipt of approval for negotiation of bill from Authorised Branch, the branches to pass the following vouchers through CBS. Dr. Foreign Outward Bills Negotiated under Letters of Credit (at the rate of Exchange advised by the authorised branch) Cr.- Party ) Cr.- Postage ) Page 37 of 39 Upon realization of bill and receipt of credit in the Non-customer Intersol Account or advice from the concerned Position Maintaining Office, the branches to pass the following vouchers through CBS. Dr.- Non-customer Intersol Account / HO A/c of Position Maintaining Office Cr.- Foreign Outward Bills Negotiated Under Letters of Credit Page 38 of 39 Annexure-I Punjab National Bank BO: Dated____________ PROPOSAL FOR SEEKING APPROVAL FOR ADDING CONFIRMATION TO LETTER OF CREDIT ISSUED BY CORRESPONDENT/APPROVED BANKS (To be sent by Authorised Branches to International Banking Division, H.O.) 1. 2. 3. Name of the Bank Nature of Credit LC Details: LC No. Date : : Amount : : : 4. 5. 6. 7. Tenor : Expiry Date for Negotiation: Reimbursement Clause Whether LC is available by negotiation/ acceptance/payment in India or outside India. Name & Address of the Beneficiary Dealings with the beneficiary of LC ,whenever beneficiary happens to be our client Any onerous stipulation embodied in the LC which may be detrimental to the interest of the beneficiary: Amount of previous outstanding confirmed credits in respect of this bank. Status of Bank Has the foreign bank requested us to add confirmation 8. 9. 10. You are requested to accord us permission to add confirmation to this proposal. We have advised/yet to advise the LC to the beneficiary. Please also advise the World Rank and the Country Risk Indicator of this bank to enable us to apply the charges. (INCUMBENT INCHARGE) Page 39 of 39                             4. FOREIGN  OUTWARD BILLS    Chapter 4 : FOREIGN OUTWARD BILLS GENERAL 1. This chapter deals with the handling of foreign outward bills purchased by branches or received by them for collection .Branches shall handle export bills subject to compliance of Foreign Trade Policy/FEMA guidelines/Uniform rules for collection (ICC Publication - presently No.522), in force from time to time. 2. Branches are requested by customers to transact three kinds of outward bills operations: a) To purchase a bill outright; b) To collect a bill in which case the credit would be provided to customer after proceeds of the bill have been received; and c) To make an advance against the security of a bill sent for collection. 3. The following types of instruments are dealt with under the above transaction: a) b) c) d) Documentary bills not under Letters of Credit; Clean bills; Cheques; and Bank drafts drawn on banks abroad. PART ‘A’: PROCEDURE FOR AUTHORISED BRANCHES 4. FOREIGN OUTWARD BILLS PURCHASED Foreign clean and documentary bills drawn at sight or at usance may be purchased/ discounted for customers of good standing only. Branches should ensure the exporter has been allotted Importer Exporter Code (IEC) number by Directorate General of Foreign Trade. Branches must ensure that name of exporter is not on the caution list of RBI and/or on the Specific Approval List (SAL) of ECGC. Cheques and drafts of approved banks may be purchased by branches as per procedure laid down in this chapter and as per delegated powers. Page 1 of 26 5. RECORDS On receipt, the bill shall be entered in the FBM Menu in CBS . All documents must be marked with the Bank’s stamp and the number from the series allotted for the purpose. 6. BILLS RECEIVED FROM BRANCHES WITHOUT DIRECT AUTHORISATION Authorised branches shall receive bills from branches without direct authorization under cover of form FEX-31, for examination and approval whether the bills may be purchased by them. Such items are to be treated by the authorized branches as collection items (See separate procedure for Foreign Outward Bills for Collection below), even though they are purchased by the branches without direct authorization. However, “Foreign Outward Bills Purchased” number from the series allotted for the purpose will be given to these items to enable the concerned position maintaining office to take the same into their position. The authorized branch shall mark all the documents with the Bank’s stamp. 7. EXAMINATION OF DOCUMENTS When a documentary bill is purchased from a customer, the merchandise covered by the bill becomes our security for the amount advanced. It is, therefore, most important that documents should be carefully examined. The export bills along with documents should be thoroughly examined by the officer concerned before submitting the same to the Manager for approval for purchase/discount etc. The Manager must also examine the documents and if he is satisfied, he shall approve purchase/advance there against if it is within his vested powers or is covered by appropriate sanction. Documents must be scrutinized closely by the concerned official to be satisfied that they give the bank adequate control over the goods i.e. buyer should not be in a position to take delivery of the consignment without payment/acceptance of the bill. In case of air consignment/post parcel, goods must be consigned to the concerned overseas branch/an approved bank. The Bill of Lading should be made out to order and endorsed in blank. The goods must be adequately insured against all risks of losses and damages at all stages. The benefit of the insurance should be available to the bank by incorporation of Bank’s clause in the Page 2 of 26 policy. In case of exports contracted on f.o.b. or c&f terms, it should be ensured that the shipment has been adequately insured against all risks of losses or damages during the entire course of transit and that such insurance cover incorporates ‘Seller’s Interest Clause” in the relative policy, permitting claims being paid to exporter in India, in the event of loss or damage to the shipment before ownership in the goods passes to the buyer. The exporter should invariably submit the original sale contract/confirmed order, which should be retained by the branch for their records. If documents contain discrepancies or defects, they must not be purchased or discounted but should be accepted only for collection. The export bills should always be accompanied by the appropriate Export Declaration Form (GR/SB&SDF, PP, SOFTEX etc), except where exempted under FEMA. The Export Declaration Forms should be carefully scrutinized. Some of the important points are given hereunder: i) All columns of the Export Declaration Form should have been completed fully and properly by exporters. ii) The number marked on the duplicate copy should be same as that of the original, which is usually recorded on the Bill of Lading. iii) Duplicate form should have been duly verified and authenticated by appropriate customs authorities under their seal and signature. Material alterations or additions should also be authenticated by customs authorities similarly. iv) The custom’s number (with ten numerals denoting the code number of the port of shipment, the calendar year and a six digit running serial number) must be there on the export declaration form. v) Exporter should have correctly completed the declaration on the forms. vi) Amount for which the bill is drawn and the invoice is made out should be the same as the value declared on the Export Declaration Forms. vii) There should be no violation of FEMA regarding permitted methods of payment. viii) Under the item “analysis of full export value”, a break-up of the full export value of goods under f.o.b. value, freight and Page 3 of 26 insurance should be furnished in all cases, irrespective of the terms of the contract. ix) The essential particulars of sale contract/firm order viz. description, quantity and value (including unit price, wherever applicable) should tally with the declaration on the Export Declaration forms. All the export declaration forms should be handled/disposed off by the branches in terms of instructions given by RBI under FEMA/issued by the bank. Exports of goods under special agreements or credits extended by Government of India to foreign Governments are governed by terms and conditions set out in the relative public notices. Important instructions relating to such exports are also communicated by Reserve Bank of India in the form of AP (DIR) circulars. While handling documents covering exports under these agreements, branches should refer to the relative public notices and Reserve Bank of India’s circulars and ensure that prescribed procedure is meticulously followed. Under present FEMA customers are required to submit shipping documents to an authorized dealer within 21 days from the date of export. In case where exporters present documents pertaining to exports after the prescribed period of twenty-one days from date of export, authorised branches may handle them without prior approval of Reserve Bank, provided they are satisfied with the reasons for delay. For sale contract between exporter and overseas buyer on terms under which freight would be to the account of overseas buyer, it should be ensured that either the exporter has not paid the freight on exports in Indian Rupees or the actual amount of freight paid has been included in the invoice, and will be recovered from the overseas buyer in an approved manner. If liability on account of marine insurance of the shipment is to be borne by overseas buyer in terms of the sale contract with the later and insurance is taken by exporter on the buyer’s account, branches should verify that the actual amount of insurance premium paid by exporter has been included in the invoice, and will be recovered from the overseas buyer in an approved manner. Page 4 of 26 It is understood that the seller of the goods has satisfied himself that the foreign buyer has obtained necessary import licence, if one is required. 8. ECGC COVER Branches should ensure that the export bills tendered by the customer are either covered under the whole Turnover Post Shipment Guarantee of ECGC or a separate policy has been obtained wherever required. The incumbent-in-charge must go through the conditions of ECGC Policy/Guarantee to ensure that Bank’s interest is safeguarded. In cases where specific approval of ECGC is required to cover post shipment credit under the Guarantee issued to bank, branches purchasing the documents must ensure that necessary approval from ECGC is obtained and the limit fixed by ECGC, if any, is adhered to. 9. DESPATCH OF DOCUMENTS Documentary bills purchased (or discounted) shall be forwarded to a correspondent/an approved bank promptly. Remittance schedule on form FEX-29 shall be used for this purpose. This form is in a set of five, and is used as under: 1st Copy This serves as a covering letter for the original documents i.e. one complete set. nd 2 Copy This serves as a covering letter for the duplicate or remaining documents. 3rd Copy This copy is receipt for the customer from whom the bill was purchased. It is also sent to the branch without direct authorization in the case of bills received from them as a receipt together with the second copy of form FEX-31. The rupee amount of the bill converted at the current rate on the date of approval must be indicated on the schedule. 4th Copy This is sent to the Position Maintaining Office whose foreign currency account is to be credited, for their record. The rate of exchange at which the item is purchased should be written below the FOBP number. th 5 Copy This is retained at the authorised branch as an office copy. (Pending payment of the bill, it should be kept in a separate file for outstanding bills). Page 5 of 26 The remittance schedule must be carefully checked by the Dy. Manager/Manager, who will satisfy himself that all the documents have been properly listed. For bills relating to branches without direct authorization, expenses incurred by authorised branches should be indicated on the copy of remittance schedule sent to the concerned Position Maintaining Office. The name of branch without direct authorization should also be indicated on the copy of remittance schedule to enable the concerned Position Maintaining Office to send realisation advice to the branch direct. It should be ensured that instructions regarding receipt of payment are in accordance with the permitted methods of receipt in terms of FEMA. Instructions must be given as to the course to be adopted if the bill is dishonoured due to non-acceptance or non-payment. The original set of documents should be dispatched on the day of purchase by approved courier/registered airmail and the duplicate set by the following registered air mail/approved courier. The clean bills also must be despatched on the day of lodgment itself. Branches should keep non-negotiable copies/photocopies of invoice, Bill of Lading/Air-way Bill/Post Parcel Receipt on record along with file copy of the remittance schedule for future reference. 10. DESPATCH OF CLEAN BILLS Branches will use a simpler form of remittance schedule form FEX-32 for clean items instead of form FEX-29 (used for documentary bills). This form is in a set of four and is used as under: This serves as a covering letter for the bill. This is sent to the Position Maintaining Office whose foreign currency account is to be credited for their record. The rate of exchange at which the item was purchased should be written below the FOBP Number. This copy is a receipt for the customer from whom the bill was purchased. It is also sent to the branch without direct authorization in the case of bills received from them as a receipt, together with the second copy of form FEX-31. This is retained at the authorised branch as an office copy. (Pending payment of the bill it should be kept in a separate file for outstanding bills). 1st Copy 2nd Copy 3rd Copy 4th Copy Page 6 of 26 11. Authorised branches must ensure that all bills are duly acknowledged by the correspondent abroad. The acknowledgement reference number of the correspondent should be noted in system for future reference to that correspondent. If an acknowledgement and/or realisation advice is not received within a reasonable time, a message should be sent to the foreign bank by swift/fax asking for present position & reasons for delay. In case of usance bills, due date as advised by the collecting bank should be noted in the system and in a due date diary. 12. REPORTS TO CONCERNED POSITION MAINTAINING OFFICE While purchasing the export bill the authorised branch shall instruct the foreign bank to credit our foreign currency account. In case the transaction exceeds the amount equivalent of Rs. 2,50,000/-(Rs. Two Lakh Fifty thousands only)(prevalent prescribed limit) the branch shall report the necessary particulars of the transaction on the same day through Retad / fax / telephone to Position Maintaining Office whose Nostro account is to be credited by the foreign bank. The foreign currency amount shall be communicated both in words and figures to avoid any discrepancy as it involves exchange risk. The exchange rate applicable shall be ascertained/confirmed from the Position Maintaining Office. The exchange rate applied shall be mentioned on the fourth copy of remittance schedule (Form FEX-29), which is sent to Position Maintaining Office irrespective of the amount of the transaction. In case forward contract has been booked for the transaction, the intimation for the utilisation of the contract shall be reported on the same day to the concerned Position Maintaining Office and the intimation to this effect shall be marked in red ink on the fourth copy of remittance schedule (Form FEX-29) which is sent to Position Maintaining Office giving the details of the forward contract utilised. Cancellation of left over unutilized balance amount if any, shall be done on the same day. In case the foreign currency amount of transaction exceeds the amount of forward contract booked, the excess amount shall be transacted at the prevailing exchange rate. 13. EXCHANGE RATES Foreign currency bills,which also include Cheques, drafts & other clean items, will be purchased at the current appropriate sight/usance bills buying rate. Page 7 of 26 For clean instruments drawn on other banks in India, the items shall be purchased by branches only at provisional rates. In such cases branches should also obtain an undertaking from the customer for adjustment of difference in amount received from the drawee bank and the amount paid to the customer, if any. 14. CHARGES All charges shall be recovered in accordance with Bank’s extant guidelines. Clear instructions should be provided to the foreign banks regarding recovery of charges. 15. INTEREST On bills, covering exports which are purchased/discounted, interest shall be charged on the date of purchase at the rate prescribed for post shipment credit (In terms of L&A circular on the subject), for the notional transit period (NTP) in case of bills payable ‘at sight’ or on ‘demand’ basis and upto Notional Due Date in case of export usance bills. Where due dates are reckoned from date of shipment or date of bill of exchange etc., no NTP shall be applicable. In case of bills purchased/discounted subsequent to lodgment, interest should be charged from the date of purchase/discount till notional due date reckoned on the basis of original lodgment. 16. OVERDUE INTEREST If any export bill which has been purchased is not paid within the notional transit period in case of sight bills and on due date in case of usance bills, overdue interest will be charged at the prescribed rate as per L&A circular on the subject from the expiry of the notional transit period in the case of sight bills and from the due date in case of usance bills, upto the date of credit of the proceeds to the foreign currency account abroad of the concerned Position Maintaining Office for foreign currency bills and upto date of debit to non-resident account of foreign correspondent for rupee bills. 17. ACCOUNTING PROCEDURE (I) FOR OWN BUSINESS Page 8 of 26 When a bill is purchased by the authorised branch from a customer the following entries shall be passed:Dr. Foreign Outward Bills Purchased at current appropriate sight / usance bill buying rate. Cr. Party Cr. Postage Cr. Commission on Foreign Bills (inward and outward). If any packing credit advance is outstanding against the particular order/contract, the same must be adjusted. The proceeds will be received from the correspondent bank through the concerned Position Maintaining Office at appropriate exchange rates ruling on the day of purchase of the bill. On receipt of advice the following entries shall be passed: Dr. Concerned Position Maintaining Office Cr. Foreign Outward Bills Purchased For rupee bills reimbursement will usually be obtained by debit to a correspondent’s Non-resident Rupee account or by remittance from abroad and entries will be passed accordingly. The date of realisation of the bills should be marked in FBM menu of CBS. The date of credit of amount to the foreign currency account (value date) must also be marked in the system to facilitate calculation of interest. (II) BILLS RECEIVED FROM BRANCHES WITHOUT DIRECT AUTHORISATION For bills relating to branches without direct authorisation, at the time of approving the bill for purchase, the following contra entries will be passed; Dr. Foreign Outward Bills lodged (Branches Purchases) Cr. Foreign Outward Bills for collection (Correspondents) (Separate heads in Subsidiary General Ledger maybe opened for clean and documentary bills, if volume of business received from branches without direct authorisation is high, to facilitate tallying of balances). At the time of realisation of the bill, the authorised branches will receive credit advice only in respect of postage and other out of pocket expenses mentioned by them on the relative remittance schedule, from the concerned Position Maintaining Office. The contra entries passed above will be reversed on receipt of credit advice and other entries in respect of charges etc. will be passed accordingly. Page 9 of 26 18. OVERDUE BILLS (NOT REALISED WITHIN PRESCRIBED PERIOD UNDER FEMA REGULATIONS) Under prevalent FEMA Regulations, all export bills must be realized by the exporter within the due date for payment or prevailing (presently modified from 6 month to 12 months – to be reviewed after 31.03.2011) maximum permissible period from the date of export, whichever is earlier. In case of export bills not realized on the due date for payment, branches should take up the matter promptly with the concerned exporter. If the exporter fails to arrange for delivery of the proceeds within prevailing maximum permissible period or seek extension of time beyond permissible period, the matter should be reported to Reserve Bank, stating where ever possible, the reason for the delay in realising the proceeds. The branches should follow up overdue export bills with exporters systematically and vigorously. Any laxity in the follow up of realisation of export proceeds by authorised dealers is viewed seriously by Reserve Bank, which may lead to the invocation of penal provisions under FEMA. However, all the export bills outstanding beyond six months from the date of export may be reported in XOS statement at the end of June & December every year and the statement shall be submitted in triplicate within 15 days from the close of the relative half year. Where authorised dealer has granted the extension of time, the date upto which extension has been granted may be indicated in the ‘Remarks’ column. 19. DELINKING OF EXPORT BILLS I) Foreign currency Export Bills are to be delinked/crystallized into rupee liability on the 30th day after the expiry of the normal transit period in case of unpaid demand bills and on the 30th day after notional due date in case of unpaid usance bills. In case the 30th day happens to be a holiday or Saturday, the export bill shall be delinked/crystallized on the next working day. Where the actual due date is advised by the foreign correspondent after the notional due date has been arrived at, the bill shall be delinked/crystallized on the30th day after the actual due date in the event of non-payment. As such whenever the intimation about actual due date is received by the branches, the same shall be informed to concerned Position Maintaining Office. However, export bills may be delinked by the branches before the said period of 30th day with specific understanding and written request from the exporter. For delinking, Page 10 of 26 branches shall apply the current TT selling rate prevailing on the date of delinking or the original bill buying rate whichever is higher ii) The Position Maintaining Office shall not delink the bill unless reported by the concerned branch as it is the responsibility of the branch to report delinking of bills to the Position Maintaining Office on the due dates. If the branch does not report the delinking, Position Maintaining Office shall follow up the same with the concerned branch/CO. iii) The branches are required to report delinking to the concerned Position Maintaining Office on due date of delinking. The authorised branches, while submitting Manager’s Monthly Certificate (MMC) of foreign exchange business to International Banking Division, Head Office should confirm that unpaid bills under the head FOBP/FOBNLC have been transferred to “Advance against export bills realisable account” by the expiry of 30 days from the notional due date implying that relevant bills have been delinked. The unpaid bills transferred to realisable account shall continue to form part of total outstanding under the sanctioned limit of the customer with exchange risk open against him. iv) Failure on the part of the branches to report delinking of the bills on or by the due dates will result in violation of FEDAI guidelines and may also result in possible complaints from customers in case of adverse movements in exchange rates. v) The branches shall report the delinking of the export bills on the due dates to the concerned Position Maintaining Office over telephone/fax and shall recover the delinking charges from the customers immediately upon intimation /receipt of the claim from the Position Maintaining Office , by debiting the same to “advance against export bills realisable account” to which the amount has already been debited at the time of delinking of the export bills. Where the total amount has been recovered from the party at the time of delinking and item has been transferred to collection head, it should be ensured that the delinking charges as advised by Position Maintaining Office are recovered immediately from the customer and remitted to concerned Position Maintaining Office .There should be no laxity in remitting delinking charges to concerned Position Maintaining Office as non recovery of these charges in time tantamount to giving undue benefit of the funds to the exporter at the cost of the bank. Page 11 of 26 vi) Position Maintaining Office upon receipt of reporting from the branches shall delink the bill from the currency position only after ascertaining that no credit entry is outstanding in their nostro accounts on account of the bills to be delinked. In order to help the Position Maintaining Office to link the items outstanding in their accounts for want of matching particulars, the branches shall ensure that any intimation of the payment of a bill received by them is forwarded to Position Maintaining Office promptly. The Position Maintaining Office shall work out the delinking charges at the time of delinking and claim the same from the branches. The authorised branches shall report delinking as notional sale (on account of reversal of purchase) in their R–Return under inflows and when the payment of the same is received subsequently, it shall be reported in R-Returns as outflows. 20. TRANSFER TO FOBC In case of transfer of bills purchased to FOBC, interest, exchange difference and swap charges etc. should be recovered from the customer as per bank’s extant guidelines. The transaction should be reported as notional sale in relative R-Returns, being reversal of purchase. 21. DISHONOUR When the bill is dishonoured by non-acceptance or non-payment, notice of dishonour must immediately be given to all parties liable on the bill. The default should be advised to Export Credit and Guarantee Corporation without delay in accordance with the prescribed procedure. The matter should also be reported to Circle Head. The recovery of amount advanced, from the exporter, or honouring of the claim by Export Credit and Guarantee Corporation does not absolve the exporter of his obligation undertaken on the export declaration form, to realize proceeds of the export within the prescribed period. 22. STORAGE OF GOODS If on customer’s instructions goods are required to be stored in foreign countries, branches should ensure recovery of charges from customer before issuing instructions to the foreign correspondent in this regard. Page 12 of 26 Branches should ensure to obtain instructions from the exporter, before accepting export documents, regarding disposal of documents/goods in the event of non-payment/non-acceptance without loss of time. The best course in such situations would be to get the goods stored in a bonded warehouse duly insured to avoid heavy demurrage charges/penalty/auction of goods. 23. RESHIPMENT OF GOODS No request for reshipment of goods to India should be entertained from the customer unless the party deposits sufficient funds to cover the expenses. The branches in such cases should satisfy themselves by verification of Customs Bill of Entry/Postal Appraisal Form that goods to the extent claimed to have been re-imported have actually been re-imported. 24. Branches shall deal the following matters as per the extant FEMA guidelines: • • • • • • • • • • • • • • • • Trade Discounts Advance Payment against exports Part Drawings Consignment Exports Reduction in invoice value on account of prepayment of usance bills Reduction in Value Export Claims Change of buyer / consignee Self write-off and extension of time Shipments Lost in Transit Payment of Claims by ECGC “Write off” of Unrealised Export Bills Return of Documents to Exporters Exporters’ Caution List Agency Commission on Exports Refund of Export Proceeds 25. ISSUE OF EXPORT CERTIFICATE Authorised branches may issue export certificates to the exporters in terms of the Foreign Trade Policy . The certificate is issued in triplicate. The first copy marked 'Original' in bold letters is given to the exporter. Page 13 of 26 2nd copy marked 'Duplicate' in bold letters is forwarded to Directorate General of Foreign Trade. 3rd copy is kept as office copy by the issuing branch. The export certificate should invariably be issued by authorised branches only and full particulars should be noted in system and marked and should have columns for Sr.No., date of issue, bill number, name of exporter and the amount. The remarks "exports certificate issued on in the system", should invariably be given against the original entry in the CBS so that duplication is avoided. The Authorised Branch should issue only one copy of the original. In case the original is reported lost by the exporter an extra copy of the original may be issued with remarks in RED INK 'TRUE COPY OF THE ORIGINAL REPORTED LOST BY THE EXPORTER''. In case where full proceeds of any bill, for which certificate has been issued, are not received in India, the fact should be promptly reported to the office of the Directorate General of Foreign Trade giving reference of the serial number and date of the certificate. A suitable note should be given in the system as also against the entry in the certificates issued in the system. Whenever Bank Realisation Certificate (BRC) is issued by the branch to the exporter, the BRC data shall be forwarded in the prescribed software to International Banking Division, Head Office through email on daily basis, for onward submission to DGFT, New Delhi 26. FOREIGN OUTWARD BILLS FOR COLLECTION Foreign clean and documentary bills, cheques and dividend warrants may be collected for customers & their accounts shall be credited with the proceeds on realization. When bills are handed over to the branch for collection, they should be listed by the customer on pay-in-slip (Form PNB-177) or be accompanied by a letter giving details of the bill lodged and any special instructions of the party. 27. RECORDS & ACCOUNTING PROCEDURE (i) FOR OWN BUSINESS On receipt, each item shall be entered in the FBM menu in CBS and allotted a number for identification purposes from the series allotted Page 14 of 26 by IBD (HO). This number is to be written along with the bank’s stamp marked on all documents. The following accounting entries shall be passed in respect of bills received and sent for collection: Dr. Cr. (ii) Foreign Outward Bills lodged ) At approximate rates Foreign Outward Bills for Collection) BILLS RECEIVED AUTHORISATION FROM BRANCHES WITHOUT DIRECT Bills received from branches without direct authorization shall be treated as collection item and shall be allotted FOBC serial number. The report shall be submitted by authorized branch in their R-Returns as if these collection items are handled by them for their own customers. For the sake of convenience separate folios should be allotted by the authorized branch at the end of its register for entering particulars of such bills. The following contra account entries will be passed in respect of bills received from branches without direct authorization and sent for collection:Dr. Cr. Foreign Outward Bills Lodged rates) (Branches Collection) Foreign Outward Bills for collection (Correspondents) (at approximate (Separate heads in Subsidiary General Ledger may be opened for clean and documentary bills, if volume of business received from branches without direct authorization is high, to facilitate tallying of balances) These contra accounts shall be opened in the Subsidiary General Ledger at the authorized branch. In the weekly statement of affairs, the balance of these accounts will be shown under item No. 11.2 – Bills for Collection – of main head Contra Items on the liability side and under main head 12. Contra Items on the assets side. Page 15 of 26 28. EXAMINATION OF DOCUMENTS Documents attached to documentary bills must be carefully examined by the officer-in-charge to make sure that they appear to be in order so that no difficulty arises at a later stage. Export bills must be accompanied by appropriate exchange control form (GR/SB &SDF, PP, SOFTEX) For examination of documents relating to export bills, provisions of paragraph 7 of this chapter also apply. 29. DESPATCH OF DOCUMENTS TO FOREIGN BANKS Branches will forward documentary bills under cover of form FEX-29 and clean bills i.e. cheques; drafts etc. under cover of form FEX-32 to an approved/correspondent bank. If the customer desires, the bills may be forwarded to a bank not in our list of approved banks, at the entire risk and responsibility of the customer, after obtaining prescribed undertaking. Clear instructions must be given to the collecting bank in accordance with the instructions of the customer. This will be done by placing ‘X’ against the desired text on the remittance schedule, other spaces being left blank. Five copies of the form FEX-29 and four copies of form FEX-32 will be used as in the case of Foreign Outward Bills Purchased (refer paras 9 & 10). The officer-in-charge should satisfy himself that all the documents have been properly listed in the remittance schedule. 30. For bills relating to branches without direct authorization, expenses incurred by authorized branches should be indicated on the copy of remittance schedule sent to the concerned Position Maintaining Office. It should be ensured that instructions regarding receipt of payment are in accordance with the permitted methods of receipt in terms of FEMA. 31. In case of documentary bills, original set of documents should be dispatched on the same day by Registered Air Mail/approved courier. The clean bills should also be dispatched on the same day by Registered Air Mail/approved courier. The second set of documents should be dispatched by the following Registered Air Mail/approved courier. Page 16 of 26 32. CHARGES The collection commission on all foreign outward bills for collection and consignments shall be charged in terms of extant bank’s guidelines. The charges are to be recovered even though the item is subsequently received back unpaid. Bill Stamps, courier, clearing and warehousing charges, if any, and other out of pocket expenses should be deducted from the proceeds payable to the party, unless stipulated otherwise. Foreign bank’s charges are in addition to our charges. Authorised branches will not charge collection commission on items received from branches without direct authorization, except postage/courier charges and out of pocket expenses, which will be reimbursed to them by concerned Position Maintaining Office. On specific instructions, the bank will endeavour to collect above charges and out of pocket expenses from drawees. In absence of such instructions or if charges are refused by the drawee they will be for the account of the party and will be deducted from the proceeds of the bill. 33. ACKNOWLEDGEMENT FROM FOREIGN BANKS Branches must insist on an acknowledgement from the foreign bank for prompt advice of acceptance. If branches do not receive advice promptly, ‘tracer’ must be sent. All items must be followed up till the realization is received in an approved manner. In the case of usance bills, the due date as advised by the collection bank should be noted in the FBM menu in CBS. 34. DISHONOUR When a bill is dishonoured due to non-acceptance or nonpayment, the customer should be advised accordingly and his instructions in the matter should be communicated to foreign bank, immediately. 35. STORATE OF GOODS The provisions of para 22 of this chapter will apply. Page 17 of 26 36. RESHIPMENT OF GOODS No request for reshipment of goods to India should be entertained from the customer unless the party deposits sufficient funds to cover the expenses. The branches in such cases should satisfy themselves by verification of Customs Bill of Entry/Postal Appraisal Form that goods to the extent claimed to have been re-imported have actually been reimported. 37. REALISATION OF PROCEEDS On receipt of realization proceeds from foreign banks through the concerned PMO, following Accounting procedure shall be followed: a. b. Reverse contra account entries Dr. Cr. Concerned Position Maintaining Office a) Party b) Income: Commission on foreign bills (inward & outward) c) Exp. Postage/Telegrams etc. The date of realization will be marked in FBM menu in CBS, and the relative pay-in-slip, covering letter or other correspondence relating to the bill attached with the relative vouchers. 38. In case of bills relating to branches without direct authorization, authorized branches will receive the credit advice only in respect of postage and other out of pocket expenses from the concerned Position Maintaining Office . On receipt of intimation, the following entries will be passed: a. Reverse contra account entries b. Dr. Cr. Concerned Position Maintaining Office Postage/telegram/other appropriate heads for other expenses. 39. For Rupee bills reimbursement will usually be received by debit to non-resident Rupee account of the foreign correspondent or by draft etc. and entries will be passed accordingly. 40. SUBMISSION OF EXCHANGE CONTROL FORMS Page 18 of 26 Provisions of paragraph 7 of this chapter will apply. 41.OVERDUE BILLS (NOT REALISED WITHIN PRESCRIBED PERIOD UNDER FEMA REGULATIONS) Provisions of paragraph 18 of this chapter will apply . 42.ISSUE OF EXPORT CERTIFICATE Provisions of paragraph 25 of this chapter will apply. ADVANCE AGAINST FOREIGN OUTWARD BILLS FOR COLLECTION 43. No advance against Foreign Outward Bills for Collection should be made unless proper sanction is obtained or the advance is made within the powers vested with the incumbent-in-charge. Branches will take usual safeguards applicable to advances against Bills for Collection. 44.A record of all bills against which advances have been made will be maintained in the FBM menu in CBS. 45.No accommodation can be allowed against overdue bills, held abroad under instructions of the party or otherwise. Such bills should be debited in the advance against foreign bills for collection ledger so as to show the balance of current advance bills in the course of collection. Care should be taken that on subsequent payment or return of such bills the amount is not debited in this ledger again. 46.Advance bills should be examined with the same care as bills purchased and great caution is necessary in the case of D/A (Documents against Acceptance) items. For arriving at drawing power to be allowed against each item, the bill amount should be converted into Indian Rupees at T.T. buying rates prevailing on the date of lodgment of bill. 47.The balance of each account in the ledger should be compared once a month with the total of bills for each client according to FBM menu in CBS after allowing for dishonored and unpaid bills, which have already been taken off from the Advance Bills Ledger. 48. On all advances granted against export bills, interest shall be charged at the rates prescribed by bank for post shipment credit from the date of advance to the actual date of repayment, subject Page 19 of 26 to the maximum period permissible as per FEDAI guidelines and L&A circulars issued from time to time. 49. The commission, postage and other expenses should be charged at the time of realization of bill or when the same is returned unpaid/unaccepted in terms of bank’s extant guidelines. PART ‘B’ : PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORIZATION FOREIGN OUTWARD BILLS PURCHASED 50. No documentary bill shall be purchased until it has been examined and approved by an authorized branch. 51. On receipt, documentary bills should be scrutinized and if apparently in order,be entered in the FBM menu of CBS. The branch stamp should be put on all documents, but no number should be added or allotted at this stage. 52. The bills should then be sent to an authorized branch for examination and approval accompanied by a request for purchase (form FEX-31). This form is in triplicate, and is used as follows: 1st copy This is the customer’s application for the bill to be purchased, and is retained at the branch without direct authorization. It must be noted that the form requires to be signed by customer. This is the covering letter to the authorized branch and is returned by them with their approval for purchase. This is a receipt for the bill, and is returned to the customer for his record. 2nd copy 3rd copy 53. Branches without direct authorization shall pass the following contra entries at the time of forwarding documents to the authorized branch. Debit Foreign Outward Bills lodged approximate rates) Page 20 of 26 (At Credit Foreign Outward Bills for collection The authorized branch will signify their approval by sending a copy of the remitting schedule (form FEX-29 sent to the foreign correspondent). This letter will show the number allotted to the bill and also the amount to be paid to the party. On receipt of approval for purchase from the authorized branch, the details will be entered in FBM menu in CBS. Appropriate remarks will be given in system. Following accounting procedure shall be followed: a. b. Reverse contra account entries passed above. Debit - Foreign Outward Bills Purchased Credit – Party Credit – Postage On realization of the bill abroad, the concerned Position Maintaining Office shall credit the branch without direct authorization, direct, at the TT buying rate , ruling on the day when purchase was approved, less postage and out of pocket expenses incurred by the authorized branch which will be remitted to them direct. The branch without direct authorization shall then pass following entries: Dr. Cr. Cr. Concerned Position Maintaining Office Foreign Outward Bills Purchased Misc. income on foreign exchange business 54. Clean bills including cheques and dividend warrants may be purchased from customers within incumbent’s vested powers or covered by specific sanction and shall be paid at the rate, which will be advised by the authorized branch on copy of the remittance schedule on form FEX-32. The copy of the remittance schedule will also show the number allotted to the bill by the authorized branch. The branch without direct authorization will pass the vouchers as mentioned in Paragraph 53. Page 21 of 26 FOREIGN OUTWARD BILLS FOR COLLECTION 55. Bills, both clean and documentary may be received for collection from customers and sent to authorized branches. The bills must be examined to see that there are no obvious irregularities, and then entered in the IRM menu for clean transactions and in the FBM menu for documentary transactions in CBS system. The bank stamp should then be put on all documents, but no number is to be allotted or added. The bills should then be sent to the authorized branch under cover of form FEX-30 which should be made out in triplicate. 1st copy 2nd copy 3rd copy This serves as covering letter to the authorized branch. This is to be used as ‘Copy for Customer’ This is retained at the branch without direct authorization as a file copy. If the bill is approved for collection, the branch without direct authorization will receive one copy of the remittance schedule from the authorized branch, indicating therein the number allotted to the bill. 56. The following accounting entries are to be passed when the bill is dispatched: rates of Cr. exchange. Foreign Outward Bills for Collection Dr. Foreign Outward Bills Lodged (At the appropriate On receipt of advice of payment direct from the concerned PMO: i) Reverse contra entries passed above. ii) Dr. Concerned PMO Cr. Party (At TT Buying rate) Cr. Postage Cr. Commission on Foreign Bills (Inward and Outward) Commission and charges should be recovered in terms of bank’s extant guidelines. Page 22 of 26 57. In case of usance bills, the due date will be advised by the authorized branch, and must be noted in the FBM menu in CBS and communicated to the party. ADVANCE AGAINST FOREIGN OUTWARD BILLS FOR COLLECTION 58. No advances may be allowed against security of Foreign Outward Bills in course of collection until the branch without direct authorization has received one copy of the remittance schedule with FOBC No. allotted therein from the authorized branch. This indicates that the bill has been approved for collection and actually dispatched to our correspondent abroad. No advance may be made unless the same is within the incumbent’s vested powers or is covered by sanction from the appropriate authority. Branches will take usual safeguards applicable to advances against Bills for Collection. 59. A record of all bills against which advances have been made shall be maintained in CBS system (Form PNB-203) in addition to the entries, which are required to be made in the FBM menu in CBS. The details under FABC will be maintained client wise and all entries must be initialed /verified by an Officer. 60. No accommodation can be allowed against overdue bills, held abroad under instructions of the party or otherwise. Such bills should be debited in the advance against Foreign Outward Bills for Collection ledger so as to show the balance of current advance bills in the course of collection. Care should be taken that on subsequent payment or return of such bills the amount is not debited in this ledger again. 61. Advance Bills should be examined with the same care as bills purchased and great caution is necessary in the case of D/A (Documentary against acceptance) items. For arriving at drawing power to be allowed against each item, the bill amount should be converted into Indian Rupees at TT buying rate prevailing on the date of lodgement of bill, as advised by authorized branch. 62. The balance of each account in the ledger should be compared once a month with the total of bills for each client according to CBS after allowing for dishonoured and unpaid bills, which have already been taken off from the Advance Bills Ledger. Page 23 of 26 63. On all advances granted against export bills, interest shall be charged at the rates prescribed by the bank for post shipment credit from the date of advance to the actual date of repayment, subject to the maximum period permissible as per, FEDAI guidelines and L&A circulars issued from time to time. 64. The commission, postage and other expenses should be charged at the time of realization of bill or when the same is returned unpaid/unaccepted in terms of bank’s extant guidelines. PART ‘C’: PROCEDURE FOR SPECIAL EXPORT PERMISSION (SEP) BRANCHES HANDLING OF EXPORT DOCUMENTARY BILLS 65. For all intents and purposes, SEP branches will function as branches without direct authorisation except as mentioned hereunder: SEP branches would quote firm rates to the customer, obtained after reporting the transaction to the concerned Position Maintaining Office . They would scrutinize all documents received for negotiations/purchase/collection with the same care as branches with general authorisation and follow the procedure as prescribed in this Book of Instruction in this regard. On the top of remittance schedule the name of the authorised branch would be typed under the words ‘Punjab National Bank’. The reference number allotted to the Bill will be from the sub-series allotted to SEP branches from the main series of the branch through whom their transactions would be reported to RBI, as under :“SEP_____________________(number from sub series allotted)” The name of SEP branch would be mentioned in the space provided at the bottom left hand corner of remittance schedule mentioning in bold letters “SEP”, to enable concerned Position Maintaining Office to send the credit advice direct to the SEP branch. SEP branches would despatch the relative documents direct to Foreign correspondents and not through the authorised branch. 66. EXPORT DECLARATION FORMS Page 24 of 26 SEP branches would scrutinise the export declaration forms (GR/SB&SDF,PP,SOFTEX) for amount, customs stamp etc., with the same care as authorised branches would do. The customs number (with ten numerals denoting the code number of the port of shipment, the calendar year and a six digit running serial number) must be there on the export declaration form. SEP Branches would send simultaneously on the day of dispatch of documents, the relative export control forms (GR/SB &SDF,PP,SOFTEX) alongwith a copy of the remittance schedule and two copies of invoices and copy set of other supporting documents to the designated authorised branch (link office) through whom their transactions would be reported to RBI. The authorised branch shall lodge the entries in their records in FBM menu in CBS and maintain export declaration forms and other supporting documents etc. in a systematic manner for the purpose of verification by auditors/RBI officials. 67.REALISATION OF BILL SEP branches would receive credit advices direct from concerned Position Maintaining Office. On receipt of realisation, they would follow the same accounting procedure for adjustment of various entries as is prescribed for branches with general authorisation. The authorised branches upon receipt of intimation of payment of bill would mark the same against relative entry and release the exchange declaration forms held with them. The SEP branch would reconcile their position of lodging immediately at the close of fortnight with the concerned authorised branch for R-Return purpose so that reporting is made in a correct manner to RBI and no delay takes place. The follow up/correspondence with foreign banks/RBI shall be done by the authorised branch/link office whereas the follow up with exporter shall be done by concerned SEP branch. 68. PROCEDURE FOR AUTHORISED BRANCHES THROUGH WHICH TRANSACTIONS OF SEP BRANCHES WOULD BE REPORTED i) RECORDS AND EXPORT DECLARATION FORMS Page 25 of 26 On receipt of copies of invoice and other supporting documents, remittance schedule with relative export declaration forms (GR/SB & SDF,PP,SOFTEX) from SEP branches, they would follow the same procedure as in case of bills received and handled by them from branches without direct authorization. The details of the bill will be entered in FBM menu in CBS and contra vouchers be passed in case of bills sent on collection basis. Upon receipt of intimation from concerned Position Maintaining Office regarding the realisation of the bill, they would reverse contra entries already passed if any and release the duplicate copy of export declaration form (GR/SDF,PP,SOFTEX) and report to RBI in R-Returns. ii) FOLLOW UP Link branches/Authorised branches will follow up with foreign correspondents, the realisation of outstanding bills in the same manner as bills relating to their own branch as well as the correspondence part with Reserve Bank of India on account of exchange regulation aspects. iii) STATEMENT OF OVERDUE EXPORT BILLS Authorised branches will include bills relating to SEP branches in their periodical statements of outstanding export bills whether for RBI purpose or otherwise. However whenever similar data is prepared for internal use of the bank, breakup showing bills on behalf of the own branch and handled on behalf of other branches should be shown separately. Page 26 of 26               5. CLEAN REMITTANCES‐ OUTWARD   AND   INWARD    CHAPTRER – 5 : CLEAN REMITTANCES–OUTWARD AND INWARD OUTWARD REMITTANCES 1. GENERAL REMARKS Any request from a resident of India, to remit any foreign currency amount in favour of a beneficiary residing outside India, constitutes outward remittance. If payment is to be made against any additional document other than simple receipt, the transaction should be treated, for all practical purposes, as a documentary remittance. Non-documentary remittances are called clean remittances. Funds may be remitted to other countries by means of (i) Demand Drafts (DD) or (ii) TT/SWIFT (MT-103/202) - Transfers. The draft is a drawing by our Bank/Branch on an overseas bank with whom a Nostro A/c in the currency of that country is maintained by Foreign Exchange Office. Whereas a Telegraphic Transfer or SWIFT MT-103 is remittance instruction issued by our Bank/Branch to another through electronic medium, to pay a certain sum of foreign currency to a beneficiary, as per instructions conveyed to them. All foreign remittances are subject to compliance of Foreign Exchange Management Act (FEMA) 1999 regulations/notifications for current account transactions, as in force from time to time. Branches should also strictly comply with Know Your Customer (KYC) guidelines of bank/RBI. 2. PROCEDURE FOR AUTHORIZED BRANCHES A. APPLICATION Application on a form prescribed as per FEMA/Banks guidelines, duly completed in all respects and signed by authorized signatories shall be obtained from the customer for release of foreign exchange. Presently for the small value remittances, not exceeding USD 5000 or equivalent, the request from customer should be obtained on Application cum declaration form (modified A-2 form,) which is devised by RBI in consultation with FEDAI. For release of exchange for current account transactions of over USD 5000, bank’s prescribed application form shall be Page 1 of 20 obtained in addition to A-2 form. In respect of regular corporate customers, branches shall obtain one time declaration under FEMA. Branches shall refer the guidelines/circulars for these forms/declarations operative at the time of remittance). Authority for remittance for specified purposes has been delegated to banks. For remittances within powers vested in authorized dealers under FEMA, the application form must be accompanied by suitable declaration/documentary evidence as per extent guidelines circulated by RBI/bank, to establish the bonafides of the application and the remittable amount. In case the remittance does not fall within the delegated powers of AD’s, the application form must be accompanied by approval from RBI/Ministry/Deptt. of Govt. of India. The prevalent FEMA guidelines allow certain remittances towards overseas employment, emigration, education abroad, maintenance of close relatives and medical treatment abroad, on the basis of the selfcertification of the purposes by the applicant along with other basic details of the transactions and the submission of Form A-2. The request from branches without direct authorization for such remittances should also be handled subject to compliance with guidelines mentioned above. The application should also be accompanied by Credit in Non Customer Inter-sol Account through CBS, for the equivalent amount, at prevailing TT Selling exchange rate, plus prescribed service charges and a certificate (if applicable) that the amount has been remitted to the debit of applicant’s account. B. PROCEDURE FOR MAKING APPLICATION TO RBI Application for release of foreign exchange from members of public will be entertained by Reserve Bank only if they are received through an authorized dealer and the remittance is not covered within the vested powers of the authorized dealer. In such situations the application is to be forwarded to the Foreign Exchange Department of the Regional office of RBI, under whose jurisdiction the applicant is functioning/ residing. C. SCRUTINY OF APPLICATION All requests for outward remittances should be carefully scrutinized to ensure the following: Page 2 of 20 1. Authorized branches may sell foreign exchange only to persons, firms and banks resident in India. No sale should be made to nonresident except as specifically provided in the FEMA. For the purpose of sale of foreign exchange, persons, firms, companies or other organizations resident in Nepal and Bhutan should be treated like any other non-residents. Remittance must be within the authority delegated for the purpose to authorized dealers under FEMA. Drawl of exchange for certain categories of transactions listed in FEMA may be permitted provided the applicant has secured the approval from the concerned Ministry/Department of Govt. of India or from Reserve Bank of India, as the case may be. The remittance must be made in favour of beneficiary, who is entitled to receive payment. Payment is required to be effected in accordance with the manner, terms and conditions as stipulated in FEMA/RBI approval/approval from the Ministry/Deptt. of Govt. of India etc. Where remitter holds an exchange approval for the remittances, it must be ensured that it is still valid and the payment shall be executed in terms of the approval. 2. 3. 4. For advance remittances against imports, refer to the chapter on Import credit/Inward Bills, respectively and the applicable/operative provisions of FEMA. D. ENDORSEMENT OF EXCHANGE APPROVAL/DOCUMENTARY EVIDENCE Where the Reserve Bank/ Government of India has granted approvals, foreign exchange may be sold within the period of validity stated in the approval and the sale be endorsed on the reverse of the original approval. In case of remittances effected within powers vested with authorized dealers under FEMA, authorized branches should mark the documentary evidence with their stamp in token of having verified the same before returning it to the applicant. E. ENDORSEMENT OF PASSPORT In the case of remittances for travel purposes, it is not mandatory to endorse the passport for the amount of foreign exchange sold for travel abroad, however if requested by the traveler, the details of the foreign exchange sold for travel should be endorsed on the passport under the Page 3 of 20 stamp, date and signature by the authorised branch as per procedure prescribed (Refer chapter No. 6 on Travel Instruments) F. EXCHANGE CONTROL FORMS The purpose, for which remittance has been applied for, must be specified in the A-2 form. Proper code for the purpose must be ticked in the form besides giving full details for specified/miscellaneous categories. Form A-2 is to be retained by the authorized Dealer through whom the remittance has been made. In case of remittances under the powers delegated to authorized dealers in terms of FEMA Regulations, the branches should clearly cite reference to the item, in terms of which the remittance has been made and the nature of documentary evidence verified, in the relative A-2 Form. Branches shall keep on record any information/documentation on the basis of which transaction was undertaken, for verification by the internal auditors/Reserve Bank inspecting officials. The Forms A2 together with connected papers shall be retained in a systematic manner as per the guidelines of RBI/Bank. Similarly Form A-3 is used for transfer of funds from a bank’s vostro to another bank. The Internal Auditors shall carry out 100% verification of all forex transactions undertaken by authorized branches including Forms A1, A2 & A3, keeping in view the guidelines issued by our bank/RBI. The auditors shall also issue certificate as per RBI/Banks guidelines in this regard. This certificate should be kept with the branches and made available to inspecting officials of Reserve Bank of India for verification. E. EXCHANGE RATE All outward clean remittances in foreign currencies should be made by authorized branches at bank’s current TT selling rate of exchange, unless a forward contract has been booked, in which case the contracted rate will apply. F. PAYMENT BY CUSTOMER When the remitter’s instructions have been examined and Exchange Control formalities completed, the applicant should be asked to make necessary payment. Branches may accept payment in cash upto Rs.50,000 (check the prevailing limit under Income Tax Act.) against sale of foreign exchange for travel abroad (for private visit or for any other purpose). Wherever the sale of foreign exchange exceeds the amount Page 4 of 20 equivalent to Rs. 50,000 the relative payment must be received from the applicant by debit to his account. If the applicant is not a customer of our bank, payment should be received by a crossed cheque drawn on applicant’s bank account or on the bank account of the firm/company where the applicant is owner/employee. Branches may also accept payment in the form of a Banker’s Cheque/Pay Order or Demand Draft issued to the debit of account of the applicant, firm/company and is accompanied by a certificate to this effect. Where the rupee equivalent of foreign exchange drawn exceeds Rs.50, 000 either for any single drawal or more than one drawal reckoned together for a single journey/visit, it should be paid by cheque or draft as explained above. Correspondent’s charges, if payable by the remitter should also be recovered from the customer. G. RECORDS AND ACCOUNTING PROCEDURE All requests for outward remittances should be entered by the CTO, in finacle in menu option ORM under applicable register type and sub type. On making entry of the remittance in ORM Menu, the CBS will generate debit/credit transactions, which may be modified, if required, to ensure collection of correct applicable Service Charges and the Service Tax etc. Dealing officer to verify the ORM entry. In case of remittances, to be made on behalf of customers of branches without direct authorizations, the authorized branches shall, on receipt of relative papers (Application/A2 form, exchange approval, if required) and credit through CBS in their Non Customer Inter-sol A/c. for required INR amount, effect the remittance. In case, remittances are to be made to the debit of EEFC/RFC/RFC(D) account, transactions shall be passed at current applicable notional rates. NOTES:1) The branches shall not deduct any remuneration from the advice to be sent to Foreign Exchange Office as no exchange benefit accrues to the bank. Page 5 of 20 2) The branches shall charge commission, if any, at prescribed rates. If commission is to be charged in rupees, the conversion shall take place at current TT Selling rate. And, if the commission is charged in foreign currency, then the conversion will take place at current TT Buying rate 3) Out of pocket expenses, Service Tax and other incidentals shall be recovered from the applicant. 4) Remittances should be made on the NOSTRO account of the Foreign Exchange Office where the corresponding EEFC/RFC/RFC(D) funds are lying. H. DRAWING ON CORRESPONDENTS All remittances must be made in accordance with the agency arrangements with our overseas correspondents. Agency Arrangement circulars are issued by International Banking Division, Head Office from time to time. Branches should keep the relative circulars handy duly updated by marking necessary amendments received from International Banking Division, Head Office. I. REPORTING TO FOREIGN EXCHANGE OFFICES All sales transactions on account of outward remittances for the equivalent of less than Rs.2,50,000.00 shall made at the prevailing card rate, as advised daily by the Foreign Exchange Office and shall be reported to the Foreign Exchange Office as a pipeline transaction by sending a TPO/HO Credit Advice. For transactions equivalent to Rs 2,50,000 (Rs.Two Lakh Fifty Thousand) and above (refer latest IBD circular on the subject for cut off limit) should be reported to the concerned Foreign Exchange Office by Phone/Fax or online through RET-AD, to obtain the applicable exchange rate and to enable Foreign Exchange Offices to take the transaction in their currency position and arrange for necessary cover. J. MESSAGE BY SWIFT Branches having SWIFT connectivity shall send appropriate messages like MT-103/202, to foreign correspondents to ensure STP(Straight Through Processing) at the overseas centre. No SWIFT message for outward remittance shall be sent on free format (MT-199/299), as it will not only delay the remittance but is also subject to additional charges by foreign correspondent on account of manual intervention involved. Page 6 of 20 Branches not having SWIFT, shall utilize the services of the SWIFT connected branches as far as possible. For this purpose, messages duly authenticated under signatures of two GBPA holders (one of whom must be Manager/Dy. Manager) shall be sent to the SWIFT connected branch for onward transmission to the foreign correspondent. The messages must be properly formatted as per guidelines issued from time to time by IBD and all the applicable charges be recovered as per extant guidelines of the bank. No mail confirmation is to be sent wherever remittance is made by SWIFT. K. ISSUE OF DRAFTS Where the outward remittance is desired to be made by way of a foreign demand draft, the branches should use MICR draft books, supplied by foreign banks, for issuance of foreign currency drafts and leaves/booklet thereof can be got indented through the Foreign Exchange Office maintaining nostro account with the foreign bank. Care may be taken to ensure that name of issuing office is indicated by affixing a small rubber stamp below the authorised signatures. Wherever such MICR drawing leaves are not available, the drafts shall be issued on bank’s own foreign drawing book (form No.S-17). The draft form must be marked with words “NOT OVER____________” and there should not be any loose spacing in such marking. The amount in words and figures must be filled in carefully so that no space is left for alteration. All drafts except those in favour of applicants covering travel allowance should be crossed A/C Payee”. L. ADVICE OF DRAWING: SWIFT MT 110 Advice of drawing by SWIFT MT-110 will be sent to the drawee bank in all cases where foreign currency draft is issued, irrespective of the amount of the draft. The TPO /credit advice, sent to Foreign Exchange Office, shall contain complete details of the draft issued. Draft must bear the signatures of two authorized officers with ‘E’ Nos., one of whom must be the Manager or Dy. Manager and their signatures must have been circulated to the drawee banks through Authorized Signatures Book. The draft duly signed should be delivered to the customer against his signatures on the back of the relative voucher. In case E-number holder is not available in the branch, then signature of E-Number from nearby branch is to be obtained. Page 7 of 20 M. CUSTODY OF DRAFTS The draft book in use and those in stock must be kept in the dual custody of the Manager/Dy. Manager, who will satisfy themselves daily that all forms issued have been properly accounted for. Further, the laid down guidelines for custody and periodical physical checking of security forms, as applicable to Inland drafts, shall be adhered to. N. CANCELLATION OF DRAFTS When the purchaser of a Draft desires to have it cancelled, he must produce the original Draft and should write on the back of the draft “Received payment by cancellation” and add his signatures. Usual procedural safeguards as applicable to cancellation of inland Drafts should also be adhered to and appropriate SWIFT message MT-192 should be sent for cancellation of advice of drawing (SWIFT MT 110) sent earlier at the time of issuing the draft. The cancellation should be reported as purchase in the relative R-Returns. Refund shall be made to the purchaser at the current TT buying rate or the Rupee amount actually received at the time of issue of Draft, whichever is less, to the debit of Suspense-Fex account and branch to seek reimbursement from and advise cancellation to the concerned Foreign Exchange Office, in order to reverse its outstanding debit suspense entry made as above. O. CANCELLATION OF TELEGRAPHIC TRANSFER (TTs) On receipt of the written request from the purchaser for cancellation of outward remittance effected via SWIFT MT-103, the branch will immediately contact the concerned foreign correspondent by quickest mode of communication i.e. by sending SWIFT MT-192, requesting them to cancel the original transfer instructions and obtain their confirmation in token of their having done so. The concerned Foreign Exchange Office shall also be advised of the cancellation. Branches will refund the amount to the purchaser only after the receipt of confirmation from foreign correspondent and credit advice from the foreign Exchange Office. Refund will be made to the purchaser at the current TT buying rate of exchange or the rupee amount actually received at the time of issuance of Telegraphic Transfer, whichever is less. The cancellation should be reported as Purchase in the relative R-Return. Page 8 of 20 P. LOST DRAFTS When a purchaser reports loss of a draft to the issuing branch, it should immediately advise the drawee bank, giving full details on SWIFT format MT-111 (Request for Stop Payment of a cheque). If the purchaser claims refund of the amount or requests a duplicate draft to be issued in lieu the lost draft, in favour of the same payee, the following procedure must be followed before the refund is made or duplicate draft is issued: 1. The issuing branch must obtain the drawee bank’s acknowledgement of the advice of loss and recording of stop payment instructions i.e. reply of foreign bank. The purchaser must execute the indemnity bond prescribed by Head Office, as in case of inland drafts. Confirmation from concerned Foreign Exchange Office should be obtained that cover is still outstanding in their mirror A/c. and reconciliation statement. In case of refund, the cancellation should be reported as purchase in the relative R Return. 2. 3. 4. The duplicate draft should be issued and Swift MT-199 be issued giving full details of DD issued. The refund should be allowed only on receipt of authorization from the concerned Foreign Exchange Office. Q. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORIZATION Branches without direct authorization should receive applications from their customers for issue of Drafts/TT/SWIFT. All applications must be supported by prescribed application/declaration form, information/ documentary evidence or approval from concerned Ministry/Department of Govt. of India or from Reserve bank of India, wherever necessary. Branches should collect the rupee equivalent to cover remittance plus all charges including the estimated cost of remittance, if any, and remit the same to authorized branch by credit in Non Customer Inter-sol a/c through CBS. Besides a letter giving details of credit of equivalent rupee and confirming that KYC norms are complied with in the a/c from where the debit originated, alongwith other relevant papers, shall be sent to the link authorized branch. The authorized branch shall scrutinize the related documents and if found in order, shall effect the remittance. Compliance of FEMA guidelines/regulations shall be the responsibility of the authorized branch. Page 9 of 20 INWARD REMITTANCES I. PROCEDURE FOR AUTHORISED BRANCHES A. GENERAL Inward Remittances in favour of banks’ customers can be received in form of 1. 2. 3. 4. 5. Personal Cheques (issued by the overseas remitter), Demand Drafts issued by overseas banks Swift MT-103 MTSS (Money Transfer Service Schemes) Rupee Drawing Arrangements (Drafts / Speed Remittance) Cheques/DDs etc. drawn in Foreign Currency are to be sent to Foreign Exchange Office, for collection/realization. Similarly the instruments drawn in INR may be sent to the bank’s branch (designated for outstation collections) at the drawee centre/station, for collection/realization. Remittances are effected by our foreign correspondents/overseas branches, through our branches included in the agency arrangements. Agency Arrangements for drawing by foreign correspondents are made by the International Banking Division, Head Office and the branches included in the arrangement are advised of the same from time to time. Inward remittances shall be either in foreign currency or in Indian Rupees. In case of the former, the foreign currency amount will be converted into Indian Rupees at the appropriate buying rate and paid to the beneficiaries in India. All payment orders received from correspondents must be promptly executed. Drafts drawn by them and presented for payment should be promptly paid, if otherwise in order. B. REIMBURSEMENT BY CORRESPONDENT BANK The drawee bank is usually reimbursed by the drawing bank in respect of their drawings by SWIFT, by any of the following methods: a) Crediting its foreign currency account in the foreign center at the time of drawing / issuance of Swift-MT-103. Page 10 of 20 b) Authorizing the drawee bank to debit the non-resident rupee account of the drawing bank when payment is made. Branches should refer to the agency arrangements with the drawing bank for ascertaining the method of reimbursement in respect of any drawing. C. CONDITIONS TO BE FULFILLED Before executing an inward remittance, authorized branches should carefully observe the following points: 1. 2. For drawings in foreign currency, the remittance should be in one of the permitted currencies in terms of FEMA guidelines. Reimbursement in respect of drawings must be received in accordance with permitted methods of receipt as per FEMA guidelines. If payment is required to be effected in foreign currency, it must be ensured that the beneficiary of inward remittance is eligible to receive payment in Foreign Currency in terms of FEMA guidelines. For amount of inward remittances, in excess of Rs. five lacs or equivalent (check the current prevaling limit) branches should enquire the purpose of remittance for reporting to Reserve Bank of India with R-Returns. However, payment should not be withheld for this reason. If purpose cannot be ascertained immediately, branches should execute the payment instructions and obtain the purpose from beneficiary, which can be reported to RBI later on. Under Foreign Contribution Regulation Act, inward remittances received in favour of certain organizations can be executed only after obtaining approval from the Central Government. The information in this regard is circulated to branches by International Banking Division, Head Office from time to time. Branches must ensure compliance of these regulations and obtain necessary permission before executing any such remittance. It must be ensured that drawing by foreign correspondent is in accordance with agency arrangements concluded with them. In case of any deviation, the matter should be brought to the notice of International Banking Division, Head Office for taking up the matter with foreign correspondent, appropriately. Beneficiaries of inward remittances in convertible foreign currencies, other than those received pursuant to an undertaking or those received for meeting any specific obligation, can open and maintain in India, accounts expressed in foreign currency titled Page 11 of 20 3. 4. 5. 6. 7. “Exchange Earners Foreign Currency Account” (EEFC A/c) and retain a certain percentage of the remittance amount (Please check the limit/percentage allowed to be retained in EEFC account as per FEMA guidelines) in the said account. Therefore, as per FEDAI rules, for all remittances in excess of USD 5,000.00 or equivalent, beneficiary’s mandate for conversion of the remittance amount in INR should be obtained. 8. D. Branches should strictly comply with Know Your Customer (KYC)/Anti Money Laundering (AML) guidelines of bank/RBI. EXCHANGE RATES Foreign currency amount of the inward remittance should be converted into Indian Rupee at exchange rates as under:1. TT buying rate should be applied for drawings where cover has already been received in any of the foreign currency account maintained by Foreign Exchange Offices. 2. Cheque buying rate should be applied for drawings where cover is not received in our foreign currency account at the time of payment. E. a) DRAWINGS BY DRAFT DRAFTS IN FOREIGN CURRENCY- NOT DRAWN ON OUR BANK: If any remittance is received by foreign currency draft, and not drawn or payable on our bank, the draft is to be sent for collection after lodging in CBS. It should be lodged in IRM Menu in finacle, using register type FOBC Sub type Cheque and sent to Foreign Exchange Office, for collection. Drafts presented by customers having a good track record of dealings with our bank, may be purchased as per the related powers vested with the branch officials, in that case, in IRM menu of finacle, register type FOBP and register sub-type Clean is to be used. Upon entry/verification system will generate related transactions. b). PROCEDURE FOR PAYMENT OF DRAFTS DRAWN ON OUR BANK All Drafts presented for payment shall be entered in IRM Menu in CBS using register type IMT and register sub type as Susp. The following procedure shall be followed:Page 12 of 20 i). DRAFTS IN INDIAN RUPEES After ensuring the genuineness of the DD issued by the overseas bank by tallying signatures etc., such DDs may be paid to the debit of SuspenseFex (5711306). The paying branch should then claim the amount from the branch holding non resident INR account (Vostro A/c) of the draft issuing bank and should adjust the Suspense-Fex entry on receipt of reimbursement. ii). DRAFTS IN FOREIGN CURRENCY After ensuring the genuineness of the DD issued by the overseas bank, by tallying signatures and wrt. drawing advice (MT-110) received, such DDs may be paid to the debit of Suspense-Fex (5711306) after converting the foreign currency amount into indian rupees at the applicable exchange rate (see para J below). The paying branch shall receive credit advice for rupee equivalent from FEO and should adjust the Suspense-Fex entry on receipt of FEO credit advice. G. INWARD REMITTANCES BY SWIFT MESSAGE The branches having SWIFT connectivity receive inward remittance messages from foreign banks on standard format ‘MT 103’ through SWIFT network. SWIFT message is an operative instrument at destination and is not followed by mail/telex confirmation. As Special Export Permission (SEP) branches are not authorised to execute inward remittances/SWIFT transfers, they should only download and forward the SWIFT messages promptly, after authenticating them, to their link office for its execution. Branches must ensure that all inward messages are executed as per prevalent FEDAI/bank guidelines. Banks are liable to compensate the beneficiaries for delayed payments of Inward remittance in terms of FEDAI guidelines The authorised branches receiving the SWIFT message under their BIC Code, from our correspondent banks shall execute the payment immediately at theirs and seek reimbursement from the concerned Foreign Exchange Office, who is maintaining the account of correspondent bank as per agency arrangement. As regards payment received from a bank other than our correspondent, the authorized branch should execute the same after verification of availability of the cover in the nostro A/c. of FEO. H. MODE OF PAYMENT OF INWARD REMITTANCES Page 13 of 20 If the beneficiary does not maintain an account with the paying branch, the proceeds may be paid to the beneficiary by way of : 1. For beneficiaries maintaining account with other branches, remittance should be affected by online credit through CBS, directly to the beneficiary’s account. 2. For beneficiaries having their accounts with other banks, a crossed demand draft in favour of the beneficiary/beneficiary’s bank should be sent by courier/speedpost/registered-post to the beneficiary/ beneficiary’s bank, as per the instructions of the remitting bank. Preferably, the mechanism of RTGS/NEFT should be used wherever NEFT/RTGS particulars are available in the MT-103 or are conveyed by the beneficiary/beneficiary’s bank. I. CHARGES Applicable service charges on all inward remittances, shall be recovered in terms of extant guidelines of the bank, as issued by International Banking Division, Head Office from time to time through FEX circulars. J. REPORTING TO FOREIGN EXCHANGE OFFICE All inward remittance purchase transactions for the equivalent of less than Rs.2,50,000.00 shall be made at the prevailing card rate, as advised daily by the Foreign Exchange Office and shall be reported to the Foreign Exchange Office as a pipeline transaction by sending a copy of the forwarding schedule and seeking reimbursement. For transactions equivalent to Rs 2,50,000 (Rs.Two Lakh Fifty Thousand) and above (refer latest IBD circular on the subject for cut-off limit) the same should be reported to the concerned Foreign Exchange Office by Phone/Fax or online through RET-AD, to obtain the applicable exchange rate and to enable FEO to take the purchase transaction in their currency position. K. INWARD REMITTANCES PAYABLE IN FOREIGN CURRENCY Under prevalent FEMA guidelines, payment of inward remittances can be effected in Foreign Currency subject to the eligible limits of the beneficiary. In such cases, the amount of foreign currency should not be converted into Indian Rupees. Intimation should be sent to the beneficiary regarding receipt of remittance in their favour. Page 14 of 20 For inward remittances received for opening for Foreign Currency NonResident (B) Accounts, refer to the chapter on Non-Resident Accounts. On receipt of instructions from the beneficiary, if the payment is required to be made in foreign currency, branches must ensure that the same is effected either with RBI’s approval or is within the authority delegated to authorized dealers. The payment can then be effected in foreign currency by way of foreign currency draft, travellers’ cheques, currency notes, etc. The details should be entered in remarks of IRM menu. If the payment is effected in foreign currency by draft, the draft should be drawn on the bank account in which the relative cover has been received for inward remittances. The concerned Foreign Exchange Office should be advised accordingly to enable them to mark-off credit in respect of inward remittance with debit in respect of foreign currency draft issued. This procedure will also be followed in cases of issue of Travellers’ Cheques of the same bank in which account the relative cover has been received for inward remittances. If travellers’ cheques of a different bank are issued, or if foreign currency draft is issued on a correspondent bank different from one in which account relative cover is received in respect of inward remittance, branches will pass appropriate entries in IRM/ORM Menu. L. ISSUE OF INWARD REMITTANCES CERTIFICATE Authorized branches may issue a certificate to beneficiaries of inward remittances received through their medium or to persons against foreign exchange surrendered by them. Certificate should be issued only by the authorized branch, which received and executed the inward remittance. In case of rupee remittances received by debit to non-resident bank accounts, certificates should be issued only by the branch maintaining the non-resident rupee account, to which amount has been debited. Foreign Inward Remittance Certificate (FIRC) may be issued on form No. S-21, which is a pre-printed security form. Certificate should be issued in form BCI with serial numbers and reference numbers on ordinary printed Bank letterhead as per FEMA/bank guidelines in the following cases without any charges: (a) Where rupee value of inward remittance does not exceed Rs.15, 000/-(check latest guidelines). Page 15 of 20 b) Branches may also issue certificates of inward remittances in form 10H to assesses for submission to Income Tax Authorities along with the Return of Income. Since inward remittances received for opening of or credit to non – resident (External) accounts/FCNR accounts can be repatriated freely, branches should not issue certificates against such remittances. A note of issue of bank certificate should be given in the Inward remittance registers (IRM Menu). In case of an inward remittance towards realization of a bill, the note should also be given in the bills register against original entry. It must be ensured that multiple certificates are not issued against the same inward remittance. All certificates should be signed by two officers one of whom must be the Manager or Dy. Manager. Normally certificates should be issued only in one copy. Where, however, more copies are required by beneficiary, additional copies may be issued after being satisfied about the need therefor. The additional copies should also bear distinctive serial numbers/reference numbers and should be prominently marked ‘Duplicate’, ‘Triplicate’ etc. at the top. The distinctive numbers of the original, duplicate etc. certificates issued earlier should also be indicated prominently at the top on the additional copies. The purpose for which the extra copies are issued and the authorities for whom they are intended should also be stated in the remarks column under IRM Menu. M. STOCK OF INWARD REMITTANCES CERTIFICATE FORMS Stocks of blank Foreign Inward Remittance Certificate (FIRC) forms should be kept in proper safe custody as in case of other security forms. Any losses thereof should be immediately reported to the Circle Office and International Banking Division, Head Office. N. REFUND OF INWARD REMITTANCES Authorized branches sometimes receive requests from the remitting bank/beneficiary to cancel the inward remittance and to refund the cover for any of the following reasons: 1. 2. 3. Draft reported lost Draft cancelled and withdrawn from circulation Remittances sent in error Page 16 of 20 4. 5. Payment not received by the beneficiary Remittances in favour of tourists who have since left the country In all cases of remittances in favour of non-resident beneficiaries, branches may authorize refund of cover through the Foreign Exchange Office in whose account the relative cover was credited, after satisfying themselves that they have not already made payment against that remittance and after noting necessary caution. Branches should satisfy themselves that the refund is not being made in cover of transactions of a compensating nature. Where inward remittances are required to be refunded to the remitters, inward remittance certificate, if any, already issued must be called back and cancelled before the refund can be allowed. II. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION Branches without direct authorization should accept drafts only on collection basis and forward to the Foreign Exchange Office under whose jurisdiction they are functioning or to the nearest authorized branch. Branches without direct authorization will credit the customers’ account at specified rates only after the relative credit advice/remittance through CBS is received or purchase is approved by the authorized branch/ Foreign Exchange Office. Page 17 of 20 REMITTANCES THROUGH MONEY TRANSFER SERVICE SCHEMES (MTSS) i) ii) iii) iv) v) vi) vii) MTSS is a quick and easy way of sending personal remittances from abroad to beneficiaries in India, mainly in the form of cash payment. Remitter approaches the sending Agent at overseas centre to remit money to India, pays money with fees and provides beneficiary’s details for disbursement. The transaction is processed through a web based server of service provider which generates a unique reference number. This number is conveyed to the remitter, who further informs it to the beneficiary in India over phone or through other modes. Beneficiary approaches to any of PNB branches, informs remittance reference number and shows photo ID Proof to receive payment. In case of location specific product, the beneficiary can receive payment from specific location only. The official at the branch is required to verify the identity of the beneficiary with photo ID and provides a “Receive Form” for filling up the required particulars i.e. name, address, contact number of the beneficiary / remitter, type & number of ID proof and remittance particulars etc. On receipt of “Receive Form” duly filled in by the beneficiary, the Branch official is required to verify relevant particulars from the software of the company through User Id / password given by the company. After authorizing the transaction in the software of the company, the branch can pay to the beneficiary to the debit of relevant suspense head. REGULATORY RESTRICTIONS • Only personal remittances are allowed through this Arrangement. Trade related remittances, remittance towards purchase of property, investments, donations / contributions to charitable institutions / trusts are not permitted. A cap of US$ 2,500 has been placed on individual transaction and amounts up to Rs.50,000 may be paid in cash. Any amount exceeding this limit shall be paid by means of cheque/demand draft/pay orders or credited directly to the beneficiary’s account (other than NRE/FCNR). Only 12 remittances can be received by a single individual during a calendar year Branches, not having Internet facility, can handle remittances through CBS menu “MTSS” Page 18 of 20 • • • • GUIDELINES FOR HANDLING INWARD REMITTANCES (UNDER MTSS) THROUGH CBS MODULE “MTSS” For Branches – i) The official at the branch would verify identity of the beneficiary with the photo ID, and provide “Receive Form” to the customer for filling up required particulars i.e. name, address, contact number of the beneficiary / remitter, type & number of ID proof and remittance particulars etc. ii) On receipt of “Receive Form”, duly filled in by the beneficiary, the Branch official would forward the request to the Nodal Branch through “MTSS” menu of Finacle system by entering relevant particulars in option “R” (Request), like Service Provider ID (system populates code of each arrangement), Remittance Tracking No, Amount of Remittance, Beneficiary / sender’s details ID type & number etc. The request needs verification by another official of the branch through the menu “MTSS” under option V (verification). iii) Branches may view status of all requests at any point of time by pressing F2 key on Remittance Track Id field under “I” Inquiry option. iv) Based on the requests sent by the branches through CBS menu MTSS, the Nodal Branch would block the remittances in the relevant software through internet facility and enter Code number generated by the relevant software in “Remarks” field and Remitted Amount in the relevant field through option “A” (Authorisation) of “MTSS” menu. v) On authorization from the Nodal Branch through “Remarks” field (showing Code number generated by the relevant software), and also remitted amount written in the relevant field, the branch would immediately make payment to the beneficiary to the debit of relevant Suspense Head. While making payment to the beneficiary, the Branch is required to mark the transaction as “Paid” using “P” option in “MTSS” menu. vi) The Nodal Branch may decline the request if the details do not match with the records available in the relevant software, giving reason in “Remarks” field through option “D” (Decline) of “MTSS” menu. ************* Page 19 of 20 REMITTANCES THROUGH RUPEE DRAWING ARRANGEMENTS (RDAs) i) Draft drawing arrangement – As per revised procedure, drafts are issued by the Exchange Houses (located in Gulf Countries & one in Singapore), drawn on our International Service Branch, New Delhi (payable at all branches in India). The Exchange House funds equivalent amount in foreign currency on next day into DDA (Designated Depository Agency) account opened in the name of our Bank with International Bank in the concerned country / our International Service Branch (in some cases). This foreign currency amount is converted into INR and remitted to Rupee vostro account of the respective Exchange House with International Service Branch periodically, not exceeding 5 days. On each morning, equivalent amount of drafts issued, is transferred from Rupee vostro account to 11 digit Draft Payable account of each Exchange House, based on the details uploaded by Exchange House on daily basis. Drafts are paid by the branches to the debit of 11 digit account number of respective Exchange House, only after selecting/feeding the correct DD number. ii) Speed Remittance arrangement Under Speed Remittance procedure, Exchange Houses upload payment instructions on a file format through Corporate Internet Banking Service. The files uploaded by Exchange Houses are processed by the Nodal Ofice (International Service Branch New Delhi by clicking appropriate command in the system. It enables direct debit to the account of Exchange House and online credits to the accounts of beneficiaries having accounts with the branches. The system is customized to generate transactions six times a day. The beneficiaries can receive payment within few hours of remittances sent from overseas centres. Page 20 of 20               6. TRAVEL INSTRUMENTS    6: TRAVEL INSTRUMENTS 1. GENERAL Powers for release of exchange for travel abroad for various purposes have been delegated to authorised dealers as per FEMA Regulations/notifications. Under FEMA, drawl of exchange for certain transactions has been prohibited and restrictions have been placed on certain other transactions. No release of foreign exchange is admissible for travel to Nepal & Bhutan. Applications, which cannot be considered under the delegated authority, are to be referred to RBI / Government of India, as the case may be. While releasing exchange under delegated powers or against RBI / Government of India approvals, the following safeguards should be undertaken : i. Where the Reserve Bank/Government of India has granted approvals, foreign exchange may be sold within the period of validity stated in the approval and the sale be endorsed on the reverse of the original approval. On the basis of a declaration given by the traveller regarding the amount of foreign exchange availed of during a calendar year, authorised dealers may release exchange for tourism and private purposes. In case of issue of Traveller’s Cheques, the traveller should sign the Cheques in the presence of an authorized official and the purchaser’s acknowledgement for receipt of the travellers’ Cheques should be held on record. The forms A2 relating to sale of foreign exchange for travel abroad, should be retained for a period of one year by the authorised dealer, together with the related documents, for the purpose of verification by our Internal Auditors. As per prevalent FEMA/Bank guidelines for transactions upto USD 5000 (US$ five thousand), the request from customer should be obtained on modified A2 form, which is simplified Application cum declaration form devised by RBI in consultation with FEDAI. For transactions over USD 5000 banks’ prescribed application form shall be obtained in addition to A2 form. (Branches shall refer the operative guidelines/circulars) In cases where the remittances are allowed on the basis of self-declaration, the onus of furnishing the correct details in the application will remain with the applicant who has certified the details relating to the purpose of such remittance. Presently, FEMA permits release of foreign exchange upto USD 1,00,000 (US$ one lakh) each for employment abroad, emigration, maintenance of close relatives abroad, education abroad and medical treatment abroad without insisting on any supporting documents but on the Page 1 of 24    ii. iii. iv. v. basis of self declaration incorporating certain basic details of the transaction and submission of form A2. However, branches shall ensure strict compliance with Know Your Customer (KYC) guidelines of bank/RBI. vi. Out of the overall foreign exchange being sold to a traveller, exchange in the form of foreign currency notes and coins may be sold up to the limit prescribed under FEMA. Presently out of the overall foreign exchange being sold to a traveller, exchange in the form of foreign currency notes and coins may be sold up to the limit indicated below: Travellers proceeding to countries other than Not exceeding USD 3000 or Iraq, Libya, Islamic republic of Iran, Russian its equivalent Federation and other republics of Commonwealth of Independent States. Travellers proceeding to Iraq or Libya Not exceeding USD 5000 or its equivalent Travellers proceeding to Islamic republic of Full exchange may be Iran, Russian Federation and other republics of released Commonwealth of Independent States. 2. COMMON TRAVEL INSTRUMENTS Travellers’ Cheques are the safest and convenient means of carrying funds when a customer has to move from place to place. These instruments are issued in one country and are negotiable in several countries as per mandate on the instrument. These instruments can be encashed only under the signatures of beneficiary. Travellers’ cheques are available in convenient denominations and are encashed by banks, authorised moneychangers and hoteliers. International Credit Cards (ICCs) are issued by international banks of repute and the provisions of FEMA govern utilisation thereof by Indian residents. Travellers can also carry currency notes up to the permissible limits mentioned in para 1 (vi) above. (Subject to change from time to time under FEMA). 3. SERVICES TO TRAVELLERS Authorised Branches are normally called upon to render the following services to travelers: a) Issue and encashment of Travellers’ Cheques b) Sale and purchase of foreign currency notes. c) Issuance of World Travel Card Page 2 of 24    PROCEDURE FOR BRANCHES AUTHORISED TO DEAL IN TRAVEL INSTRUMENTS SALE OF TRAVELLERS’ CHEQUES 4. AUTHORITY TO HOLD STOCKS OF TRAVELLERS’ CHEQUES The names of foreign correspondents whose Travellers’ Cheques can be held by branches are approved by International Banking Division at Head Office from time to time. At present only American Express foreign currency traveller cheques are available in branches for sale. Branches may place order with the American Express directly for their requirements. As far as possible, overstocking of blank traveler cheque stocks should be avoided. 5. RECORDS The Travellers’ Cheques received from foreign correspondents are normally accompanied by their receipt in duplicate. When a supply of Travellers' Cheques is received from foreign correspondent, branches must check number and denominations of the Travellers’ Cheques against the particulars mentioned in the covering letter. Signatures of the custodians of Travellers’ Cheques should be obtained on the receipt of foreign correspondents. The original should then be dispatched to the sender at the address specified, as acknowledgement of receipt. However, if no receipt is enclosed, acknowledgement should be sent to the foreign correspondent on Bank’s letterhead, such acknowledgement must bear the signatures of authorised signatories with E numbers. All Travellers’ cheques should then be recorded serially in the “Travellers’ Cheques Register (Form Fex-54), separate pages being allotted to each currency. Contra Transactions for the rupee equivalent of the total foreign currency value of Travellers’ Cheques at prevailing notional rate should be passed as per accounting procedure given below. Dr. Cr. Foreign Travellers’ Cheques Stock Account. (* * * * 005939939) Foreign Travellers’ Cheques Issuable Account (* * * * 003231509) (* * * * denotes Sol ID in CBS) Whenever there is change in Notional Rate the stock should be revalued at new Notional Rate and vouchers be passed. 6. CUSTODY OF TRAVELLERS’ CHEQUES The stock of Travellers’ Cheques should always remain in safe custody under the dual control. Since the cheques already bear the signatures of the foreign bank and are Page 3 of 24    valid without any additional signatures, they must, therefore, be guarded with the same care as per procedure for our own Rupee Travellers’ Cheques. The Stock of Travellers’ Cheques must be physically checked and tallied with the records in the Travellers’ cheques Register under signatures of checking official, as is done in the case of Rupee Travellers Cheques. 7. TORN OR MUTILATED TRAVELLERS’ CHEQUES In case a branch finds at the time of receipt of supply of Traveller Cheques from a correspondent that certain cheques are torn or mutilated or otherwise rendered unfit for issue to the purchaser, they should be cancelled and returned to the foreign bank concerned and proper receipt thereof must be kept on record. 8. ELIGIBILITY CONDITIONS TO BE FULFILLED BY TRAVELLERS FOR PURCHASE OF TRAVELLERS’ CHEQUES Indian nationals proceeding abroad must fulfill the following conditions:a) b) c) d) The applicant must be in possession of a valid passport. The applicant must hold a ticket for proposed journey abroad. The applicant must be in possession of a valid approval of RBI /Government of India, issued in his name, wherever required. Branches may accept payment in cash up to Rs. 50,000 (Rs.fifty thousand only) (check the prevailing limit) against sale of foreign exchange for travel abroad (for private visit or for any other purpose). Wherever the sale of foreign exchange exceeds the amount equivalent to Rs. 50,000 either for any single drawal or more than one drawal reckoned together for a single journey/visit, the rupee equivalent must be received by debit to applicant’s account or through A/c. Payee cheque/ draft drawn on / issued from his account. If the applicant is not a customer of our bank, payment should be received by a crossed cheque drawn on applicant’s bank account or on the bank account of the firm/company on whose behalf travelling abroad. Branches may also accept payment in the Form of a Banker’s Cheque/Pay Order and/or Demand Draft issued to the debit of account of the applicant, firm/company and is accompanied by a certificate to this effect. 9. COMPLETION OF FORMS AT THE TIME OF SALE After the purchaser has complied with all the above requirements, the application form of the foreign bank for sale of Travellers’ Cheques and forms/declarations as prescribed Page 4 of 24    under FEMA/bank guidelines should be completed. Application form of foreign correspondent is usually taken in manifold. Purchaser’s signatures should be obtained on the application form. The original of the manifold form is normally required to be dispatched to the foreign bank with the remittance or instructions for debiting our foreign currency account. Each foreign bank has its own requirements to be completed and the instructions given by them must be strictly followed while issuing their cheques. 10. COMMISSION & SWIFT CHARGES Commission as well as SWIFT charges are to be charged as per extant guidelines issued by International Banking Division, Head Office from time to time. Besides above Service Tax as per latest guidelines, if applicable, be also collected separately if not already included in customized service charges in finacle. 11. EXCHANGE RATE Current Travellers’ Cheque selling exchange rate should be applied for sale of Travellers’ Cheques. 12. ACCOUNTING PROCEDURE /PROCEDURE IN CBS When Travellers Cheques are issued to a customer, the entries should be recorded in ORM menu in CBS. The register type chosen should be OMT and Sub Register Type should be T.CHQ and in the second page the purpose code, Passport details and details of Travellers Cheques issued should be entered. On entry/verification transactions, as per following accounting procedure, are automatically generated, which may be modified, if required. Dr. Cash / Party For (a) Face amount of Travellers’ Cheques at Current Travellers’ Cheques selling exchange rate (b) Commission (c) Service Tax (d) SWIFT Charges For face amount of Travellers’ Cheques at FTC selling rate. For commission plus service tax & SWIFT Charges. Cr. Cr. Concerned FEO Misc. Income on Foreign Exchange Business In case of issuance of traveller cheques to the debit of purchaser’s EEFC account, voucher should be passed at the notional rate. Page 5 of 24    Credit advice should be despatched to concerned Foreign Exchange Office, on the day of sale along with photocopy of purchase agreement form. It should invariably show the printed number of Travellers’ Cheques issued and name of correspondent. At the time of sale, the contra entries (passed at time of receipt of FTCs) should be reversed for the Rupee equivalent of the face amount of the Travellers’ Cheques sold at the rates at which the contra vouchers were passed earlier as under :-Dr. Cr. Foreign Travellers’ Cheques Issuable Account (* * * * 003231509) Foreign Travellers’ Cheques Stock Account. (* * * * 005939939) (* * * * denotes Sol ID in CBS) 13. ENDORSEMENT OF PASSPORT Although, it is not mandatory for authorised branches to endorse the amount of foreign exchange sold for travel abroad, on the passport, but if requested by the traveller, they may record the details of foreign exchange sold for travel on the prescribed page of the passport, under their stamp, date and signature. 14. DELIVERY OF TRAVELLERS’ CHEQUES After completion of all the formalities, details of the Travellers’ Cheques sold, should be recorded in the Travellers’ Cheques Register (FEX-54) under the signatures of an officer. The purchaser must be asked to sign the Travellers’ Cheques manually at the space provided for the purpose, in the presence of issuing official of the bank. Thumb impression should not be accepted in place of signatures on the Travellers’ Cheques. Purchaser’s acknowledgement for receipt of TCs should be obtained on the purchase slip (PAF). Purchaser’s signatures on PAF also serve as specimen for the paying bank to verify the holder’s signatures, at the time of encashment. The holder must be warned that the Travellers’ Cheques should be countersigned only at the time of encashment/ payment. He should be advised to keep Traveller cheques and copy of PAF separately so that if FTCs are lost he/she has details of the same. 15. SALE REPORTING TO CONCERNED FOREIGN EXCHANGE OFFICE All sales transactions on account of sale of travellers’ cheques for the equivalent of less than Rs.2,50,000.00 shall made at the prevailing TC Selling card rate, as advised daily by the Foreign Exchange Office and shall be reported to the Foreign Exchange Office as a pipeline transaction by sending a TPO/HO Credit Advice. Page 6 of 24    For transactions equivalent to Rs 2,50,000 (Rs.Two Lakh Fifty Thousand) and above (refer latest IBD circular on the subject for cut off limit) should be reported to the concerned Foreign Exchange Office by Phone/Fax or online through RETAD, to obtain the applicable exchange rate and to enable Foreign Exchange Offices to take the transaction in their currency position and arrange for necessary cover. 16. SETTLEMENT WITH FOREIGN CORRESPONDENTS The issuing branch should send the debit authority/SWIFT MT 202 / remittance for payment to foreign correspondent, being reimbursement of Travellers’ Cheques sold as per the arrangement, on prescribed form along with the original copy of FTC Sale Receipt on the same date of sale of the Travellers’ Cheques. 17. LOST OR STOLEN TRAVELLERS’ CHEQUES Branches must ensure that Travellers’ Cheques do not fall into unauthorized hands. If at any time it is found that some cheques have been lost or stolen, full particulars thereof must be sent immediately to the foreign bank concerned. The matter should also be reported to the Circle Office and International Banking Division at Head Office. 18. UNUSED TRAVELLERS’ CHEQUES As per FEMA guidelines a traveller can surrender unspent foreign exchange within 180 days from the date of return to India, if the unspent exchange is in the form of currency notes and / or Travellers’ cheques. A returning traveller is also permitted to retain with him, foreign currency Travellers’ cheques and Notes up to an aggregate amount of US $ 3000 and foreign coins without any ceiling. The traveller can utilize foreign exchange so retained for his subsequent visits abroad. The unspent foreign exchange can be deposited in the Resident Foreign Currency (Domestic) account also as per FEMA guidelines. When a customer surrenders unused Travellers’ Cheques, they should be purchased at the current Travellers’ Cheques buying rate of exchange ruling on the day they are returned. The commission charged at the time of sale is not refundable. 19. ISSUE OF TRAVELLERS’ CHEQUES PASSENGERS AND FOREIGN NATIONALS. TO FOREIGN VISITORS/ TRANSIT Travellers’ Cheques can be issued to foreign visitors against receipt of payment in the permitted manner as per FEMA. Travellers’ Cheque can be issued to tourists at the time of departure against reconversion of unspent Indian Page 7 of 24    currency, acquired by them by sale of foreign exchange to an authorised dealers, on production of encashment certificate. Page 8 of 24    ENCASHMENT/PURCHASE OF TRAVELLER’S CHEQUES 20. GENERAL Authorised Branches /Exchange Bureaus may encash travellers’ cheques issued by our correspondents or reputed Travellers’ Cheques issuing agencies with whom regular agency arrangements exist and where control documents are held with the branch. Travellers’ Cheques may be purchased from bonafide travellers. The Travellers’ Cheques may also be purchased from the authorized moneychangers / Full Fledged Money Changers / Restricted Money Changers who have accepted them from foreign tourists/customers or otherwise in good faith in payment of goods and services supplied, at the risk and responsibility of customer. Purchase of Travellers’ Cheques should be made only within the power vested with incumbents’ in charge or limits sanctioned for the purpose. (Also refer paragraph 22 [d]). 21. PRECAUTIONS TO BE TAKEN BEFORE PURCHASING TRAVELLERS’ CHEQUES Branches must Cheques. take the following precautions before purchasing Travellers’ a) The Travellers’ Cheques presented for encashment must conform to the specimen supplied by the foreign bank. The branches must keep updated records of specimen Travellers’ Cheques and control documents to facilitate verification. b) When presented by the original holder of the cheque, it must be countersigned by him in the presence of encashing officer of the Bank. The counter signatures must tally with the signatures on the cheques inscribed at the time of issue. In cases, where Travellers’ Cheques have already been countersigned before presentation for encashment, the holder must be requested to sign again on the reverse, in the presence of encashing officer of the bank, who should verify the signatures to prevent any possible misuse/forgery. c) When Travellers’ Cheques are presented by the original holder, their passport should be examined as an additional proof of identity. The details of passport number, date of issue, country of issue, name of holder, nationality and his foreign and local addresses should be obtained and entered in appropriate fields in IRM Module in CBS. d) If Travellers’ Cheques are presented by person other than to whom they were issued, branches should ensure that the Travellers’ Cheques are properly endorsed in Bank’s favour and are purchased within the powers vested with the incumbents in charge or limits sanctioned for the purpose in favour of the Page 9 of 24    customer and the amount is credited only to the customer’s account. No cash payment should be allowed. It must be ensured that the Bank has full recourse. In such cases, the customer should give an undertaking that collection is being made by the Bank at his risk and responsibility. e) All lost Travellers’ Cheque bulletins/circulars must be properly kept for ready reference with the encashing officer. f) In case FTCs have been issued by American Express Bank then Branches may checkup with Their Toll Free Number 1800-180-1245 available 24X7 to safeguard against fraudulent/stolen FTCs. 22. EXCHANGE RATES Travellers’ Cheques must be purchased at the current Travellers’ Cheques buying rates of exchange. 23. ISSUE OF ENCASHMENT CERTIFICATES Certificates of encashment should invariably be issued in terms of FEMA. Branches should issue certificates in Form BCI against receipt of inward remittances or realization of foreign exchange on security paper if the amount exceeds Rs 15,000/ in value, bearing distinctive serial numbers and reference numbers. In case the amount of inward remittance or realization of foreign exchange is up to Rs 15,000/- certificates in Form BCI with serial numbers and reference numbers may be issued on the bank’s letterhead. 24. PROCEDURE IN CBS When Travellers Cheques are purchased from a customer the entries should be done in IRM Module in CBS .The register type chosen should be FOBC/FOBP and Sub Register Type should be T.CHQ and in the second page the purpose code, Passport details and details of Travellers Cheques purchased should be entered. On entry/verification transactions, as per following accounting procedure, are automatically generated, which may be modified, if required. a. When Travellers’ Cheques are purchased: Dr. Foreign Outward Bills Purchased Cr. Commission Cr. Sundry Fex ( being Service Tax) Cr. Cash/Party. b. When the proceeds are received from the Foreign Exchange Office at the TC Buying rate ruling on the date of purchase of the Travellers’ Cheques: Dr. Concerned Foreign Exchange Office. Page 10 of 24    Cr. Foreign Outward Bills Purchased. 25. RECORDS AND PARTICULARS OF TRAVELLERS’ CHEQUES AND PROCEDURE FOR DESPATCH TO FOREIGN CORRESPONDENT (CHEQUES, DRAFTS AND FTCs). After, Travellers’ cheques encashed /purchased are entered in CBS, each TC leaf must be marked /crossed with the Bank’s stamp and the FOBP number as per CBS. Travellers’ Cheques should be suitably endorsed and be forwarded to an approved correspondent Foreign bank, for collection and credit of proceeds in the Nostro A/c. of concerned FEO, as per extant guidelines of the bank. The specific rules of endorsing the clean instruments as advised by the foreign correspondents and circularized by International Banking Division, from time to time, must be strictly followed as in case of any deviation, the instruments may not be accepted for payment by the foreign correspondents. 26. CENTRALIZATION OF CLEAN INSTRUMENTS FOR COLLECTION: With a view to eliminate the problem of exorbitant charges being levied by the foreign correspondents on our clean collections, denominated in specified currencies, a system known as “ Centralization of clean instruments collections” also known as “Cash Letter Plus” system was introduced. The detailed procedure/names of designated centers and the branches, which would use the designated centers for collection of their clean instruments, are circulated by International Banking Division from time to time. As such branches should not send such clean instruments directly to foreign banks. It must be noted that only those collections need to be sent under Cash Letter System, which are drawn on countries falling in the same currency area (e.g. a US Dollar draft drawn on a bank in United States or a Pound Sterling Cheque drawn on a UK Bank). All other instruments which are drawn on countries falling in the different currency area (e.g. a US Dollar draft drawn on a bank other than in United States or a Pound Sterling Cheque drawn on a Bank other than in UK) should be lodged separately and sent to Position maintaining Office. 27. CREDIT ADVICES Generally, foreign banks follow a system of crediting the clean collections on “Provisional” basis pending realizations and such credits are subject to final payments in due course. As such, there is always a possibility that the instrument against which credit has once been received in our Nostro account may be subsequently returned as unpaid by the foreign correspondent for any reason. In order to obviate this possibility Foreign Exchange Offices are required to prepare the credit advice immediately on receiving the credit in their Nostro account and mark the same as “Valid for credit after…………”, and dispatch Page 11 of 24    the same to the respective branches. The credit advice should not be treated as final/valid for credit before the date given on each credit advice. 28. PHOTOCOPY Before sending the Travellers’ Cheques for collection, branches must invariably keep a photocopy of the instrument for record purposes. 29. TRAVELLERS’ CHEQUES REPORTED LOST OR STOLEN & ENCASHED BY US. Branches must observe prescribed precautions while encashing Travellers’ Cheques. If payments are made by branches in due course of business and without negligence and after ensuring compliance of terms and conditions applicable to the Travellers’ Cheques, the concerned correspondents will honour our claim irrespective of the fact that they are reported lost/stolen. If any Travellers’ Cheque is reported unpaid, the branch should represent the same direct to drawee bank claiming full payment with returning charges, if any. At the time of representing the Travellers’ Cheques the branch should confirm to the drawee Bank that: i) Travellers’ Cheques were purchased on due identification of the customer from passport. ii) iii) The customer had signed the Traveller’s Cheques in presence of an Officer of the Bank. The signatures of the customer were verified with those inscribed at the time of issue of Travellers’ Cheques and they tally. In case of any difficulty being experienced by the branches in getting reimbursement of such Travellers’ Cheques, matter should be referred to International Banking Division at Head Office. FOREIGN CURRENCY NOTES 30. PURCHASE OF CURRENCY NOTES In terms of FEMA guidelines, authorised branches/exchange bureaus shall freely purchase foreign currency notes and coins from any person whether a traveller or not against payment in rupees. Where the foreign currency was brought in by declaring on form CDF (Currency Declaration Form), the tenderer should be asked to produce the same. The production of the form may, however, be waived if for any reason the tenderer is unable to produce it. The purchase of foreign currency notes are fraught with various risks as under and should, therefore, be purchased only by authorised branches and other branches holding specific permission. Page 12 of 24    I. Security risk II. Forgery risk III. Exchange fluctuation risk 31. PRECAUTIONS TO BE TAKEN BEFORE PURCHASING FOREIGN CURRENCY NOTES. Authorised branches must take following precautions before purchasing foreign currency notes: a) If Currency notes, tendered for encashment, are more than USD5000 or equivalent, then Branches must endorse purchase of currency on Currency Declaration Form, if the currency was brought by customer against declaration of the same on this form, giving number and date of encashment certificate issued under stamp and signatures. This formality may be waived if customer is unable to produce the CDF for any reason. The fully used Currency declaration form should be retained. Passport of the person tendering currency notes, should be examined for identification purposes, in case currency notes are purchased from a tourist. If transaction is equivalent or more than INR 20,000 a copy of passport may be retained. In case of persons other than tourists, currency notes should be purchased from a identified person after proper identification. Currency purchased should be examined without fail under U.V. light to ascertain genuineness. Branches should purchase only those notes which prima-facie appear to be genuine. Currency notes should be purchased at current currency notes buying rates. The foreign currency notes should not be defaced with the branch rubber stamp. Defaced or mutilated notes should not be accepted in any case. Branches should comply with current FEMA Regulations. b) c) d) e) f) g) h) 32. ACCOUNTING PROCEDURE in CBS AND RECORD When Foreign Currency is purchased from a customer the entries should be done in IRM Module in CBS .The register type chosen should be FOBP and Sub Register Type should be CURCY and in the second page the purpose code, Passport details and details of Currency purchased should be entered. On entry and verification, transactions based on the following accounting procedure are generated automatically, which may be modified, if required, to account for Service Charges (if any). Debit Credit Suspense Fex /Foreign Outward Bills Purchased Cash/Party Page 13 of 24    Each purchase will be allotted a separate FOBP Number, Notes of same currency purchased from one person may be allotted only one FOBP number. The printed number of individual notes should be recorded in the FOBP Register for reference purposes. 33. ISSUE OF CERTIFICATES Certificates of encashment should invariably be issued in terms of FEMA. Branches should issue certificates in Form BCI against receipt of inward remittances or realization of foreign exchange on security paper if the amount exceeds Rs 15,000/ in value, bearing distinctive serial numbers and reference numbers. In case the amount of inward remittance or realization of foreign exchange is up to Rs 15,000/- certificates in Form BCI with serial numbers and reference numbers may be issued on the bank’s letterhead. 34. SAFEGUARDS FOR HANDLING CURRENCY NOTES Foreign currency notes should be handled with the same care as cash at branches. All safeguards applicable for handling cash at branches laid down in Bank’s Book of Instructions will be applicable in case of foreign currency notes. The balance of foreign currency notes purchased in FOBP (Crncy) are automatically shown as Cash in hand in the branch Weekly Statement of Affairs. For the purpose of covering the stock of foreign currency notes also, under bank’s Insurance policy for cash balance, the rupee equivalent of balance as per currency notes stock register should be recorded in Cash Memo for cash balance held at the branch. 35. SALE OF CURRENCY NOTES abroad in terms of Branches may sell foreign currency notes to travellers proceeding FEMA guidelines. Procedural instructions laid down for sale of Travellers’ Cheques in respect of verification of the travel ticket for proposed journey, endorsement on passport(optional )as per FEMA guidelines and application/declaration form as prescribed by bank/RBI or specific approval from RBI and reconversion of Indian currency acquired by sale of foreign currency by foreign tourists should also be followed. Branches may accept payment in cash up to Rs. 50,000(Rs. fifty thousand)(check the prevailing limit) against sale of foreign exchange for travel abroad (for private visit or for any other purpose). Wherever the sale of foreign exchange either for any single drawal or more than one drawal reckoned together for a single journey/visit, exceeds the amount equivalent to Rs. 50,000, the relative payment in rupees must be received from the applicant by debit to his account where KYC norms have been complied. Page 14 of 24    If the applicant is not a customer, payment should be received by a crossed cheque drawn on applicant’s bank account or on the bank account of the firm/company. Branches may also accept payment in the form of a Banker’s Cheque/Pay Order and/or Demand Draft issued to the debit of account of the applicant, firm/company and is accompanied by a certificate to this effect. 36. ACCOUNTING PROCEDURE AND RECORDS All currency notes sold to a customer should be entered in ORM Module in CBS. The following entries should be passed at current selling rate for currency notes:Dr. Cr. Cash/Party Sundry Fex for amount of foreign currency notes sold at Current selling rate of exchange. When all currency notes relating to any purchase under one FOBP item has been disposed off, the following entries should be passed: Dr. Cr. Cr. Sundries Fex FOBP /Suspense Fex Misc. income on Foreign exchange (In reversal of entries credited earlier) (Towards adjustment of outstanding entry in FOBP relating to purchase of currency notes) (For difference) 37. SURRENDER OF UNSPENT CURRENCY NOTES If a customer returns unused currency notes, they shall be purchased at the current currency buying rate of exchange. 38. HOLDING AND DISPOSAL OF CURRENCY NOTES Branches dealing in currency note business (both purchase & sale) should retain currency notes with them for their normal business requirements. The surplus Balance, if any, shall be surrendered only to Full Fledged Money Changers (FFMCs), the names of which have been approved by the bank. The approval will be valid as long as the FFMC has a valid RBI license. Every branch dealing with a FFMC shall diarise the expiry date of the license and shall stop dealing with the FFMC if renewed license is not submitted to them. The FFMC has to offer a competitive premium on our currency buying rates. Branches should keep the quote of two or three FFMCs (according to the availability of services of FFMCs to the concerned branch) on record in the proforma prescribed by bank and surrender the currency to the FFMC, which has offered the highest rate. If services of more than one FFMC are not available at a particular center, quotation should be accepted under the signatures of Incumbent Incharge. Page 15 of 24    The branches shall part with the foreign currency notes only after realization of the rupee equivalent by cheque / draft or on credit of funds to any of bank’s nostro account. Branch shall not surrender Foreign Currency to any FFMC till the concerned office of the FFMC lodges the following documents/papers with them: I. A copy of the approval letter issued by IBD, H.O., II. A Copy of RBI license, III. List of authorised persons to take delivery of the currency. The list will include photos and signatures of all the persons from the concerned office of the FFMC who will visit the branch for sale/purchase of currencies duly attested by the Incharge of the concerned office of FFMC. The FFMC shall bear the entire transportation, insurance and other miscellaneous cost for visiting the offices / branches of the bank and picking up the currencies. The FFMC shall thoroughly examine the currency notes to their satisfaction before taking delivery. Once, the currency notes are delivered, the branches shall not be liable in any manner whatsoever for any loss, defect or otherwise. The branches off-loading surplus currency to the money changers shall submit the fortnightly report prescribed by the bank to their respective Circle Offices within 7 days of completion of each quarter. Zonal Offices shall consolidate the statements received from the branches and submit the consolidated statement to International Banking Division, Head Office, within 5 days from completion of the fortnight, incorporating remarks of branches about services provided by the various FFMCs. Remote branches should remain in touch with the authorised branches at the main centers and may send the foreign currencies to main center if the gain from difference of rate at the remote center and main center is more after providing for the entire cost to be borne by the branch in sending currency to the main center. Branches should send currency notes to the concerned office by Registered Airmail under insurance cover or through a person taking usual security precautions, with a list in duplicate of notes sent, giving full particulars viz. name of currency, denomination, amount and printed serial number of notes. 39. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION All Travellers’ Cheques and currency notes should be taken on collection basis only. Such branches should send the Travellers’ Cheques under registered cover to the nearest authorised branch & similarly the foreign currency notes should be forwarded under insured parcel. All currency notes/Travellers’ Cheques should be despatched under cover of form PNB174 in duplicate. Page 16 of 24    The authorised branch in turn will send one copy of the schedule approving the purchase and advising the rates to be applied or otherwise advise collection number for future reference. The branch without direct authorisation will credit the customers account only after the purchase is approved by the authorised branch and at rates advised to them. In case of Travellers’ Cheques/currency notes accepted for collection, customer’s account should be credited only after receipt of relative credit advice. 40. COUNTERFEIT NOTES All purchases of foreign currency notes are at the Bank’s own risk and responsibility. All prescribed precautions must be taken before encashing of foreign currency notes. In case of counterfeit notes detected by the encashing officer the under mentioned points may be observed: I. II. III. IV. V. VI. Do not return it to the customer. Delay the customer if possible. Contact the local Police Station. Note the description of customer, description of any companion and the registration no. of vehicle if any. Handle the note as little as possible. Surrender the note to local police only against proper receipt / seizure memo etc. INTERNATIONAL CREDIT CARDS/ DEBIT CARDS (MASTER CARD) 41. GENERAL The restrictions contained in Rule 5 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 are not applicable for use of International Credit Cards (ICCs) by residents for making payment towards expenses, while on a visit outside India, to the extent of the limit of the card. Residents can use ICCs on internet for any purpose for which exchange can be purchased from an authorized dealer in India, e.g. for import of books, purchase of downloadable softwares or import of any other item permissible under EXIM Policy. ICCs cannot be used on internet or otherwise for purchase of prohibited items, like lottery tickets, banned or proscribed magazines, participation in sweepstakes, payment Page 17 of 24    for call-back services etc., since no drawal of foreign exchange is permitted for such items/activities There is no aggregate monetary ceiling separately prescribed for use of ICCs through internet. Resident individuals maintaining a foreign currency account with an authorized dealer in India or a bank abroad, as permissible under extant Foreign Exchange Regulations, are free to obtain ICCs issued by overseas banks and other reputed agencies. The charges incurred against the card either in India or abroad, can be met out of funds held in such foreign currency account/s of the card holder or through remittances, if any, from India only through a bank where the card-holder has a current or savings account. The remittance for this purpose should also be made directly to the cardissuing agency abroad, and not to a third party. It is also clarified that the applicable credit limit will be the limit fixed by the card issuing banks. There is no monetary ceiling fixed by the RBI for remittances, if any, under this facility. Branches shall bring to the notice of constituents the guidelines applicable to the user of International Credit Cards/Debit Cards on their visits abroad. For the purpose of settling the entries pertaining to master card, whether Debits or credits in Nostro accounts (being maintained by position maintaining office) B/O International Banking Branch, New Delhi has been designated as satellite office between FEO and Transaction Banking Division (TBD). FEO sends list of Master Card related “Their Debits” as well as “Their Credits” in the Nostro Accounts to International Banking Branch, New Delhi from time to time. IBB in turn responds the “Their Credits” and sends credit to Master Card Cross Border settlement Account (1232002100041040) informing details to TBD, ATM Sharing Section. Likewise IBB, New Delhi provides Credits in respect of “Their Debits” and seeks reimbursement from TBD, ATM Sharing Section. Page 18 of 24    PNB WORLD TRAVEL CARD (WTC) The Bank has launched a new product viz. Pnb World Travel Card(WTC). It is a prepaid travel card just like our debit card denominated either in USD/EURO/GBP for visitors going abroad. It is on Master Card platform. The card is being sold through the branches authorized to handle foreign exchange business (AD branches) and some other branches having NRI business potential specially authorized for this purpose. The card holders can use the card for withdrawal through ATMs and & PoS terminals displaying Master card logo across the globe except in India, Nepal & Bhutan. Major advantages of World Travel Card 1. This card does away with the need for carrying Traveler Cheques and Currency. 2. Exposure to foreign currency is decided on the day the card is issued/topped up. 3. Customers need to look around for money changers and pay their transaction charges in a foreign country. 4. In case of loss of card, customer can immediately get it deactivated. 5. In the unlikely event of loss & possible subsequent misuse of the card, we insure loss up to USD 5000. 6. PNB customers can access their card account on line (thorugh Internet Banking Facility) to check balance, spending etc. 7. The unspent balance can be surrendered. 8. It can be reloaded any number of times, within entitlement. 9. We also have a 24x7 call centre to provide information and hot listing of the card in case of loss. Salient features of World Travel Card Eligibility: o Indian Nationals desirous of visiting abroad (except Nepal and Bhutan) for any purpose as permitted by RBI against rupee or to the debit their EEFC/RFC account. o Foreign Nationals while on visit to India against FOREX brought in India & or INR balance supported by encashment certificate. o NRIs against surrender of FOREX / to the debit of their NRE / FCNR account. Currency of Issue: o These are available in three different types of currency i.e. USD, GBP & EUR. The Cards will be printed with expiry date in mm/yy format and the expiry will be 5 years from the month of printing. Page 19 of 24    - Documents required: o Application form o Copy of valid passport, o latest photograph of the customer and o Form A- 2 if currency sold exceeds USD5000 or equivalent. There is no minimum amount for Card to be issued. However the Maximum amount is linked with the purpose of visit and the same is parameterized. At present the following limits are have been stipulated by RBI. Purpose BTQ or Basic Travel Quota - For holidays etc Business Travel Immigration - For people who settle abroad like Canada, New Zealand etc Employment Abroad - For a person who is going to work abroad Medical Treatments - For people who are traveling abroad for treatment Studies Abroad - For students going abroad for studies Maintenance of close relatives abroad Limit USD 10,000 per Financial Year USD 25,000 per trip USD 100,000 per trip - USD 100,000 per trip USD 100,000 per trip USD 100,000 per trip USD 100,000 per trip - Card can be recharged / reloaded from any of AD Branch irrespective of the branch of issue. Similarly it can be surrendered at any AD branch and not necessarily at the issuing branch. Facilities available on ATMs: (PNB ATMs in India) o Balance enquiry, o Statement of Account. o PIN change. - Page 20 of 24    - ATMs of Other Banks: (outside India, Nepal and Bhutan only) Balance enquiry and Cash withdrawals. In case of existing customers of the Bank availing IBS facility, they will automatically be using IBS facility for the Card also. In case not using the facility earlier, he/she will be provided the same on request after completion of requisite formalities. Card can be issued against cash only for amount below INR 50000/-. For non customer applicants desirous of having Card for an amount equivalent of INR 50000/- or above, the card can be issued on recovery of issue fee of Rs100 in cash and receipt of cheque made payable in favour of ‘Punjab National Bank’. Every card holder is provided (on request) the facility of getting monthly statement of account on e-mail. The statement in electronic form will be sent on the e-mail address mentioned in the application form and no separate request for this purpose will be needed. On return, facility of part surrender of the card is also allowed. The customer can keep balance in card account to be used in his subsequent visits. Reporting of Loss of Card at call centre on phone 1800 180 2222 (from BSNL & MTNL lines) or +91- 0120-2490088 (accessible worldwide). On loss of the card, the card will be blocked and the linked card account will be freezed. At the request of the customer, new card, linked with new account with zero balance will be dispatched to the customer and on confirmation of receipt, the balance in the previous linked account will be transferred to the new linked account which will make the new card ready for use. - - - - - Guidelines & Instructions for Branches (World Travel Card) The cards will be delivered to the customers in pre-activated stage along with ATM PIN, a welcome letter giving details of charges and printed pamphlet containing the detailed terms & conditions in a kit. As the Cards are linked to zero balance accounts till these are issued to customers, there is no risk in keeping the inventory in pre-activated stage. Cash Withdrawal limit per transaction on ATM will be as per the limit set up by the concerned ATM provider with a maximum of USD 1000/Euro 800/GBP 500 per day. No maximum ceiling for use of the card at merchant establishments has been prescribed. Page 21 of 24    - - WTC Selling rate(presently Interbank + 5 paise) is applicable for sale of FOREX at the time of issue/recharge of the Card and TT buying rate for purchase at the time of refund. The selling and buying rates are picked up by the system and not to be applied manually. Card can be recharged / reloaded from any of AD Branch irrespective of the branch of issue. Similarly it can be surrendered at any AD branch not necessarily at the issuing branch. All card linked accounts are being maintained in one Nodal branch {(International Service Branch (ISB), New Delhi}. However, the transactions/issuance of cards is to be done by all authorised branches. All charges paid by the customer are retained by the issuing branch. The float balance of outstanding cards remains with the Nodal branch and reflected as ‘Demand Deposits-current account’, as clarified by Finance Division. The balance in INR in the Card Linked Account being maintained at Notional Rate (as advised by IBD from time to time) and float balance in weekly/balance sheet being reflected at the Notional Rate. The Nodal branch is passing necessary entries as suggested as per AS-11 on each balance sheet date. ‘Card linked account’ with A/C numbers matching with the Card Numbers have been opened in the Nodal Branch. On issuance of a card the card holder’s particulars will be updated/edited in the respective card linked account and the amount will be credited in that account. With the credit of the amount in the linked account, the card will be ready for use. The specimen signatures of the card holder need not be uploaded in the account and the branch at the time of refund will verify the identity of the card holder from his passport or any other appropriate document. The amount will be refunded to the credit of customer’s operative account or in cash as was done at the time of issue Consolidated reporting of sale of currency to FEO is being done by the nodal branch irrespective of the branch of issue. The issue / recharge will result in the sale of FOREX and refund will result in the purchase of FOREX. The R-returns to be system generated. Customer IDs created for walk in customers are only for our internal operational convenience and cannot be used for opening any operative account of that customer and obtaining introduction, since the walk in customer is not subject to full KYC norms, required as per Bank/RBI KYC Page 22 of 24  - - - - - - -   - guidelines. All such Customer IDs will be created only in SOL ID of ISB (455300). We have obtained insurance cover from Oriental Insurance Company against unlikely event of loss & subsequent misuse of the card. Maximum coverage presently is equivalent to USD 5000 per card. Insurance cover is available for a period of 24 hours of loss /theft if the information of loss/theft is given to the Bank. Documents required for settlement of insurance claim are: (1) Claim form (2) Copy of Card profile (3) Copy of FIR(depending upon the circumstances of loss & possibility of lodgment of FIR) (4) An affidavit from the card holder regarding non-involvement in the disputed transactions. (5) Copy of hot listing proof. - Card can be topped up/reloaded from any of our branch which is authorized for foreign exchange transaction/World Travel Card Transactions, irrespective of the fact that from which branch card has been issued. For reloading customer can authorize the bank to debit his account by giving cheque or mandate or alternatively card can be loaded through cash or local cheque drawn in our favour. Remote reload by anybody other than customer himself is also possible. Customer can leave signed reload form and authorization with his family. The person authorsied by the customer for the same will need to come to the branch with the money and will need to provide necessary documents. On receipt of the application form and the funds, the card will be reloaded for the desired amount immediately. An individual cannot hold more than one card of the same currency at any given point of time. However if he is visiting more than one country on a single trip and wishes to carry different card for different currencies, then more than one card can be issued albeit in difference currency, within overall RBI approved limits for the trip. - CBS guidelines The following menus have been provided in CBS which relate to WTC module. Sr. No 1. 2. 3. Menu Option WTCKIT WTCISS WTCRLD Function For issuance of kits by back-office For issuance of WTC to customers For reloading of WTC with appropriate value Page 23 of 24    4. 5. 6. WTCSUR WTCRCN WTCRPT For surrendering of WTC WTC reconciliation Reports – To be run by ‘455300’ SOL only. The reports includeWTC_1 – No. and Value of Cards Sold WTC_2 – Currency wise/branch wise/circle wise balance in cards WTC_3 – Outstanding position of cards, debits/credits during the day WTC_4 – Outstanding expired (inoperative) cards. WTC_5 – Daily Summary Report for Nodal Office for Sale Reporting to FEO New Delhi WTC_6 – Daily Summary Report for Nodal Office for Purchase Reporting to FEO New Delhi In no case any manual TM entry has to be made by the branch. All required entries will be created at the time of verification of the transaction by the system. Detailed oprative guidelines are available in following circulars: IBD Circular No. 14/2010 dated 15.02.2010 IBD Circular No. 51/2010 dated 31.07.2010 ITD-CBS Circular No. 51/2010 dated16.06.2010 DETAIL OF VARIOUS CHARGES FOR WTC (Subject to change from time to time) Sr.No Particulars Charges fixed (Excluding Service Tax) 1 Issuance/Recharge Rs.100.00 2 Duplicate PIN Rs.100.00 3 Replacement of Card Rs.100.00 if delivered in India USD 20.00 for delivery abroad 4 ATM withdrawal fee USD/GBP/EUR 1.50 as per the currency of the card. 5 ATM balance enquiry USD/GBP/EUR 0.50 as per the currency of the card. 6 Refund of Balance in branch/ Rs.100.00 for each withdrawal on PNB ATM in India. 7 Mark up on conversion 2% over and above the charges of (cross currency payment) the Master Card. Page 24 of 24                  7. NOSTRO /VOSTRO  ACCOUNTS AND   CURRENCY POSITION    CHAPTER-07 : NOSTRO - VOSTRO A/CS & CURRENCY POSITION NOSTRO ACCOUNTS (FOREIGN CURRENCY ACCOUNTS) GENERAL This chapter deals with the manner and procedure for maintenance of our foreign currency accounts in the name of Position Maintaining Offices (PMOs) i.e. Foreign Exchange Offices - (FEOs) with Foreign Correspondents abroad. Most of the international trade transactions are settled in currencies other than Indian Rupee (INR). Currencies which are more prominently used for settlement are listed as permitted currencies in FEMA. The expression “permitted currencies” is used to indicate a foreign currency, which is freely convertible, i.e. a currency that is permitted by rules & regulations of the country concerned to be converted into major reserve currencies like US Dollar, Pound Sterling and Euro etc. Depending upon the volume of our trade at different centers in India, foreign countries involved, currencies used for settlement etc., accounts in selected currencies are maintained by the bank with our foreign correspondents in the name of FEOs. The details of our foreign currency accounts and FEOs, in whose names, these are maintained is circulated to branches by International Banking Division at Head Office from time to time through Agency Arrangement Circulars. 2. OPENING OF NOSTRO ACCOUNT Whenever any Position Maintaining Office feels the necessity of opening an additional foreign currency account, they need to refer the matter to International Banking Division at Head Office. International Banking Division at Head Office maintains country/Bank-wise profiles and keeps updated information about reports of working of various banks, central banking regulations in various countries and other relative information on the basis of which they would decide name of foreign correspondent with whom the account should be opened. International Banking Division at Head Office will then approach the concerned foreign correspondent for opening the account and request them to advise the account number allotted to the concerned office. International Banking Division at Head Office will also advise the correspondent about usual instructions (including standing instructions) to be noted by them. These broadly include communication relating to any overdraft in our account and daily balance at the close of the day by SWIFT/E-MAIL and as also the mode to make the statement of account available by them. On receipt of information from the foreign correspondent in having allotted the account number, the concerned Office should remit initial funds for the account. Page 1 of 28 At the time of opening of any new foreign currency account, a report should be submitted to concerned office of Reserve Bank of India giving the name and address of the correspondent, currency and the purpose for which account is opened etc. After opening of the account, the concerned office should convey the information to International Banking Division at Head Office to enable them to circulate information to Branches/FEDAI. 3. CONTROL DOCUMENTS International Banking Division at Head Office will arrange for control documents (including signatures of the officials) of the concerned foreign correspondent for record and use, if the same are not already held with them. The Control documents should be held under the custody of Senior Manager / Manager / Deputy Manager during the daytime and under joint custody overnight. 4. OPERATION OF FOREIGN CURRENCY ACCOUNT Any of our authorized branches can operate upon the foreign currency accounts maintained by Foreign Exchange Offices. Any deviation observed in operation of the account should be brought to the notice of the concerned branch, under intimation to International Banking Division at Head Office. MAINTENANCE OF ACCOUNT 5. STANDING INSTRUCTIONS If any change is required in our general standing instructions conveyed to foreign correspondent at the time of opening foreign currency account, the concerned office should approach foreign correspondent in consultation with International Banking Division, Head Office. If any of the standing instructions are not followed by foreign correspondent, matter should be taken up with them suitably. If foreign correspondent does not take any action in spite of the follow up, International Banking Division at Head Office should be advised to enable them to take up the matter at appropriate level. 6. MANAGEMENT OF FUNDS Page 2 of 28 Funds in each of the Nostro account should be constantly monitored and reviewed on daily basis. Large balance, not commensurate with the dayto-day requirements, is a sign of mismanagement of funds and should be avoided. The nostro balances be kept within the prescribed limits and the breaches, if any, be got confirmed from Treasury Division, HO. 7. OVERDRAFT IN NOSTRO ACCOUNTS Position Maintaining Offices should not normally avail any overdraft in any of foreign currency accounts maintained by them. Overdraft limit(s) for Nostro Accounts maintained in the name of Position Maintaining Offices with Foreign Correspondents abroad are arranged and/or fixed by Middle Office, Treasury Division, Head Office. Even in cases where regular overdraft limits have been arranged with foreign correspondents, the efforts should be made to ensure that facilities are utilized only in exigencies where account gets overdrawn because of unforeseen circumstances e.g. payments under letters of credit opened by branches or any such other transactions. In order to have a proper control over the Nostro Accounts and avoid overdrafts therein, it is desired that the branches must timely report the transactions to the respective Position Maintaining Offices, so that the related funding in the Nostro accounts could be ensured in time. Also if any overdraft is caused due to mis-reporting / non-reporting, the branch should compensate the Position maintaining Office, as such overdraft will be responsibility of the concerned branch. Funds should be provided in the account immediately on receipt of swift intimation from foreign correspondents in respect of any account getting overdrawn. Position Maintaining Offices should intimate complete particulars of overdrafts in Nostro Accounts, to Treasury Division Head Office through Daily/Monthly Overdraft Statements. Any overdrafts in the account together with sub-limits allocated for the purpose from time to time by Middle Office, Treasury Division, Head Office, will be subject to Foreign Exchange Management Regulations. The various risk limits fixed must be adhered to meticulously by the concerned PMO. 8. RECONCILIATION OF ACCOUNTS Reconciliation is the process of tracing every transaction from its origin to its end in order to detect errors in execution, if any, and to get them rectified. The purpose is to ensure that every transaction originating from our branches in India has been properly executed by foreign Page 3 of 28 correspondent and similarly we have correctly transaction originating from foreign correspondent. executed every Offices maintaining foreign currency account must ensure receipt of statement of account at regular intervals as per our standing instructions with the foreign correspondent. Immediately, on receipt of the statement, the same must be scrutinized to ensure that requisite particulars of various items of debits and credits are available. Balance in the statement of account should also be verified for its correctness. The base records for the reconciliation of Nostro accounts are the foreign bank’s statements and the Mirror account. Debit and credit entries in Mirror account should be cross-marked with credit and debit entries appearing in statements of account. For any entries in respect of which particulars are not available, matter should be taken up with the foreign correspondent and particulars obtained to help reconciliation of the accounts. At the end of every month, all outstanding entries in the mirror account and in the statement of account should be taken down bank wise in prescribed Reconciliation Register (FEX-102), choosing the same date for both Mirrors as well as for statement of account. Concerned official should initial all outstanding entries. Total of all debit entries outstanding and any credit balance in either statement of account or mirror account should tally with total of all outstanding credit entries and any debit balance in statement of account or mirror account. The concerned Official & Manager should sign the summary of reconciliation in the register. For all outstanding entries, matter should be followed up with foreign correspondent/concerned branch for adjustment of entries. Any delay would only make the job of adjustment of entries more difficult. The following guidelines advised by Reserve Bank for reconciliation of unreconciled Nostro Account Entries should be adhered to meticulously:1. Reconciliation of Nostro Account entries to be done on daily basis. Page 4 of 28 2. All the entries amounting to or more than equivalent of USD 50000 & above in all the currencies to be reconciled within a period of 24 hours as per the extant guidelines; All the entries amounting to or more than equivalent of USD 10000 & above but below USD 50000 in all the currencies to be reconciled within a period of one month; All the entries equivalent of less than USD 10000 in all the currencies must be reconciled within a maximum period of three months; No debit entry should appear in the monthly statement of Unreconciled Nostro Account entries outstanding for more than three months. Any laxity in this regard to be viewed seriously; 3. 4. 5. PMOs maintaining Nostro accounts should report outstanding of unreconciled nostro account entries to Middle Office, Treasury Division, Head Office through monthly statement prescribed for the purpose. While cross marking entries in Mirror account and statement of account particular attention should be paid to the following points: 1. Debit and credit items should not be set off against each other in statement of account except in the case of reversals. 2. Unreconciled items should not be transferred to profit and loss account without proper authority. 3. Any write-off of debit entries involving loss of foreign exchange or credit entries are to be transferred to Unclaimed Deposit Accounts (Sundry Credits) with prior approval of the Board. BALANCE CERTIFICATES/CONFIRMATION LETTERS The PMOs maintaining nostro accounts should obtain certificates of balance of accounts, on quarterly basis from Foreign Correspondents. The matter should be followed up till such time the certificate is received, which should be filed at appropriate place. 9. REVALUATION OF NOSTRO BALANCES Page 5 of 28 At the end of each month, credit and debit balances in Mirror account should be revalued at FEDAI rates. The following accounting procedure will be followed: Page 6 of 28 For Booking Profits Dr. Cr. Foreign Correspondent (mirror account) Exchange Profit (for profit) For Booking Loss Dr. Cr. 10. Exchange Profit Foreign Correspondent (mirror account) REVALUATION OF FORWARD POSITION Balances of all forward positions outstanding should be revalued at FEDAI rates every month. PMOs should furnish monthly statement to this effect to Middle Office, Treasury Division, Head Office. As per SEBI guidelines, the quarterly financial results of the Bank are to be published and as such the following entries are to be passed at the end of every quarter for booking profit/loss in forward position. For Booking Profits Dr. Suspense A/c Cr. Exchange Profit For Booking Loss Dr. Exchange Profit Cr. Sundry A/c Note: The above entries are to be reversed on the next working day from the close of the quarter in question so that suspense/sundry entries are adjusted. In case of any loss being booked under paragraphs 9 and 10 above, the position should be reviewed by the incumbent-in-charge who should look into the reasons for the loss and take necessary steps in the matter. The reasons for losses and steps taken to avoid recurrence should be reported to Middle Office, Treasury Division, Head Office in the monthly report of revaluation. 11. RETURNS/STATEMENT TO RESERVE BANK OF INDIA/ INTERNATIONAL BANKING DIVISION/MIDDLE OFFICE, TREASURY DIVISION HEAD OFFICE Page 7 of 28 Incumbents in charge must ensure that all returns and statements are submitted within stipulated time to Reserve Bank of India, International Banking Division and Middle Office, Treasury Division, Head Office, as per instructions from time to time regularly at prescribed intervals. VOSTRO ACCOUNTS (RUPEE ACCOUNTS OF NON-RESIDENT BANKS) 12. GENERAL This part deals with the procedure for opening and maintenance of Rupee accounts in the names of branches and correspondents outside India, other than Nepal & Bhutan. All operations in these accounts are subject to regulations as per Foreign Exchange Management Act, 1999 and instructions issued there under from time to time. Banks are permitted to open/close non-resident rupee accounts (noninterest bearing) in the names of their overseas branches and/or foreign correspondents without prior reference to Reserve Bank of India. Opening of rupee accounts in the name of Pakistani Banks operating outside Pakistan requires specific approval of Reserve Bank of India. Opening of rupee accounts in the names of Exchange Houses for facilitating private remittances into India requires prior approval of Reserve Bank of India. Remittances through exchange houses for financing trade transactions are permitted only upto Rs.2,00,000 per transaction. 13. OPENING OF VOSTRO ACCOUNT Immediately on receipt of intimation of a foreign correspondent’s intention to open rupee account with us, the same should be conveyed to International Banking Division, Head Office to enable them to process the request expeditiously. International Banking Division, Head Office maintains country/bank wise profiles and keeps up-dated information about reports of working of various banks, central banking regulations in various countries and other relevant information. After processing the request, International Banking Division Head Office would convey their approval to the concerned branch, on receipt of which the account number allotted to the foreign correspondent should be immediately advised to them. The concerned branch should follow up with foreign correspondent for receipt of initial funds into their account. On receipt of funds, the information should be conveyed to International Banking Division at Head Office to enable them to circularise the same to the branches. Page 8 of 28 At the time of opening any fresh account, the concerned office of Reserve Bank of India should be advised giving the name and address of foreign bank, purpose for which the account will be used and manner in which it will be kept in funds. A copy of intimation should also be sent to their Bombay Office. 14. CONTROL DOCUMENTS International Banking Division at Head Office will arrange for control documents (including signatures of officials) of the concerned foreign correspondent for the use of branch, in case the same are not already held at the branch. All control documents should be held in the custody of a Senior Manager/Manager or Deputy Manager during the day-time and under joint custody overnight. MAINTENANCE OF VOSTRO ACCOUNTS. 15 STANDING INSTRUCTIONS Branches should note any standing instructions of foreign correspondent and ensure compliance of the same without any error and omission. 16. DRAWINGS OF FOREIGN CORRESPONDENTS. Any debits of Indian Rupees for payment to residents are equivalent to remittance in India from the country in which correspondent is situated. FEMA Regulations applicable for inward remittances shall be applicable to debits in these accounts also. Foreign correspondents are making drawings on our branches included in agency arrangements with them. These branches after execution of their drawings claim reimbursement from the branch maintaining Rupee account. Such reimbursement claims should be honoured, without delay, inspite of overdrafts in the account over and above the limits, if any. Branches should lodge claim in case of drawings of large amounts by courier/fax/speed post. The branches maintaining vostro accounts of foreign correspondents must ensure that the branches executing payment orders are following these instructions meticulously. Drawings other than above and in excess of balance available or overdraft arrangement should be kept pending till funds are obtained Page 9 of 28 from foreign correspondent. Branches should take up the matter with foreign correspondents for obtaining funds by Swift/fax. 17. CREDIT IN VOSTRO ACCOUNTS Credit of rupees to these accounts is equivalent to remittance of foreign currency to India from the country in which correspondent is situated and all FEMA guidelines as applicable on such remittances would be applicable to credits in these accounts also. Transactions in the accounts should be closely monitored to ensure that overseas correspondent/banks do not take a speculative view on the rupee and any such instances should be brought to the notice of International Banking Division, Head Office. Forward purchase or sale of foreign currencies against rupees for funding is prohibited. Offer of twoway quotes to non-resident banks maintaining rupee accounts is also prohibited. 18. CONVERSION OF BALANCE Rupee balances held in accounts of non-resident banks are freely convertible in any permitted currency. All such transactions should be reported in Form A2 and the corresponding debit to the account should be reported in Form A3 under the relevant R Returns. 19. FUNDING OF VOSTRO ACCOUNTS Branches maintaining vostro accounts can freely purchase telegraphic transfers and other remittances from foreign correspondents, in any permitted currency, for providing funds in the account. Funds kept in vostro accounts by foreign correspondents should be need based and commensurate with their normal turnover in India. Keeping funds in the account for building up open position and undertaking speculative dealings should not be permitted. To this effect, the account should be under continuous monitoring for quickly identifying the sudden changes in volume and nature of operations. In case any deviation from the above instructions is observed in the account, the same should be advised to International Banking Division, Head Office who will suitably take up the matter with concerned correspondent. 20. OVERDRAFT IN VOSTRO ACCOUNTS Credit risks in Vostro accounts arise out of several factors e.g. Page 10 of 28 (i) (ii) Overdrafts availed by foreign correspondents in the account; Concealed overdrafts in the account (drawing executed by the branches but not debited in the account); Branches maintaining Rupee accounts in name of foreign correspondents should not normally allow any overdraft in the account without prior arrangement. Overdrafts allowed, if any, are subject to FEMA Regulations and should be within sub-limits allocated for the purpose by International Banking Division, Head Office. Sub-limit so allocated can be utilized over and above the regular overdraft limit sanctioned in any account. Where no overdraft arrangements exist with the foreign correspondent and the account is allowed to be overdrawn within allocated sub-limits, intimation of account getting overdrawn should be sent to the concerned foreign correspondent, by Swift/Fax/E-mail requesting them to remit funds. Statement of Vostro accounts to be made available to foreign correspondents, as per the mutually agreed mode and the periodicity. 21. CONCEALED OVERDAFT Branches are advised to claim reimbursement in respect of drawings of large amounts executed, by fax/courier/speed post/e-mail, to minimize the amount of concealed overdraft in the account. Branches maintaining vostro accounts must ensure that drawee branches are claiming the reimbursement as per the instructions and should bring name of defaulting branches to the notice of International Banking Division, Head Office to enable them to take appropriate measures. 22. SETTING UP OF CLEAN OVERDRAFT LIMITS At the request of foreign correspondent, International Banking Division at Head Office shall set up regular overdraft limits, within the overall limit permitted by Reserve Bank of India, in their favour. Immediately on receipt of such a request, the proposal should be processed expeditiously by the branch maintaining vostro account in consultation with International Banking Division, Head Office and sanction of appropriate overdraft limit may be obtained. Overdraft facility shall not be used to postpone funding of non–resident rupee accounts. In cases where overdrafts, in excess of overall limit permitted by Reserve Bank of India, is not adjusted within five days, a report to Central Office of Reserve Bank of India (Forex Markets Division) is required to be furnished within 15 days from the close of the month stating therein reasons thereof if arrangement for value dating does not exist. Page 11 of 28 Any other credit facility, in excess of above, to overseas correspondents/ overseas branches of banks incorporated in India maintaining nonresident rupee accounts, requires prior approval of Reserve Bank of India. Branches maintaining Vostro accounts should adopt a definite system to ascertain overdraft at any point of time and to maintain overdraft sanction register for the purpose. Important guidelines relating to maintenance of vostro accounts are advised by International Banking Division, Head Office, from time to time. The branches shall submit the following statements to International Banking Division, Head Office for monitoring of overdrafts and operations in Vostro Accounts: – 1. Statement for monitoring the operation in vostro accounts; 2. Statement of debit balances in vostro accounts 23. STATEMENT OF ACCOUNT Every effort should be made to ensure correct compilation of statement and to give complete particulars including foreign correspondents reference of various items of debit & credit. This would not only help foreign correspondent in reconciliation of their account but also to avoid frequent references from foreign correspondents enquiring details of various entries. Statements of accounts should be sent by swift/e-mail and hard copy of statement should be dispatched regularly at periodic intervals as desired by correspondent keeping in view the operations in the account. Any query regarding any entry or balance in account should be promptly attended to and details advised to help foreign correspondents in reconciling their books. 24. BALANCE CONFIRMATION LETTERS The branches maintaining vostro account should send certificates of balance on quarterly basis to Foreign Correspondents. While sending certificate of balance on quarterly basis, vostro account maintaining branches should advise foreign correspondents to send balance confirmation certificate within 15 days failing which the balance communicated would be treated as confirmed. The record for compliance of this aspect must be properly maintained. Page 12 of 28 25. RETURNS/STATEMENTS TO RESERVE BANK OF INDIA/ INTERNATIONAL BANKING DIVISION, HEAD OFFICE Incumbents-in-charge must ensure timely submission of all returns and statements to Reserve Bank of India and International Banking Division, Middle office, Treasury Division, HO as per instructions from time to time. CURRENCY POSITION 26. GENERAL When the assets in a foreign currency (including spot and forward purchase contracts) do not match with the liabilities in the currency (including spot and forward sale contract), we carry an open position and the difference between assets and liabilities is the net open position in that currency. If the assets are more than liabilities, the position is overbought and if less, the position is oversold. In accordance with FEMA Regulations, the basic rule governing position is that the offices maintaining independent position should maintain at close of business each day, square or near-square position (assets nearly matching with liabilities). The maturities of various transactions entering position should be reasonably matched (The timings of inflows and outflows of cash should be matched). The mismatching, if any, between assets and liabilities for any period should be minimum. COMPONENTS OF CURRENCY POSITION 27. BALANCE AS PER OUR BOOKS (MIRROR ACCOUNT) The balance as per mirror account reflects net of all purchases and sales in respect of which settlement in rupee equivalent has taken place to the debit/credit of mirror account. Purchases include Foreign Outward Bills for Collection/Purchased/Negotiated and Inward Remittances executed in respect of which reimbursement has been provided to branches, purchases in Inter Bank/Overseas market that have matured for payment and have been settled to the debit of mirror account. Sales include Foreign Inward Bills for Collection/Negotiated under our Letters of Credit and Outward Remittances effected in respect of which reimbursement has been received from branches and sales to Reserve Page 13 of 28 Bank of India or in Inter Bank/Overseas market which have matured for payment and have been settled by credit of mirror account. 28. FOREIGN OUTWARD BILLS PURCHASED/NEGOTIATED Bills purchased by branches, in respect of which reimbursement to branches is pending because of non-realization of bills, forms a part of purchases and are taken in position on the basis of outstanding bills. On realization and reimbursement to branches, they are removed from the outstanding bills and reflected as a part of balance as per our books (Mirror account) 29. INWARD REMITTANCES Inward Remittances executed by branches in respect of which their claims are pending with the Position Maintaining Office, for want of credit in our foreign currency account, form a part of purchases and is taken in position on the basis of Outstanding Claims. On reimbursement to branches, they will be removed from outstanding claims and reflected as a part of balance as per our books (Mirror Account). 30. FORWARD PURCHASE/SALE CONTRACTS Contracts in respect of which exchange rates have been fixed but would be maturing for delivery (when actual exchange of currencies takes place) on a future date form a part of currency position. These contracts are taken out of forward position at the time of maturity and are reflected as a part of balance as per our books (Mirror account). 31. CURRENCY POSITION SHEET Net currency position in any currency would be arrived at, as follows: Balance as per mirror account Foreign outward bills purchased/ negotiated outstanding IMT Claims outstanding Forward Purchases Forward Sales Net Currency Position (+) Debit (+) Purchases (+) Purchases (+) Purchases (-) Sales (+) Overbought (-) Oversold (-) Credit In the currency position prescribed sheet (FEX- 66), foreign outward Bills, Forward Purchases and Forward Sales should be recorded maturity wise. Page 14 of 28 32. VARIOUS RISKS While dealing in foreign exchange business, we are running a risk in keeping open position in any currency which may result into actual loss, if exchange rates change to our disadvantage. We also run a risk if the timings of our inflow of cash do not match with outflow in any currency. Mismatching results from several sources principally early/late delivery of customer contracts, buyer in Inter-bank market exercising option at unexpected time, extension of customer contracts, and mismatching created at the time of cover operations. In such cases, we would either be required to undertake swap transactions or allow our account either to get overdrawn (in which case we would be required to pay interest) or to have excessive credit funds not commensurate with our normal requirements (in which case our funds would be unnecessarily blocked without any advantage or interest). In case, we undertake swap transactions, we may have to bear the cost of swap, if against us (premium or discount). Also during the period when our position is mismatched we run a risk of fluctuations of premium and discount which may result into a loss if they move against us. We are also exposed to a credit risk if the other party fails to fulfill its obligations. 33. DEALING LIMITS To keep our risk and losses arising there from within control, Middle Office, Treasury Division at Head Office fixes up suitable limits from time to time for various position maintaining offices, keeping in view the volume of foreign exchange business routed through their accounts, strength of the currency, Reserve Bank of India guidelines etc. 34. DAYLIGHT LIMITS Daylight limits are fixed keeping in view the nature and volume of operations at each centre and conditions of the exchange market. In the course of operations during the day, the Dealer may have to maintain open position in various currencies. The open position during the day may be because of transactions reported by branches and the time taken by Dealer in covering the position. 35. OVERNIGHT LIMITS Reserve Bank of India guidelines require us to maintain square or near square position in each currency at the end of each day. The limit is fixed Page 15 of 28 for overnight closing position beyond which it is considered not near square. 36. GAP LIMITS The gap limits (i.e. mismatching in the forward position) is fixed on the basis of nature and volume of foreign exchange business routed through position maintaining offices, conditions in exchange market, liquidity of various contracts for different periods in the market and also time lag for retirement of documents under letters of credit by customers. For this purpose individual gap limit for each currency applicable to any position in each forward month and aggregate gap limit in that currency for the sum total of month-wise gaps is fixed from time to time. 37. INTER BANK LIMITS Inter bank limits are fixed up for dealing with individual banks both in India and overseas, keeping in view the capital plus reserve position of each bank, our experience with them in the past and the market reports about the functioning of these banks. 38. CUSTOMER LIMITS Customer limits for forward purchase and sale contracts to be fixed by the branches in relation to their foreign exchange turnover and limits such as FOBP/FOBNLC & FLC sanctioned in favour of the customer. This aspect of limits sanctioned is to be ascertained and confirmed by the Authorized Branches.. 39. INSTRUCTIONS FOR DEALERS Dealers must operate in the market according to guidelines laid down by Reserve Bank of India from time to time. The Dealers should confer with the Chief Dealer/Incumbent Incharge before the work starts, on the trend in the market in the light of overnight position and business routed through their accounts to arrive at tentative conclusions valid for the day. Major changes in such conclusion because of transactions reported by branches on that day should be informed to Chief Dealer/Incumbent Incharge. The Dealing Department should work independent of Accounting Department. Dealers in the Dealing Department should maintain position pads and funds chart alongwith the statement of maturity pattern of the contracts Page 16 of 28 on the basis of information received from Accounting Department. The Dealer must maintain updated position in the currency; keep a close watch on the movement of funds in the account and balance thereof and updated information regarding maturities of different purchase/sale contracts and gaps in the position, at any point of time during the day. The dealer must keep a close watch on movement of exchange rates in the market. Depending upon position, cash balance and mismatching in the position, the Dealer should operate in market for covering exchange risk, replenishment/disposal of foreign currency balances and adjustment of gaps, if any, in forward position. No other transactions should be entered into unless specifically authorized. The dealer should follow guidelines as follow: 1. Limits fixed for day light position, overnight position, individual banks for inter bank contracts, individual gaps, aggregate gaps and cut loss trading limits must be adhered to; Any temporary excess over the approved day light position limit should be reported to the Incumbent Incharge. This will require approval of Middle Office, Treasury Division at Head Office, if the same exceeds the powers vested with the Incumbent Incharge; A statement of day light position and overnight position should be submitted to Middle Office, Treasury Division at Head Office on a daily basis (FEX-93). If the limits are exceeded, approval of same should be obtained from Incumbent Incharge, Middle Office, Treasury Division at Head Office. If by taking single reporting, day light position is exceeded, power is vested with Incumbent; For the purpose of ensuring that contracts outstanding on any date with any bank fall within limits set up for the purpose, contracts except those maturing for delivery on that day should be taken into account; Although no separate individual gap limits have been fixed by Middle Office, Treasury Division at Head Office for short and long periods, yet Dealers should minimize the gaps in long forward contracts; 2. 3. 4. 5. Page 17 of 28 6. Any excess over other limits fixed must be reported to the Incumbent Incharge on the same day and approval of the same should be obtained from Middle Office, Treasury Division at Head Office, if it exceeds the powers vested with Incumbent Incharge; 7. As far as possible dealing transactions for open position and mismatching should be undertaken with our own position maintaining offices at other centers; 8. Brokers’ network for Inter-bank market operations should be usefully employed to ensure each transaction at best available market rates. Opportunity should be given to at least 3-4 empanelled brokers so that Bank is able to derive the benefits of competition and exchange deals are concluded speedily. Dealer should not discriminate amongst recognized brokers; 9. All options available viz, overseas market and inter-bank market, inter-office adjustments at Treasury Division, Head Office should be kept in mind while undertaking cover operations; The rates for swap transactions should be in line with market rates at the time of transactions. The Dealer should keep in mind time zone factors in any currency. For example, if a bank is buying Japanese Yen spot from Gulf Bank against rupees, the Gulf Bank must send its SWIFT Message to its Japanese correspondent on the day previous to the settlement day instructing it to debit its account and credit the account of our Bank, so that the delivery can be made on the day of settlement; In certain countries SWIFT Message for transfer of funds must reach before a particular time. The dealer should keep in mind these factors to avoid late receipt of funds in our account. Holidays and Weekly Closing Days at various centers should also be kept in mind while dealing in various currencies. Immediately after a deal is finalized, deal slip should be prepared on form FEX-89, 90, 91, as applicable, in duplicate. One copy of the deal slip should be sent to Accounting Department for their doing the needful in the matter. The deal slip should contain name of broker, name of counterparty bank, currency, amount, rate and delivery. The deal slip should be signed by the Dealer; 10. 11. 12. 13. Page 18 of 28 14. Time at which the deal is put through should be indicated in the deal slip; 15. Any deals concluded after office hours on any date should be done with the approval of the Incumbent Incharge; 16. The Dealer should not undertake any deals from any place outside bank premises, whether during business hours or outside; 17. Substitution of one bank by another in Inter-bank contracts by brokers should not be permitted under any circumstances; 18. Reserve Bank of India guidelines and code of conduct evolved by them for Dealers should be adhered to. Note: Incumbent-In charge, who is also the Head of Accounting Department, should not perform any dealing functions. 40. PROCEDURE FOR ACCOUNTING DEPTT.IN RESPECT OF EXCHANGE DEALS. 1. For exchange deals through brokers the accounting department should watch receipt of exchange broker’s notes. The Accounting Department should ensure that all notes have been received before the close of business on the day on which the deals were concluded and latest before the opening of the succeeding day. The broker’s notes received should be checked for all deals concluded through the medium of exchange brokers for their correctness vis-à-vis deal slip. Any discrepancy should be brought to the notice of Dealer immediately. If any clarification or rectification of errors is to be called for from the broker, the Accounting Department should do the needful. For all exchange deals, Accounting Department should send requisite confirmation of contract on form (FEX – 95 or 96), as applicable to the counter party banks. The Accounting Department should also watch receipt of confirmation of contracts from the counter party banks, check the correctness thereof, confirm the contracts sent by them and return the confirmation copy to them. Likewise, the Accounting Department must ensure receipt of confirmation copy of contract from the counter party banks in each case and verify the signatures of the counter party banks on the confirmation; Page 19 of 28 2. The contract and the confirmation copy received from counterparty banks should be systematically paired off and after verification should be filed separately for records; The Accounting Department should prepare bank wise summary of all outstanding forward exchange contracts, from Running Contracts Register, for which confirmations have not been received as at the last working day of each month and have the outstanding confirmed by counter party banks. 3. The Accounting Department should keep position and the funds register updated at every point of time on the basis of deal slips received from Dealers and the report of foreign exchange transactions flowing in from various branches; The Accounting Department should inform all transactions reported by branches to the Dealer and keep him intimated with latest position; The Accounting Department should also keep a track on the Nostro balances on the basis of SWIFT Message from Overseas Correspondents and provide updated information at frequent intervals to the Dealer; The Accounting Department should prepare a Rate Scan Report showing the day’s market spread and mean rate for each currency, both spot and forward. This report should be prepared on the basis of on going rates in the market at suitable intervals; Accounting Department at the end of each day should peruse the deal slips to spot out any variations from the rate scan report and report the variations to the incumbent Incharge. The Incumbent Incharge should call for the explanation immediately, for any variation observed, from the Dealer. The rate scan report should be daily put upto Incumbent Incharge; The Accounting Department should maintain bank wise record of all outstanding forward contracts at any time and advise Dealer if limits fixed are exceeded. The Accounting Department Should maintain broker-wise record showing details of the exchange dealings made by the Dealers through such exchange broker from deal slips and keep the same up dated at all times; Page 20 of 28 4. 5. 6. 7. 8. 9. 10. The brokerage bill should be checked by the Accounting Department from this record and payment effected after proper sanction from the Incumbent Incharge. At the close of day, currency-wise position sheets should be prepared on prescribed form (FEX –66). 11. 41. RECEIPT/PAYMENT OF INTEREST For late receipt of foreign currency funds under Inter-bank contracts, details should be entered in “Interest Receivable Register” with the following columns: 1. 2. 3. 4. 5. 6. 7. S. No. Date when claim lodged Name of bank Date of purchase Date of Pick-up Amount of Contract Rupee Equivalent 8. 9. 10. 11. 12. 13. 14. Date when received Period of delay Rate of interest Amount of interest Date of receipt Initials of officer Remark credit Accounting Department should ensure proper follow up for receipt of interest for late receipt of funds from counter-party banks. Date when interest is received should be marked in “Interest Receivable Register”. The amount recovered should be credited to “Interest received on Inter Bank T.T, on Purchases”, which should form a part of “Miscellaneous interest” under revenue income head. Claims for late payment of foreign currency funds from other banks, should be verified and details entered into “Interest Payable Register” with following columns: 1. 2. 3. 4. 5. 6. 7. S. No. 8. Date of receipt of 9. claim Ref. No. and date of 10. claim Name of Bank 11. Date of sale 12. Date of Pick-up Amount of Contract 13. 14. Date of debit Period of delay Amount of interest claimed Reasons for delay Amount and date of payment Initials of Officer Remarks. Page 21 of 28 Interest should be paid after obtaining proper sanction from Incumbent Incharge. The amount should be paid to debit of “Interest paid on Inter Bank T.T. on Sales” which should form a part of “Interest on O.D.” under revenue expenditure head. All receipts/payments of interest should be in accordance with FEDAI rules in force from time to time. RECORDS & ACCOUNTING PROCEDURE FOR MAINTAINING CURRENCY POSITION 42. VOUCHERS IN RESPECT OF TRANSACTIONS DETAILED HEREUNDER SHALL BE PASSED IN FOREIGN CURRENCY AS WELL AS RUPEE EQUIVALENT. The General Ledger in respect of various head shall be maintained in Rupees only. The Subsidiary General Ledger (control) will show the outstanding in foreign currency as well as in Rupees. Currency Position Book (FEX-56) will be posted on daily basis reflecting all the transactions during the day effecting the position. All headings in the Subsidiary General Ledger (control) should be reconciled with the position in Foreign Currency and/Rupees, in the Currency Position Book (FEX-56). 43. FOREIGN OUTWARD BILLS PURCHASED/NEGOTIATED On receipt of bills schedule/information, foreign currency amount should be converted into Indian Rupees at appropriate bill buying rates. The bills should be segregated currency wise and maturity wise. The details should be entered in outward bills position ledger (FEX-103) taking care that bills with different maturity are entered in appropriate columns to be maintained month wise in the ledger. For total of all bills lodged on any date, following contra vouchers shall be passed: Dr. Foreign Outward Bills Purchased/Negotiated(Branches)}for each currency Cr. Foreign Outward Bills Purchased/Negotiated (Outstanding) } separately Transactions reported by branches on telephone/fax should be lodged similarly. Details of such transactions, however, should be entered in a separate Register with columns for date, branch, bill reference and amount. On receipt of relative schedule from branches, the entry should be deleted. It should be ensured that relative schedules received are not Page 22 of 28 lodged again. For non-receipt of schedules in respect of such transactions, matter should be followed up with concerned branch. On receipt of credit advice from foreign correspondent, the same should be paired off with the relative bill schedule and following vouchers passed: 1. Reverse contra entries as passed above for the amount of foreign currency and Rupee equivalent lodged. Consolidated contra vouchers may be passed for each currency for all realizations. Dr. Correspondent (Mirror account) } for the Rupee equivalent }Lodged less correspondent’s } charges, if any Cr. Concerned branch. } 2. Swap costs for late realization, if any, should be deducted from the proceeds as per instructions, issued from time to time. Date of reimbursement should be marked in Outward Bills Position Ledger. Bills outstanding should be reviewed from time to time and transferred to Foreign Outward Bills for Collection, as per instructions issued from time to time. At the time of transfer of a bill from Foreign Outward Bills Purchased to Foreign Outward Bills for Collection, swap charges, if any, and exchange difference should be recovered from the concerned branch. The amount recovered should be credited to “Exchange Profit.” 44. FOREIGN OUTWARD BILLS FOR COLLECTION The schedules for Foreign Outward Bills for Collection should be segregated currency wise and entered in Outward Bill for Collection Register (FEX-104). On receipt of credit advices from foreign correspondent, the same should be paired off with the relative bill schedule and following vouchers passed: Dr. Correspondent (Mirror Account)} for the Re. equivalent of the amount Cr. Concerned branch } of realization at current TT buying rate/ Fine rate, as sanctioned in favour of the party, as per rules. Page 23 of 28 Date of reimbursement should be marked in Outward Bills for Collection Register 45. INWARD REMITTANCES REIMBURSEMENT CLAIM. Foreign currency amount of all inward remittances reimbursement claims received from branches should be converted into Indian Rupees at TT buying rates ruling on the date of payment. The details should be entered into inward remittances position ledger (FEX-105), and for total of all claims received following contra vouchers should be passed: Dr. IMT (Branches) Cr. IMT (Outstanding) } For each currency separately. } Transactions reported by branches on telephone/fax should be lodged similarly. Details of such transactions should be entered in a separate register with columns for date, branch, reference number and amount. On receipt of relative claims from branches, the entry should be deleted. It should be ensured that relative schedules received are not lodged again. For non-receipt of schedules in respect of such transactions matter should be followed up with concerned branch. Credit advices received from foreign correspondents should be paired off with the relative claims. Remittances in respect of which credit advices have not been received, statement of account should be verified for credit. Position maintaining offices should pass following vouchers at the time of providing reimbursement to branches: 1. Reverse contra entries passed above for the amount of foreign currency and the Rupee equivalent lodged. Consolidated contra vouchers may be passed for each currency in respect of all reimbursements; Dr. Correspondent (Mirror account) Cr. Concerned branch. 2. Date of reimbursement should be marked in Inward Remittances Position Ledger. For claims in respect of which cover is not traceable in the statement of account, the concerned branch should be advised accordingly, who will follow up with the foreign correspondent for the cover. 46. OUTWARD REMITTANCES/FOREIGN INWARD BILLS FOR COLLECTION / NEGOTIATED UNDER LETTERS OF CREDIT Page 24 of 28 On receipt of credit advice from the branch, following vouchers shall be passed: Dr. Concerned branch Cr. Foreign correspondent (Mirror account) Cr. Interest on FIBNLC In cases, where branches report sale by tested telegram/fax, vouchers may be passed accordingly. It must, however, be ensured that vouchers are not passed again on receipt of credit advice from branch confirming their phone/fax. In case where branches report sale on telephone, correspondent’s mirror account should be credited to the debit of suspense account to ensure inclusion of transaction in position. On receipt of relative credit advice, entry in Suspense account will be adjusted. Matter should be followed up with the concerned branch to ensure that entries in suspense account are adjusted without delay and in any case not later than a period of 10 days. It should be ensured that branch has applied correct rate for the transaction and remitted due interest. 47. FORWARD CONTRACTS (CUSTOMERS) REFER TO PROCEDURE LAID DOWN IN CHAPTER ON FORWARD CONTRACTS 48. INTER BANK/RESERVE BANK OF INDIA TRANSANCTIONS 1. CASH SALES Following vouchers shall be passed: Dr. Head Office- main office maintaining account with Reserve Bank of India. Cr. Mirror account of foreign bank through which foreign currency amount will be paid SETTLEMENT OF INTER BANK DEALS Inter Bank deals are being concluded at Front Office. However, the execution of deals is being done at Back Office. Page 25 of 28 In case of purchase/sale deals say USD/INR with other banks, the foreign currency will be received/paid in designated Nostro account whereas the rupee settlement will be made either through CCIL or RTGS module on value date. FEO, New Delhi is a nodal office for CCIL, on behalf of all the FEOs. All the centers shall forward their details of inter bank deals for spot settlement to FEO, New Delhi and in turn FEO, New Delhi shall forward all the deals to CCIL through V-sat for necessary settlement on value date. Thus, the foreign currency and rupee amount is settled. If the foreign currency is payable to CCIL, FEO will remit foreign currency to USD designated account of CCIL and CCIL will credit rupee funds to Bank’s RBI account maintained by our BO PNB House, Mumbai. In case foreign currency is receivable from CCIL, FEO, New Delhi will receive the same in Bank’s USD designated account and rupee funds shall be debited by CCIL to RBI account maintained by our PNB House, Mumbai on value date. The settlement with other FEOs shall be made individually by sending/receiving of their net settlement to designated USD nostro account and for rupee, debit/credit of HO Account/Suspense. In case of rejection of deals by CCIL due to mis match or any other reason, the settlement of deals is being made with counter-party bank outside CCIL i.e. if foreign currency is payable/receivable the same is remitted/received to designated nostro account and rupee funds are received/paid through RTGS (Real Time Gross Settlement) module. The RTGS module is functioning from our BO: PNB House, Mumbai branch for settlement with RBI. The rupee funds are being settled with our BO: PNB House, Mumbai by our office through HO credit advice. The cheque received for the Rupee equivalent will be deposited for credit of main office account with Reserve Bank of India. The counter foil of cheque deposit slip will be forwarded to the main office alongwith debit advice. SWIFT instructions should be sent for payment of amount to the account of buyer bank. 2. CASH PURCHASES Following vouchers shall be passed: Page 26 of 28 Dr. Mirror account of foreign bank through which foreign currency amount will be paid Cr. Head Office- main office maintaining account with Reserve Bank of India. Credit advice will be sent to main office maintaining account with Reserve Bank of India for issue of cheque on Reserve Bank of India, which should be delivered to concerned Bank. 3. SPOT & FORWARD TRANSACTIONS At the time of entry into the contract, following contra vouchers shall be passed: (i) For forward purchase: Dr. Forward Purchase (inter bank/RBI) Cr. Forward position (ii) For forward sale: Dr. Forward position Cr. Forward sale (inter bank/RBI) At the time of maturity of contract, above contra vouchers shall be reversed and vouchers as in case of each sales/purchases, as above, will be passed. The procedure for delivery/receipt of cheque and payment instructions will also be followed as in case of cash sales/purchases. 49. TRANSACTIONS WITH OVERSEAS BRANCHES/CORRESPONDENTS (i) CASH TRANSACTIONS Dr. Mirror Account of correspondent through which foreign currency shall be received (Purchased Currency) currency shall be paid (Currency sold) SWIFT instructions should be sent for payment to the account of buying bank in respect of currency sold. Page 27 of 28 Cr. Mirror Account of Correspondent through which foreign (ii) SPOT AND FORWARD TRANSACTIONS At the time of entering into the contract, following vouchers shall passed. be Dr. forward purchase (Overseas)- (In respect of purchased currency) Dr. Forward position Cr. forward sale (Overseas)- (In respect of currency sold) Cr. Forward Position At the time of delivery of contract, the above contra account entries shall be reversed and vouchers will be passed as in case of cash transactions as above. SWIFT instructions should be sent for payment to the account of buying bank at the time of delivery of contract. 50. For all inter bank, RBI and overseas contracts, particulars will be recorded in Currency wise Running Contract Register with following columns. 1. 2. 3. 4. 5. 6. Delivery Funds Date of sending confirmation of contract Currency and 10. Date when confirmed copy amount received Rate 11. Remarks. Equivalent Amount (Rupees/Currency) 51. All vouchers passed in respect of forward contracts made on any day should be posted currency wise and category wise in Forward Contract Ledger FEX- 101. Date of delivery shall be marked in forward contract ledger against original entries. 52. RETURNS/STATEMENT S. No. Date of contract Bought/sold 7. 8. 9. Incumbent Incharge must ensure that all control returns and statements prescribed by Reserve Bank of India and International Banking Division/Middle Office, Treasury Division Head Office are submitted regularly within stipulated timeframe to the concerned office. Page 28 of 28               8. FORWARD CONTRACTS‐ CUSTOMER    CHAPTER 8 : FORWARD CONTRACTS – CUSTOMER 1. GENERAL 1.1 Forward Exchange Contract is an agreement between the Bank and the Customer whereby the Bank agrees to buy/sell foreign exchange at a future date, at a firm rate fixed on the date of the contract. It is a firm commitment wherein the rate of exchange, amount, currency, the date/period of delivery and mode of delivery are agreed between the Bank and the customer at the time of entering into the Contract. It is obligatory on the part of customer to fulfill his commitment within the period stipulated under the Contract. 1.2 The need for a Forward Contract arises due to fluctuations in Exchange Rates of foreign currencies. With the advent of the floating exchange rate of most currencies, the incidence of volatility in exchange rates is more than ever before. By entering into a forward Contract, an exporter can fix the realisable value in rupees for a foreign currency so that he is assured of a reasonable profit. Similarly, an importer can fix the amount payable in rupees for imports in foreign currency thus avoiding cost escalation due to exchange fluctuation. An exporter would approach his bank for the issue of Forward Purchase Contract. Similarly, the importer would approach the Bank for the issue of a Forward Sales Contract in respect of his import commitments. 1.3 All Forward Contracts are subject to Exchange Control Regulations/FEMA guidelines and FEDAI Rules. Authorised branches forwarding requests to Position Maintaining Offices should ensure compliance of these rules and regulations meticulously. 2. ELIGIBILITY 2.1 Branches holding import and export business receive requests from their importer and exporter customers for booking forward contract in various currencies to cover the exchange rate fluctuation risks for the payment to be made/received at a future date. Forward contracts for customers are booked in respect of genuine trade transactions and not for speculative purposes. These contracts are subject to exchange control regulations provided under FEMA Act 1999 As per Master Circular on Risk Management and Inter-Bank Dealings issued by RBI from time to time, the transactions eligible for hedging exchange risk are prescribed. Page 1 of 31    2.2 Branches should entertain requests for issue of Forward Contracts from their Customers, who are sanctioned suitable credit limits to finance their import/ export business. For current account holders not enjoying the import/export credit limits, the limits for booking forward contracts may be set up, to the extent of underlying exposure, with a specific margin of 15% of the proposed forward contract amount, to take care of the losses on account of cancellations of forward contracts, if any, due to the adverse exchange rate movements. Outstanding contracts at any one time with any customer should be commensurate with his credit limits for forwards contract and his capacity to fulfill his commitments. 3. TRANSACTIONS ELIGIBLE FOR FORWARD CONTRACT 3.1 Forward Exchange Contracts can be issued by banks to their customers in respect of genuine trade transactions only. Before entertaining any request from the customer for booking of a Forward Contract, branches should ensure that the customer, in fact, is exposed to exchange risk in respect of the underlying transaction and the risk is in the currency in which the Forward Cover facility is desired. Further, the Contract can be booked in one of the permitted currencies only in terms of Exchange Control Regulations. (i) RESIDENTS IN INDIA A person resident in India may enter into a forward contract with the Bank to hedge an exposure to exchange risk in respect of a transaction for which sale and/or purchase of foreign exchange is permitted under the Foreign Exchange Management Act, 1999 or rules or regulations or directions or orders made or issued there-under, subject to the following terms and conditions: (a) Bank through verification of documentary evidence is satisfied about the genuineness of the underlying exposure, irrespective of the transaction being a current or a capital account transaction. Full particulars of the contract should be marked on such documents under proper authentication and copies thereof retained for verification. However, bank may also allow importers / exporters and special dispensation entities to book forward contracts on the basis of a declaration of an exposure subject to the conditions mentioned below. (b) The maturity of the hedge does not exceed the maturity of the underlying transaction; (c) The currency of hedge and tenor are left to the choice of the customer; Page 2 of 31    (d) Where the exact amount of the underlying transaction is not ascertainable, the contract is booked on the basis of a reasonable estimate; (e) Foreign currency loans/bonds will be eligible for hedge only after final approval is accorded by the Reserve Bank where such approval is necessary or loan identification number is given by the Reserve Bank; (f) Global Depository Receipts (GDRs) will be eligible for hedge only after the issue price has been finalized; (g) Balances in the Exchange Earner's Foreign Currency (EEFC) accounts sold forward by the account holders shall remain earmarked for delivery and such contracts shall not be cancelled. They may, however, be rolled-over; (h) All forward contracts with rupee as one of the currencies, booked to cover foreign exchange exposures falling due within one year can be freely cancelled and rebooked. All forward contracts, involving the rupee as one of the currencies, booked by residents to hedge current account transactions, regardless of tenor, may be allowed to be cancelled and rebooked freely. This relaxation will not be applicable to forward contracts booked on past performance basis without documents as also forward contracts booked to hedge transactions denominated in foreign currency but settled in INR, where the current restrictions will continue. The corporate exposures are required to be reported in the format prescribed by RBI. As hitherto, the statement relating to exposure in foreign currency shall be submitted by the Authorized Branches to the concerned Circle Office. On compilation, Circle Office shall submit consolidated figure to IBD for onward submission to RBI for Bank as a whole. The details of exposures of all corporate clients have to be included in the report. Further, the facility of cancellation and rebooking should not be permitted unless the corporate has submitted the required exposure information as prescribed. All non- INR forward contracts can be freely re-booked on cancellation. (i) Substitution of contracts for hedging trade transactions may be permitted by an authorized dealer on being satisfied with the circumstances under which such substitution has become necessary. (ii) IMPORTERS / EXPORTERS Bank may also allow importers and exporters to book forward contracts on the basis of a declaration of an exposure and based on past performance up to the average of the previous three financial years’ (April to March) actual Page 3 of 31    import/export turnover or the previous year’s actual import/export turnover, whichever is higher, subject to the following conditions: (a) The forward contracts booked in the aggregate during the year and outstanding at any point of time should not exceed the eligible limit i.e. the average of the previous three financial years’ (April to March) actual import/export turnover or the previous year’s actual import/export turnover, whichever is higher. Contracts booked in excess of 75 per cent of the eligible limit will be on deliverable basis and cannot be cancelled. These limits shall be computed separately for import/export transactions. (b) Any forward contract booked without producing documentary evidence will be marked off against this limit. (c) Importers and exporters should furnish a declaration to the bank regarding amounts booked with other bank under this facility. (d) An undertaking may be taken from the customer to produce supporting documentary evidence at the time of cancellation / before the maturity of the forward contract. (e) Outstanding forward contracts higher than 50 per cent of the eligible limit may be permitted by bank only on being satisfied about the genuine requirements of their constituents after examination of the following documents: A certificate from the Chartered Accountant of the customer that all guidelines have been adhered to while utilizing this facility. A certificate of import/export turnover of the customer during the past three years duly certified by their Chartered Accountant/bank in the format prescribed by RBI. The details of forward contracts booked by constituents on past performance basis, shall be kept on record for audit purpose. Monthly statement shall be sent by Authorized Branches to the concerned Circle Office for compilation of customer-wise exposure taken by the Bank. (f) In the case of an exporter, the amount of overdue bills should not be in excess of 10 per cent of the turnover, to avail the above facility. (g) Banks are required to submit a monthly report (as on the last Friday of every month) on the limits granted and utilized by their constituents under this facility in the format prescribed by RBI. The details of forward contracts booked on past performance basis shall be sent by authorized branches to the concerned Page 4 of 31    Circle Office on monthly basis. Circle Office shall compile the data and send to IBD for onward submission to The Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Amar Building, 5th Floor, Central Office, Mumbai-400 001. NOTE: Limits specified in paragraph (ii) pertain to forward contracts booked on the basis of declaration of an exposure. When forward contracts are booked by the bank after verification of documentary evidence, these limits are not applicable and such contracts may be booked up to the extent of the underlying. (iii) SMEs Bank may allow Small and Medium Enterprises (SMEs) to book forward contracts to hedge their direct and / or indirect exposures to foreign exchange risk without production of underlying documents, subject to the following conditions: (a) Such contracts may be allowed to be booked after ensuring that the entity qualifies as a SME as defined by the Rural Planning and Credit Department, Reserve Bank of India vide circular RPCD. PLNS.BC.No.63/06.02.031/ 2006-07 dated April 4, 2007. (b) Such contracts may be booked through bank with whom the SMEs have credit facilities and the total amount of forward contracts booked should be in alignment with the credit facilities availed by them for their foreign exchange requirements or their working capital requirements or capital expenditure. (c) These forward contracts may be allowed to be cancelled & rebooked freely. (d) Bank should carry out due diligence regarding “user appropriateness” and “suitability” of the forward contracts to the SME customers. (e) The SMEs availing this facility should furnish a declaration to the bank regarding the amounts of forward contracts already booked, if any, with other banks under this facility. Note: SMEs are also permitted to use foreign currency rupee options for hedging their exposures after production of underlying documents. (iv) REMITTANCES Bank may allow resident Individuals to book forward contracts to hedge their foreign exchange exposures arising out of actual or anticipated remittances, both inward and outward, without production of underlying documents, up to a Page 5 of 31    limit of USD 2,00,000, based on self declaration and subject to the following conditions: (a) The contracts booked under this facility would normally be on a deliverable basis. However, in case of mismatches in cash flows or other exigencies, the contracts booked under this facility may be allowed to be cancelled and rebooked. (b) The notional value of the outstanding contracts should not exceed USD 2,00,000 at any time. (c) The contracts may be permitted to be booked up to tenors of one year only. (d) Such contracts may be booked through bank with which the resident individual has banking relationship, on the basis of an application-cumdeclaration in the format prescribed by RBI (such application cum declaration obtained should be kept on record for audit purpose). Individuals understand the nature of risk inherent in booking of forward contracts and should carry out due diligence regarding “user appropriateness” and “suitability” of the forward contracts to such customer. (v) BOOKING/ CANCELLATION/ RE-BOOKING OF FORWARD CONTRACTS WITH OTHER BANKS A forward contract cancelled with one bank can be rebooked with another bank subject to the following conditions: (a) The switch is warranted by competitive rates on offer, termination of banking relationship with the bank with whom the contract was originally booked, etc; (b) The cancellation and rebooking are done simultaneously on the maturity date of the contract; (c) The responsibility of ensuring that the original contract has been cancelled rests with the bank who undertakes rebooking of the contract. (vi) INVESTMENTS (a) Residents having overseas direct investments in equity and loan are permitted to hedge the exchange risk arising out of such investments. Bank may enter into forward contracts with residents for hedging such investments subject to verification of exposure. Contracts covering overseas direct investments can Page 6 of 31    be cancelled or rolled over on the due dates. However, Authorized branches may permit rebooking only to the extent of 50 per cent of the cancelled contracts. (b) If a hedge becomes naked in part or full owing to shrinking of the market value of the overseas direct investment, the hedge may continue to the original maturity. Roll over on due date shall be permitted up to the extent of the market value as on that date. (vii) CUSTOM DUTY PAYABLE ON IMPORTS Bank may also enter into forward contracts with residents in respect of transactions denominated in foreign currency but settled in Indian Rupees including hedging the economic (currency indexed) exposure of importers in respect of customs duty payable on imports. These contracts shall be held till maturity and cash settlement would be made on the maturity date by cancellation of the contracts. Forward contracts covering such transactions once cancelled, are not eligible to be rebooked. However, in the event of change in the rate of customs duties due to the government notifications, importers may be allowed to cancel and/or rebook the forward contracts before maturity. (viii) FACILITIES FOR NON-RESIDENT INDIANS(NRIs) Authorized branches may enter into forward contracts with NRIs as per the following guidelines to hedge: i) The amount of dividend due to him on shares held in an Indian company. ii) The balances held in the Foreign Currency Non-Resident (Banks) [FCNR(B)] account or the Non-Resident External Rupee [NRE] account. Forward contract with the rupee as one of the legs may be booked against balances in both the accounts. With regard to balances in FCNR(B) accounts, convert the balances in one foreign currency to another foreign currency in which FCNR(B) deposits are permitted to be maintained. iii) The amount of investment made under the portfolio scheme in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 or under notifications issued there-under or is made in accordance with the provisions of the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 as amended from time to time. ix) FACILITIES FOR HEDGING FOREIGN DIRECT INVESTMENT IN INDIA Page 7 of 31    (a) Authorized branches may enter into forward contracts with residents outside India to hedge the investments made in India since January 1, 1993 subject to verification of the exposure in India. (b) Residents outside India having foreign direct investment in India are also permitted to enter into forward contracts with Authorized branches with rupee as one of the currencies to hedge the currency risk on dividend receivable by them on their inve stments in Indian companies. (c) Residents outside India may also enter into forward sale contracts with Authorized branches to hedge the currency risk arising out of their proposed foreign direct investment in India. Such contracts may be allowed to be booked only after ensuring that the overseas entities have completed all the necessary formalities and obtained necessary approvals (wherever applicable) for the investment. The tenor of the contracts should not exceed six months beyond which permission of the Reserve Bank would be required to continue with the contract. These contracts, if cancelled, shall not be eligible to be rebooked for the same inflows and exchange gains, if any, on cancellation shall not be passed on to the overseas investor. NOTE : All foreign exchange derivative contracts permissible for a person resident outside India other than a FII once cancelled, are not eligible to be rebooked. FII s can rebook. x) HEDGING OF GOLD PRICES Authorized branches are permitted to enter into forward contracts with their constituents (exporters of gold products, jewellery manufacturers, trading houses, etc.) in respect of the underlying sale, purchase and loan transactions in gold with them, subject to the conditions specified by the Reserve Bank. The tenor of such contracts should not exceed six months. xi) HEDGING OF CAPITAL (a) Foreign banks may hedge the entire Tier I Capital held by them in Indian books subject to the following conditions: (i) The forward contract should be for tenor of one year or more and may be rolled over on maturity. Rebooking of cancelled hedge will require prior approval of Reserve Bank; (ii) The capital funds should be available in India to meet local regulatory and CRAR requirements. Therefore, foreign currency funds accruing out of hedging Page 8 of 31    should not be parked in Nostro Accounts but should remain swapped with banks in India at all times. 4. BOOKING OF FORWARD CONTRACTS 4.1 While booking forward contracts, branches should verify suitable documentary evidence to verify the underlying transaction and ensure that an exposure exists to the extent of amount of cover sought. The particulars of forward contract such as amount, date, number etc. should be marked on such documents under the stamp and signature to ensure that multiple forward contracts are not booked simultaneously in respect of the same underlying transaction. Copies of the documents so marked should be retained for record for inspection/audit purpose. Branches should also satisfy themselves that the underlying commitments are firm and should ensure that forward cover is not provided for anticipated transaction. Branches shall also allow importers and exporters to book forward contracts on the basis of a declaration of an exposure and based on past performance subject to the conditions laid down in FEMA, as amended from time to time. 5 EXTENT AND PERIOD OF COVER 5.1 A transaction may be covered in whole or part also, if required by the customer. The choice of currency, period and extent to which an exposure is to be covered may be left to the choice of the customer. Ordinarily, the maturity of the contract should match that of the underlying transaction, but in no case the maturity of the contract should exceed the maturity of underlying transaction. Where the exact amount is not ascertainable owing to the rates/costs being linked to variable factors, contracts may be booked on the basis of reasonable estimates. However, contracts must be booked for definite amounts and period. Contracts may, however, be booked for shorter maturities with a view to reducing the costs for the customer. 6 PERIOD OF DELIVERY 6.1 Banks can issue the Contracts with the customers on fixed date basis or option forward period basis, depending upon the requirements of the customer. Normally, the contracts would be required to be issued with the option for delivery with the customer, when fixed date of delivery of documents cannot be pre-determined at the time of issue of the Contract. The option of delivery under the Contract should in no case, extend over a total period of more than one month and shall be regulated by the provisions of FEDAI rules in force. Contracts permitting option of delivery must state the first and last date of delivery. Page 9 of 31    7 SUBSTITUTION OF CONTRACTS 7.1 In respect of import and export transactions where forward cover has been booked, the customer may be permitted to substitute another order under the same contract provided the branch is satisfied, after verification of suitable documentary evidence that a genuine exposure to the extent of the amount of original forward contract subsists under the substituted order/contracts. The details should be noted down and attached to the documents relating to the forward contract. 8. MANAGEMENT INFORMATION SYSTEM (MIS) 8.1 Branches shall ensure submission of statement of all forward sale/purchase contracts booked on behalf of customers to Circlle Office /IBD as advised from time to time on the prescribed proforma . PROCEDURAL GUIDELINES FOR BOOKING OF FORWARD CONTRACTS 1. PROCEDURE FOR BOOKING OF FORWARD CONTRACT BY AUTHORISED BRANCHES 1.1 To ensure that branches follow uniform procedure for booking of forward contracts, the following registers may be used in CBS, for the purpose: i FEX 85 - Application for forward purchase contracts, ii FEX 86 - Application for forward sale contracts iii FEX 87 - Forward Contract Register, maintained in CBS system iv FEX 88 - Customer-wise forward contract liability register maintained in CBS system 1.2 Application forms prescribed at Sl. No (i) and (ii) would be completed by customers in triplicate and submit to the branch at which their account is maintained. The branches not with direct authorization to handle foreign exchange business would obtain the application from their customer and Forward the same to the authorized branch/ Foreign Exchange Office under whose jurisdiction they are working along-with documentary evidence. Page 10 of 31    1.3 The branches to ensure that they do not forward the application for booking Forward Contracts to Foreign Exchange Office in routine manner without assessing the capacity of the customer to pay cancellation charges in case the contract is not taken up. 1.4 Branches are required to pay these charges to Foreign Exchange Office as and when contracts are cancelled by customers and the exchange rate moves against them. Under no circumstances, these charges can be waived and therefore, must be remitted to Foreign Exchange Office. 1.5 Branches are advised to assess the capacity of the customers before forwarding the application for booking Forward Contract and necessary guidance may be given to the customers advising them that in case they fail to take up the contract irrespective of any reason, they may have to pay the cancellation charges, if any. Hence the Branches should keep in mind the risk involved as stated above and may keep adequate margin in doubtful cases. 2. Limits for booking of forward contracts 2.1 Specific forward contract limit needs to be set up as a part of the overall credit limit sanctioned by the Bank in favour of the client. No separate processing fee for setting up forward contract limit should be charged from the customer. However, no forward contract limit shall be set up for booking of forward contracts against FCNR (B) deposits, EEFC funds and foreign inward remittances On the basis of underlying exposure of the customer, maximum eligible amount of the limit for booking of forward contract could be the accepted projected turn over’. However, the sanctioning authority may fix the lower limits than the ‘accepted projected turnover’. The limits for booking forward contracts may also be fixed on the basis of past performance up to the average of previous three financial years’ actual import/export turnover or previous year’s actual import/export turnover whichever is higher. But the limits so fixed shall not exceed the ‘accepted projected turnover’ of the customer. However, the sanctioning authority may fix lower limits than the ‘accepted projected turnover’. Page 11 of 31    A declaration on the letter head of the Company shall be furnished by concerned exporter/importer regarding the amount booked with Authorised Dealers(AD) category banks under past performance basis as per prescribed format. 2.2 In case the forward contract limit is within post shipment / import letter of credit limit, no additional security / margin may be insisted upon. However, in case of fixing of forward contract limit in excess of the postshipment / import letter of credit limit, branches should take extra margin of 10% (for BB+ and above category) or 25% (for BB and below category) from the customer on the excess amount above the post-shipment / import letter of credit limit. Further, the Foreign Exchange Office (FEO) through which the forward contracts have been booked, will send a fortnightly statement to the concerned branches after doing the mark to market (MTM) of the exposure. In case there is loss more than the margin held, the customer would be asked to top up the margin within 3 days from the date of demand failing which the branch will have the discretion to cancel the contract at the risk and responsibility of the customer. 2.3. For current account holders not enjoying the import/export credit limits, the limits for booking forward contracts may be set up, to the extent of underlying exposure, with a specific margin of 15% of the proposed forward contract amount, to take care of the losses on account of cancellations of forward contracts, if any, due to the adverse exchange rate movements. However, MTM of the forward contracts will be done by FEO on fortnightly basis and if the adverse exchange rates erode the margins kept, the customer will be asked by the concerned branch to top up the margin at the required level within 3 days from the date of demand failing which the branch shall have the option of cancellation of the forward contract at the risk and responsibility of the customer. The necessary changes in this regard will be made in the application form for booking the forward contracts. 2.4. Branch will take specific approval from Circle Head for booking the forward contracts in excess of the credit limit sanctioned in favour of the customer. 2.5 In the case of current account holder to whom credit limits are not sanctioned but the limit for booking forward contracts have been fixed, Branch shall take the prior approval of Circle Head for booking forward contracts above USD 1 Mio. or its equivalent for each customer. Page 12 of 31    2.6 The branch will take approval of Circle Head for booking further forward contracts on behalf of those customers who are in default for paying the cancellation charges. 3. Powers for sanctioning facility for booking forward contract 3.1 The powers vested for fixing forward contract limits SHOULD BE AS PER CIRCULAR/GUIDELINES ISSUED BY IBD, H.O. FROM TIME TO TIME. 4. Clubbing of Limits for Forward Contracts and Option transactions 4.1 As per extant guidelines issued by Middle Office (Forex), Risk Management Division , all conditions and sanctioning powers applicable to booking and cancellation of forward contracts will be applicable to option contracts also. Further, the exposure towards forward contract and option transactions for a particular customer will be adjudged by clubbing outstanding Forward Contracts and Option Transactions, at any point of time. 5. Agreement to be obtained from the customer for booking of forward contract . 5.1 In compliance with RBI guidelines, it is to be ensured that the corporate clients have drawn up a risk management policy, laid down clear guidelines for concluding the transactions and institutionalized the arrangements for a periodical review of operations and annual audit of transactions to verify compliance with the regulations. Appropriate authorities, while sanctioning forward contract limit as a part of the over all credit limit in favour of the customer will ensure to take an agreement from the customer as prescribed by IBD and the same will form an integral part of the main loan documentation with the customer. 6. Other procedural (Guidelines) 6.1. A written request of customer on the revised format of prescribed application Form (FEX 85 & 86)/ Contract confirmation shall be obtained by the branches. 6.2 On receipt of the application for booking forward contract from the party, the branch, after necessary verification at its end, should immediately take up with FEO/Treasury Division for booking of forward Page 13 of 31    contract through telephone, e-mail and fax or by any other fastest means of communication. The branch should ascertain the exchange rate from FEO / Treasury Division and convey the same to the party by fax /email/telephone on the same day and should keep a record of the same. 6.3 FEO / Treasury Division shall send copy of the forward contract to the branch for acceptance by the party within 24 hours of booking of the contract. On receipt of confirmation from FEO branch will obtain confirmation immediately from the customer. The branch shall send copy of the forward contract confirmation, duly accepted and signed by the party, and countersigned by branch official to the concerned FEO/Treasury Division by fax within 7 working days after receipt of the same from them. 6.4 Non-submission of the contract confirmation should be brought to the notice of Circle Head/Treasury Division/FEO immediately. In case the customer refutes having booked the contract, the liabilities need to be crystallized forthwith with the permission of the Circle Head and appropriate steps for recovery of the cancellation charges from the customer, if any, be taken by the branch. 6.5 The normal formalities such as obtaining prescribed application for booking forward contracts, verifying the underlying exposures or the declaration given on past performance basis, opening of the current account, taking prescribed margin etc., will be completed by the customer having regular credit limits. The same formalities are also to be completed by the customers in case the regular credit limits are not sanctioned. 7. Monitoring of Forward Contracts 7.1 FEO will prepare a MTM report of all outstanding contracts, branchwise, customer-wise, contract-wise at the end of every fortnight and in case of negative MTM, the same will be sent to the concerned branch, with a copy to IBD, within 2 working days from the close of concerned fortnight. The customer will be asked to top up the margin within 3 days from the date of demand as per Para 2.3. However, FEO/Treasury Division will set up a system to have daily MTM of the forward contracts portfolio and any negative MTM above 10% will be the trigger point for placing position to the authorities. 7.2 In case the total MTM loss is in excess of the stipulated margin for the Page 14 of 31    client, the branch will take steps to immediately to top up the same by taking up with the customer and confirm to FEO / Treasury Division . 7.3 In case margin is not provided by the customer within 3 working days from the date of demand, the branch will have the option of crystallizing the liabilities by canceling the forward contracts, with the permission of the Circle Head for which necessary undertaking is taken from the customer as per the Agreement. 7.4 Customer’s undertaking, in this regard shall also be taken as a part of the application to book the contract. 8. Role of Foreign Exchange Office (FEO) 8.1 FEO will maintain the forward contracts exposures customer wise vis-àvis the limits fixed for booking the forward contracts and under no circumstances, contracts will be booked in excess of the limits fixed. 8.2 When the forward contracts are booked against the underlying exposures, attested photocopy of such underlying exposure i.e. contract/order/LC is to be kept along with the application for booking forward contracts. 9. Recovery of Charges 9.1 Upon receipt of communication from FEO regarding cancellation of forward contract and recovery of charges, the branch must immediately remit the same to FEO / Treasury Division to the debit of the client’s account. 9.2 In case, the customer does not pay the cancellation charges and the account becomes irregular, the powers of booking of any fresh forward contract in respect of that customer shall be with the next higher authority with the concurrence of the Circle Head. 9.3 FEO/ Treasury Division will submit a monthly statement to Risk Management Division HO in respect of outstanding cancellation charges on the prescribed format on account of forward contract transactions which are not paid by the customers/ branches so as to ascertain that a clear picture of overdue cancellation charges could be ascertained for the bank as a whole and remedial measures are taken keeping in view the credit risk involved. Page 15 of 31    9.4 The powers to permit any deviation on the above said guidelines will be vested with General Manager (IBD). A) FORWARD PURCHASE CONTRACTS – EXPORTS 1. APPLICATION FOR BOOKING OF CONTRACT 1.1 (i) Application for issue of Forward Purchase Contracts should be obtained from the customer on the prescribed Form No. FEX-85 in duplicate, along-with following documentary evidence: (ii) Export letter of Credit; or Original Sale Contract/Firm Order signed by the buyer showing description and quantity of goods, value, date of shipment and mode of payment; or Copy of FOBC/FABC Schedule (in cases where shipping documents have already been sent for collection through the medium of bank). 2. REQUIREMENTS TO BE COMPLETED 2.1 Branches should ensure compliance of following requirements before sending the application to the concerned Foreign Exchange Office. i) The original Sale Contract should be verified before entertaining customer’s request, if the requisite details are not available in Letters of Credit. ii) Where the deal is finalized by exchange of mails/fax messages the same may be accepted as documentary evidence provided requisite details are available and a written understanding is furnished by the customer are available and a written undertaking is furnished by the customer that he will produce original Sale Contract or Letter of Credit within a month from the date of booking of the Contract. iii) The Foreign Exchange offered should be expected proceeds of a shipment already made/to be made against a firm order received by the exporter. iv) The last date of delivery under Forward Contract should BE IN ACCORDANCE TO FEMA/FEDAI GUIDELINES ISSUED FRO TIME TO TIME. v) Where shipment has already been effected, the amount of Forward Page 16 of 31    Purchase Contract should not exceed the value of the Bill presented by the exporter for negotiation/collection. vi) In case of exports through an agent in foreign country, where the Letter of Credit stipulates deduction of agency commission and exporter’s agency agreement is registered with RBI, the forward contract amount should not exceed the amount receivable after deduction of agency commission. 3. FORWARD CONTRACTS FOR DEFERRED PAYMENT EXPORTS 3.1 In case of Forward Contracts required for Deferred Payment Exports the branches should ensure that the Schedule of Deferred Payments has been approved by RBI. Forward Contract for Deferred Payment will be booked subject to the availability of the cover with Export Credit Guarantee Corporation Ltd. 3.2 However, the Forward Contract in this case can also be booked on roll-over basis, i.e., Contract would be booked AS PER FEMA/FEDAI GUIDELINES for aggregate amount of exports including interest and the same would be extended for further six months after the delivery of the first instalment. Forward Contract can also be booked according to due dates for one or more instalments subject to availability of cover and the balance on roll-over basis as above. 3.3 Requests for cancellation/re-booking of Forward Contracts, so booked are required to be accompanied by RBI’s approval for re-scheduling the payment. 4. FORWARD CONTRACTS FOR EXPORT OF SERVICES 4.1 In case of Forward Contracts required to be booked for export of services, e.g., technical know-how, computer software etc., branches should ensure that the last date of delivery under the contract does not fall beyond seven days from the expected date of receipt of payment in terms of underlying firm contract. 5. FORWARD CONTRACTS FOR EXPORT OF FOREIGN CURRENCY NOTES 5.1 In case of Forward Contracts required to be booked for export of foreign currency notes, branches should entertain such requests only from full-fledged money changers and ensure that the currency notes are dispatched through medium of our bank. Page 17 of 31    6. RECORDS 6.1 Details of forward contract desired to be booked should be provisionally entered in Forward Contracts Register (FEX-87) in the CBS system and Customer wise Forward Contracts Liability Register (FEX-88) in CBS system. For Forward Contracts on behalf of branches without direct authorization, details will be entered in Forward Contracts Register only. 6.2 A separate entry should be created in customer-wise Forward Contract Liability Register in CBS system for Forward Contract booked against FOBCs and FOBPs to keep track on limits of Forward Contracts in favour of various parties. 6.3 Branches have been vested with powers for authorizing issuance of Forward Contract. If the amount of contract does not fall within their powers they should obtain proper authorization from the competent authority before forwarding the request to the concerned Foreign Exchange Office. 6.4 Upon receipt of the contract, the Branch should complete the details of the contract in Forward Contracts Register and Party-wise Forward Contracts Liability Register created in CBS system, immediately. 7. PROCEDURE FOR FORWARDING APPLICATION 7.1 After ensuring compliance of the formalities in terms of paragraphs above, branches should forward one copy of the application along-with copy of Sale Contract/Firm Order/Letter of Credit/Copy of shipping Bill (if shipment already effected) to the Foreign Exchange Office for issue of the Forward Purchase Contract. 7.2 To avoid any complications arising out of movement of exchange rates against the customer between the date of his request and date of booking of contract by Foreign Exchange Office. Authorized branches should communicate customer’s requests by telephone/fax to Foreign Exchange Office confirming compliance of formalities followed by the prescribed application by mail. 8. PROCEDURE ON RECEIPT OF CONTRACT 8.1 If the request is found to be in order, Foreign Exchange Office WILL BOOK THE CONTRACT AND ALSO issue the Contract, on Form No. FEX-27 Page 18 of 31    and send three copies of the same to the branch. On receipt of the same, BY THE BRANCH the original Sale Contract/Letter or Credit/Firm Order/FOBC Schedule should be marked under Bank’s stamp and authorized Signatures as under: “Forward Contract No._________________________________dated_____________for_ __________________maturing on ___________________issued”. 8.2 Proper contract-wise record of documentary evidence verified should be maintained by the branch. 8.3 The first copy of the contract should be handed over to the Customer. Customer’s confirmation should be obtained on the second copy which should be returned to Foreign Exchange Office. Third copy should be retained by the Branch in their contract file. 8.4 The maturity date of the contract should be diarised, at least ten days ahead of the maturity. 9. DELIVERY UNDER FORWARD CONTRACT 9.1 The delivery under the Forward Contract is completed when the shipping documents are tendered for purchase/negotiation. In case of bills tendered for collection delivery is completed when payment is received. 9.2 The amount of export bills purchased/negotiated and delivered under the Contract should be entered in the Forward Contract Register and Customer-wise Forward Contracts Liability Register in CBS system. The amount should also be marked on the back of the file copy of the contract. 9.3 While forwarding respective copies of the FOBP/FOBNLC/FOBC Schedule to Foreign Exchange Office, care should be taken to see that the same are marked in red ink “Purchase under Forward Contract No.________________ dated____________”, otherwise the same would be construed as a fresh purchase exposing the Bank to exchange fluctuation risk which is not permitted under Exchange Control Regulations and may involve the Bank in financial losses. 9.4 For Forward Contracts booked against Letters of Credit restricted for Page 19 of 31    negotiation with other Banks, branches while forwarding documents should advise negotiating bank to issue draft in foreign currency in payment of such negotiations. 10. OVERDUE CONTRACTS 10.1 Every effort should be made not to carry any overdue contracts in the books. Instructions for cancellation/rebooking of Contracts should be obtained from the customer sufficiently before the expiry of the contract and sent to Foreign Exchange Office to avoid any undue cancellation. 10.2. The Contract may be extended at any time prior to, during or after the currency of the Contract by cancellation/rebooking of the contract at current rate. It is subject to payment of cancellation charges laid down in FEDAI Rules/Exchange Control Regulations. Customers may be advised in their own interest to ensure that the instructions are given to the Bank before expiry of the Contract to avoid overdue interest and other charges. 10.3 The request for cancellation/rebooking for extension of the Contract should be forwarded to Foreign Exchange Office after verification from documents evidencing that the date of shipment in the letter of credit or sale contract or firm order has been extended. The request for extension is cases where the shipment has already been made should be entertained only if the period of realisation of the proceeds under Exchange Control Regulations has not expired. In order to expedite, the request should be forwarded to the Foreign Exchange Office by Telephone/Fax. 10.4 On receipt of confirmation from the Foreign Exchange Office, the details of extension by way of cancellation/rebooking should be noted in the Forward Contracts Register. 11. CANCELLATION OF CONTRACTS 11.1 Contract can be cancelled by the customer with a written request liable for all charges & costs. 11.2 Details of cancellation should be entered in the Forward Contracts Register and Customer-wise Forward Contracts Liability Register in CBS system. 12. RECOVERY OF CHARGES Page 20 of 31    12.1 Cancellation charges will be intimated to the branch by the Foreign Exchange Office which should be recovered from the customer and remitted to the respective office without delay. 13. PROCEDURE FOR FOREIGN EXCHANGE OFFICE 13.1 On receipt of request from the authorized branch for issuing a Forward Purchase Contract, Foreign Exchange Office will verify from the documents received that the requisite formalities have been completed by the authorized branch and ensure that the request is in order. 14. RECORDS & ACCOUNTING PROCEDURE 14.1 If the request is found in order, Foreign Exchange Office shall pass contra entries for the rupee equivalent of amount of the contract: Dr. Forward Purchase (Customers) Cr. Forward Position The vouchers will be posted in Forward Contracts Ledger FEX-101. 15. ISSUANCE OF CONTRACT 15.1 The Contract will be issued on Form No. FEX-27 which is in a set of four copies and will be used as under: First Copy Meant for the customer, second Copy Confirmation to be signed by the customer & returned to Bank. Third Copy File copy for Foreign Exchange Office-New Delhi Fourth copy For the branch 15.2 Three copies of the Contract should be forwarded to the concerned branch. 16. EXCHANGE RATE 16.1 The exchange rate for the Contract booked should be fixed on the basis of cover rate in the Inter Bank Market or rate at which cover is available in the market if absorbed in Bank’s position. 17. CONFIRMATION OF FORWARD CONTRACT Page 21 of 31    17.1 Foreign Exchange Office should ensure receipt of customer’s confirmation on second copy sent to the customer through the branch and a note should be given in the Forward Contracts Register of having received confirmation. 18. DELIVERY UNDER CONTRACT 18.1 At the time of delivery under the contract, the amount of export bills purchased/ negotiated should be entered in the Forward Contract Register FEX-87 and also marked on the back of the file copy of the Contract. 18.2 The following contra vouchers will be passed by Foreign Exchange Office for the rupee equivalent of the amount of Bill purchased/negotiated under the Contract: Dr. – Forward Position Cr. – Forward Purchase (Customers) 19. CANCELLATION/RE-BOOKING OF FORWARD CONTRACT 19.1 On receipt of request for extension, Foreign Exchange Office will ensure that the same is in order and extend the contract by cancellation/rebooking at the current rate under advise to the concerned branch. 20. CANCELLATION OF CONTRACT 20.1 The overdue contract may be cancelled automatically as per FEDAI Rules. Presently, the rule permits that in the absence of any instructions from the customer, the contracts which have matured shall be automatically cancelled on the 7th working day after maturity date. For the limited purpose of this FEDAI Rule, Saturday is not to be reckoned as a working day. However, the contract may also be cancelled after the maturity date but before the 7th working day with specific understanding and written request from the customer. 20.2 The details of the cancellation will be recorded in Forward Contracts Register. 20.3 Contra vouchers will be passed for cancellation amount as it is done in case of utilization of contract. Page 22 of 31    21 RECOVERY OF CHARGES 21.1 In case of early / late delivery, charges should be calculated in terms of FEDAI rules and the amount recoverable should be noted in the Forward Contracts Register FEX-87.The Exchange difference/charges recoverable should be recovered from the proceeds by giving suitable note on the FOBP/FOBNLC Schedule. 21.2 In case of cancellation / rebooking, the charges calculated in terms of FEDAI Rules should be recovered from the customer through the concerned branch. 22. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION 22.1 On receipt of requests from their customers for booking of Forward Purchase Contracts, branches without direct authorization will provisionally enter the details of the contract in Forward Contracts Register Form FEX-87 and Customer wise Forward Contracts Liability Register Form FEX-88 and forward prescribed application in duplicate to the nearest authorized branch with requisite papers and details of limits sanctioned in favour of the customer. 22.2 For records at branch without direct authorization, provisions of Para 11 will apply. 22.3 On receipt of Contract, the details of Forward Contract will be completed in the Forward Contracts Register and Customer wise Forward Contracts Liability Register. 22.4 Branches without direct authorization should keep in mind, provisions in other relative paragraphs in procedure for authorized branches and Foreign Exchange Office for booking, utilization, rebooking and cancellation of contracts and recovery of charge. B) FORWARD SALE CONTRACTS—IMPORTS 23. PROCEDURE FOR AUTHORISED BRANCHES 23.1 The application for issue of Forward Sale Contract should be obtained from the customer in the prescribed Form No. FEX-86, in duplicate alongwith the following documentary evidence: Page 23 of 31    Copy of Import Letter of Credit opened by any of our authorized branches; or Original Firm Order; or Number and date of Inward Bill for Cancellation already received and outstanding. Branches should also obtain a valid import licence or details of the Open General Licence under which imports are made. 24. REQUIREMENTS TO BE COMPLETED 24.1 Branches should ensure compliance of following requirements before sending the application to Foreign Exchange Office. (i) Foreign Exchange Sold should not exceed the value of goods contracted by the importer with the overseas seller of the goods or value for which Letter of Credit has been opened by the Branch. (ii) Imports should be covered by a valid import licence or free item as per latest trade policy applicable. (iii) The last date of delivery under the Contract should BE AS PER FEMA/FEDAI GUIDELINES from the date of shipment if the goods have already been shipped and expected date of shipment, if the goods are yet to be shipped. The expected date of shipment should be within the period permitted under specific licence or Open General Licence. 25. FORWARD CONTRACTS FOR DEFERRED PAYMENT IMPORTS 25.1 In case of Forward Contracts required for Deferred Payment Imports, the branches should ensure that import licence has been issued on deferred payment basis and schedule of payment is approved by Reserve Bank of India. The Forward Contract in this case can be booked on Roll-Over Basis, i.e., Contract would be booked AS PER FEMA/FEDAI GUIDELINES for the aggregate amount of payment (including interest) to be remitted under relative letter of credit and/or guarantee approved by the RBI and the same would be extended for further six months after delivery of the first installment. The Forward Contract can also be booked providing for specific deliveries corresponding to due dates of one or more deferred installments and Roll-over Basis for remaining installments for a period longer than six months subject to availability of cover. Page 24 of 31    25.2 Request for extension of Forward Contract so booked are required to be accompanied by RBI approval for re-scheduling payment. 26. FORWARD CONTRACTS AIRLINES/SHIPPING COMPANIES FOR REMITTANCES BY FOREIGN 26.1 In case of Forward Contracts required to be booked on behalf of foreign airline, shipping companies operating in India or their agents against their surplus collection of freight and passage, earnings, etc. branches should ensure that: Their constitutions are definitely expecting to be able to remit the amount. Application with required documents for remittance should have been submitted by them to Reserve Bank of India. Contract is required for a period not exceeding two months from the date of application submitted to RBI. 27. RECORDS 28.1 Details of Forward Contract desired to be booked should be provisionally entered in Forward Contract Register (FEX-87) and Customerwise Forward Contracts Liability Register (FEX-88). A separate page for each contract should be used in Forward Contracts Register. For Forward Contracts on behalf of branches without direct authorization details will be entered in Forward Contracts Register only. 27.2 Branches have been vested with powers for authorizing issuance of Forward Contract. If the amount of contract does not fall within their powers, they should obtain proper authorization from Circle Head before forwarding the request to Foreign Exchange Office. 27.3 Upon receipt of the Contract, the branch should complete the details of the contract in Forward Contracts Register immediately and Customer-wise Forward Contracts: Liability Register . 28. PROCEDURE FOR FORWARDING APPLICATION Page 25 of 31    28.1 After ensuring compliance of formalities in terms of Paragraphs above, branches should forward one copy of the application along-with a photo-copy of the Purchase Contract/indent and acceptance/letter of credit opened by the branch to Foreign Exchange Office for issue of Forward Sale Contract. 28.2 To avoid any complications arising out of movement of exchange rates against the customer between the date of his request and date of booking of contract by Foreign Exchange Office. Authorized branches should communicate customer’s requests by telephone/fax to Foreign Exchange Office confirming compliance of formalities followed by the prescribed application by mail. 29. PROCEDURE ON RECEIPT OF CONTRACT 29.1 If the request is found to be in order, Foreign Exchange Office will book the contract and issue the contract on Form No.FEX-28 and send three copies of the same to the Branch. On receipt of the same by the branch, the Exchange Control Copy of the Import Licence should be marked as under:“Forward Sale Contract No._______ dated_________ for ________ Maturing on ___________Covering Letter of Credit No._______________ /Import Bill for Collection No._________________/Contract or Order No.________________/ for _____________________ dated___________________ issued. (Stamp and Signature) 29.2 Letter of Credit/firm order/indent should also be marked accordingly. 29.3 In case of contracts booked against letter of credit; the difference in amount between the contract rate and rate at which licence was endorsed at the time of opening the letter of credit, be added to or subtracted from the outstanding balanced in the licence. 29.4 In other cases, the licence should be endorsed with the amount at contract rate to be available at the time of remittance 29.5 Proper contract-wise record should be maintained for documentary evidence verified by the Branch. Page 26 of 31    29.6 The first copy of the Contract should then be handed over to the customer. Customer’s confirmation should be obtained on the second copy which should be returned to Foreign Exchange Office. The third copy should be retained by the branch in their contract file. 29.7 The maturity date of the contract should be diarised at least 10 days ahead of the maturity. 30. DELIVERY UNDER FORWARD CONTRACT 30.1 The amount of import bills received for collection/negotiated under the import credits and delivered under the contract should be entered in Forward Contracts Register and Customer-wise Forward Contracts Liability Register. The amount should also be marked on the back of the file copy of the Contract. While sending credit advice to Foreign Exchange Office at the time of retirement of import bill, the same should be marked in red ink: “Sale under Forward Contract No._______________ dated______________”. 31. OVERDUE CONTRACT 31.1 The guidelines laid down in para 21 for forward contracts exports may be followed. 32. EXTENSION OF CONTRACTS 32.1 The extension/ROLLOVER of a contract is at the Bank’s option and the Contract may be extended any time prior to, during or after the currency of the Contract subject to payment of charges laid down in FEDAI Rules/Exchange Control Regulations. Customers may be advised in their own interest to ensure that the instructions are given to the Bank before expiry of the Contract to avoid overdue interest and other charges. 32.2 The request for extension /ROLLOVER of the contract should be forwarded to Foreign Exchange Office after verification from documents evidencing that the date of shipment in the letter of credit/indent and acceptance have been suitably amended. The request for extension in cases where the shipment has already been made should be entertained only if the period prescribed in the Exchange Control Regulations for Page 27 of 31    payment has not expired. To expedite, the request should be forwarded to Foreign Exchange Office by email/Fax. 32.3 On receipt of confirmation from Foreign Exchange Office, the details of extension should be noted in Forward Contracts Register. 33. CANCELLATION OF CONTRACTS 33.1 The overdue contract may be cancelled automatically as per FEDAI Rules, the details of which are given in Para 21(i). Customer would be liable for all charges and costs. 33.2 While canceling Forward Sale Contracts against import of goods into India, amount cancelled must be endorsed on Exchange Control Copy of the relative import licence in terms of Exchange Control Regulations. In cases where amount cancelled is not endorsed on the licence, suitable explanatory note should be given in the report required to be submitted to Reserve Bank of India. 33.3 Details of cancellation should be recorded in Forwarded Contracts Register and Customer-wise Forward Contracts Liability Register. 34. RECOVERY OF CHARGES 34.1 The cancellation charges will be intimated to the Branch by the concerned Foreign Exchange Office, which should be recovered from the customer and remitted to the respective office without delay. C)PROCEDURE FOR FOREIGN EXCH.OFFICE 35. On receipt of a request from the authorized branch, for issuance of a Forward Sale Contract, Foreign Exchange Office will verify the documents received and ensure that the requisite formalities have been completed by the authorized branch and the request is in order. 36. RECORDS AND ACCOUNTING PROCEDURE 36.1 If the request is found to be in order, Foreign Exchange Office will enter the details of the Contract in Forward Contracts Register No.FEX-87 (to be used for customer contracts only). A separate page should be used for each Contract. Page 28 of 31    36.2 The request should, then, be put up to dealer for fixing the rate. 36.3 At the time of issuance of the contract, the following contra voucher will be passed by Foreign Exchange Office for the rupee equivalent of amount of the contract. Dr. Forward Position Cr. Forward Sale (Customers) The vouchers will be posted in Forward Contracts Ledger FEX-101. 37. ISSUE OF CONTRACT 37.1 The contract will be issued on Form No. FEX-28 which is in a set of four copies and will be used as under: First Copy - Meant for customer. Second Copy -Confirmation to be signed by the customer and returned to the bank. Third Copy - File copy for Foreign Exchange Office. Fourth Copy - For the branch. 37.2 The three copies of the contract should be forwarded to the concerned Branch. In case of amount exceeding US$ 10000 or equivalent in other currencies, or where the branch requires (irrespective of the amount), the rate of contract booked should be advised to the concerned branch by telephone/fax. 38. EXCHANGE RATE 38.1 The exchange rate for the contract booked should be fixed on the basis of cover contract or rate at which cover is available in the market if absorbed in Bank’s position. 39. CONFIRMATION BY CUSTOMER 39.1 The concerned Foreign Exchange Office should ensure receipt of customer’s confirmation on second copy and a note should be given in the Forward Contracts Register of having received confirmation. Page 29 of 31    40. DELIVERY UNDER CONTRACT 40.1 At the time of delivery under the contract, the amount of Inward Bills received under the Letter of Credit or for collection should be entered in the Forward Contracts register No. FEX-87 and also marked on the back of the file copy of the contract. 40.2 Following contra vouchers will be passed by the Foreign Exchange Office for the rupee equivalent of Foreign Currency Bill received at the Contract rate: Dr. Forward Sale (Customers) Cr. Forward Position 41. EXTENTION OF CONTRACTS 41.1 On receipt of a request for extension/ROLLOVER, Foreign Exchange Office will ensure that the same is in order and extend the contract BY CANCELLATION & REBOOKING THE SAME under advise to the concerned branch. 41.2 The details of extension/ROLLOVER should be recorded in Forwarded Contracts Register. 43. CANCELLATION OF CONTRACTS 42.1 The overdue contract may be cancelled automatically as per FEDAI Rules, the details of which are given in Para 21(i) customer would be liable for all charges and costs. 42.2 The details of cancellation should be recorded in Forward Contract Register. 42.3 Contra vouchers will be passed as in Para 41 for amount of cancellation. 43. RECOVERY OF CHARGES 43.1 In case of an early/late delivery/extension/cancellation, charges should be calculated in terms of FEDAI rules and the amount recoverable should be noted in the Forward Contracts Register FEX-87. Page 30 of 31    43.2 The charges recoverable should be recovered from the customer through the concerned branch. 44. PROCEDURE FOR BRANCHES WITHOUT DIRECT AUTHORISATION 44.1 On receipt of request from their customers for booking of forward sale contracts, Branches without direct authorization will provisionally enter the details of the contract in Forward Contracts Register (Form FEX87) and Customer-wise Forward Contract Liability Register (Form FEX-88) and forward prescribed application in duplicate to the nearest authorized branch or Foreign Exchange Office under whose jurisdiction they are working, with requisite papers and details of limits sanctioned in favour of the customer. 44.2 For records at branches without direct authorization, provisions of Para 37 will apply. 44.3 On receipt of Contract, the details of Forward Contract, will be completed in the Forward Contracts Register and Customer-wise Forward Contracts Liability Register. 44.4 Branches without direct authorization should keep in mind, provisions in other relative paragraphs in procedure for authorized branches and Foreign Exchange Office, for booking, utilization, extension and cancellation of contracts and recovery of charges. Page 31 of 31                  9. NON RESIDENT ACCOUNTS    Chapter 9 : NON-RESIDENT ACCOUNTS GENERAL This chapter deals with the accounts maintained by Non-Resident Indians, persons of Indian origin and foreign nationals in India. The opening, maintenance and operations in these accounts are subject to compliance of FEMA Regulations in force. The guidelines regarding “Know Your Customer” issued by Inspection and Audit Division, Head Office are to be followed. NON- RESIDENT ORDINARY RUPEE (NRO) ACCOUNTS 2. All branches can open and maintain Non Resident Ordinary accounts in the name(s) of any person resident outside India subject to compliance of FEMA guidelines. 3. OPENING OF NEW ACCOUNTS Branches may open Non–Resident Ordinary Rupee Accounts , in the names of Indian nationals as well as persons of Indian origin resident abroad provided initial deposit for opening the account is received from abroad in an approved manner or tendered in foreign currency by them while on visit to India or transfer of funds from existing non-resident accounts of the same person, or funds from resident sources eligible for credit to their account in terms of FEMA Regulations. Opening of account by individuals of Bangladesh/ Pakistan nationality requires approval of Reserve Bank of India. 4. JOINT ACCOUNTS Non-residents can hold NRO accounts jointly with residents and/or with non-residents. 5. CHANGE OF STATUS When an Indian national or a person of Indian origin residing in India leaves India for a country other than Nepal and Bhutan, for taking up employment, business or vocation outside India and for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be immediately designated as Non-Resident Ordinary Rupee Account. The account should be re-designated as Page 1 of 27 resident Rupee account on return of the account holder to India for taking up employment, business or vocation for any other purpose indicating his intention to stay in India for an uncertain period. 6. TYPES OF ACCOUNTS NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. 7. OPERATIONS IN THE ACCOUNT All operations in the account are subject to compliance of FEMA/Reserve Bank of India guidelines. 8. INTEREST Interest will be paid to the depositors in the same manner as in case of resident accounts. Incumbents may treat the effective date of relevant NRO fixed deposits for the purpose of payment of interest as the date on which our Nostro account has been credited instead of date of conversion of foreign currency into Indian rupees. The interest rates on NRO accounts are the same as applicable in case of domestic deposits. No additional interest for Senior Citizens shall be paid in NRO accounts. 9. NOMINATION Registration of nomination is permitted, both in favour of residents as well as non-residents. 10. (a) RECORDS ACCOUNT OPENING FORM Account Opening Form ( FEX-111 ) will be obtained by the branches for opening all types of deposit accounts in case of individuals singly or jointly. These should be maintained in separate binders. (b) PASS BOOK/CHEQUE BOOK/DEPOSIT RECEIPT Pass Book, Cheque Book or Deposit Receipt issued to the customer should be marked “NRO” for the purpose of identification. Page 2 of 27 (c) MAINTENANCE OF LEDGERS Shall be maintained by taking Account reports in CBS. 11. ACCOUNTING PROCEDURE Accounting procedure applicable to resident accounts (as laid down in Bank’s Book of Instructions) shall also be applicable for operations in these accounts, renewal of deposits and payment of principal/interest etc. 12. TAX PROVISIONS Income tax on interest earned on these accounts shall be deducted by the branches at source at the rate applicable from time to time. Finance Division guidelines on TDS in line with DTAA (Double Taxation Avoidance Agreement) be taken into account while fixing TDS Rate. 13. GRANT OF LOAN/OVERDRAFT TO ACCOUNT HOLDERS AND THIRD PARTIES (a) Loans to non-resident account holders and to third parties may be granted in Rupees by the branches against the security of fixed deposits subject to the following terms and conditions: (i) The loans shall be utilized only for meeting borrower's personal requirements and/or business purpose and not for carrying on agricultural/plantation activities or real estate business or for re-lending. (ii) Other provisions relating to rate of interest, margin, documentation etc will be in terms of circulars issued by Risk Management Division, Head Office from time to time. (iii) The usual norms and considerations, as applicable in case of advances to trade/industry, shall also be applicable for such loans/facilities granted to third parties (b) The period of the loan shall not exceed un-expired period of maturity of the NRO fixed deposit accepted as security. In addition, the non-resident depositor should furnish an irrevocable undertaking to the branch not to withdraw the deposit during the period of the loan/overdraft. There is no objection in renewing such deposits as also the loan granted against them on the specific request from the NRI depositor and resident borrower. (c) The loan should be granted by the branch against the NRO fixed deposit(s) issued by our own branches. Under no circumstances Page 3 of 27 loan should be granted against Fixed Deposit(s) held with another bank. (d) The branch giving the loan should hold the original deposit receipt(s) against which the loan is granted and the branch, which has issued the receipt, should be advised of the lien. Necessary acknowledgement should be obtained from the branch, which has issued the FDR ,for having noted the lien in their books. Loan against NRO deposit(s) to the depositor himself or to a third party is granted only under his specific request/mandate, after verifying the authenticity of the signature of the depositor. Loan should not be granted by the branches on the basis of power of attorney in any case. ACCOUNT IN THE NAME OF FOREIGN TOURISTS (e) 14. Branches may open Non-Resident (Ordinary) Rupee account (NRO) accounts of foreign nationals of non Indian origin including tourists on temporary visits to the country with the funds remitted from outside India in a specified manner or by sale of foreign exchange brought by them. Branch may also allow these foreign tourists to convert the balance in the account at the time of their departure from India into foreign currency for payment to the account holder provided the account has been maintained for a period not exceeding six months and account has not been credited with any local funds, other than interest accrued thereon. Repatriation of balance in the account maintained for period exceeding six months require prior approval from the concerned Regional Office of Reserve Bank of India. 15. TRANSFER TO INOPERATIVE CATEGORY The guidelines as applicable to domestic accounts shall be followed mutatis mutandis for Non-Resident Ordinary (NRO) Accounts. FOLLOW UP TO ENSURE THE CONTINUANCE OF NRI STATUS In case of all NRO accounts, the branches shall take up the matter with the NRI account holder for providing the fresh details of passport i.e. Page 4 of 27 Passport number, date of renewal, date of expiry, place of renewal and nationality along with one attested photo copy of the renewed passport in regard to those NRI accounts where passport has expired and shall keep the same along with the account opening form. The necessary modification shall also be made in the CBS system of the bank. The correspondence made in this matter may also be kept along with the Account opening form. In case of need, a final notice may also be sent to NRI account holder by the concerned branch stating that the account shall be re-designated as Resident Account in case the desired information regarding the valid/renewed passport is not submitted. Page 5 of 27 NON-RESIDENT (EXTERNAL) ACCOUNTS All branches are authorised to open and maintain Non-Resident (External) Accounts. These accounts are maintained in Indian Rupees. 16. OPENING OF ACCOUNTS Non-Resident (External) accounts may be opened in the name of non resident Indians, provided funds for the purpose, are transferred to India in an approved manner. NRE accounts mobilized by overseas offices/marketing teams shall be opened by EBay and transferred to respective branch (Sol) in the system. 17. JOINT ACCOUNTS Opening of joint accounts in the names of two or more nonresidents is permitted. However, opening of joint Non-resident (External) account with a resident is not permitted. 18. TYPES OF ACCOUNTS NRE accounts may be opened/maintained in the form of current, savings, recurring or fixed deposit accounts. NRE accounts in the name of Overseas Corporate Bodies (OCBs) cannot be opened. 19. CHANGE OF STATUS FROM NON-RESIDENT TO RESIDENT Non-Resident (External) account of Non-Resident depositors should be re-designated as Resident Account or the funds held in these accounts may be transferred to the RFC account, at the option of the account holder immediately upon the return of the account holder to India if the branch is satisfied that he has returned to India for taking up employment or for carrying on a business or vocation or for any other purpose with the intention of residing in India for an uncertain period. Page 6 of 27 20. OPERATIONS IN THE ACCOUNT All operations in the account are subject to compliance of FEMA/Reserve Bank of India guidelines. 21. OPERATIONS BY RESIDENTS UNDER POWER OF ATTORNEY Operations in Non-resident (External) Accounts may be allowed based on instructions received from resident Power of Attorney holder with the condition that operations by resident will be for local disbursement only. In addition, branches may allow a resident power of attorney holder to remit, through normal banking channels, funds out of the balance in NRE account to the non-resident account holder, provided specific powers for the purpose have been given to the Power of Attorney holder. The resident power of attorney holder shall not however be allowed to make payment by way of gift to a resident on behalf of the account holder or to transfer funds from the account to another NRE account. In cases where the account holder or a branch designated by him is eligible to make investments in India,the power of attorney holder may be permitted by the authorised branch to operate the account to facilitate such investment. 22. NOMINATION FACILITY Nomination facility is permitted in respect of individual NRE A/cs. Nominee can either be a resident in India or a resident outside India. The registration of nomination shall be in the same manner as in case of domestic deposit accounts. 23. INTEREST Interest shall be paid to the depositors in the same manner as in case of ordinary resident accounts. Incumbents may treat the effective date of relevant NRE fixed deposits for the purpose of payment of interest as the date on which our nostro account has been credited instead of date of conversion of foreign currency into Indian rupees. The rate of interest shall be applicable as per circulars issued by IBD, HO, from time to time. Where NRE account is re-designated as Resident account upon the return of account holder to India, the funds held in fixed deposit in NRE Page 7 of 27 account will continue to earn interest at the rate originally fixed provided the deposit is kept for its full term. No additional interest shall be paid on NRE deposits in the name of members of staff (existing or retired) 24. (a) RECORDS AND ACCOUNTING PROCEDURE ACCOUNT OPENING FORM I. Branches are advised to obtain Account Opening Form (FEX-111) for opening all types of deposit accounts in case of individuals for opening single/joint Accounts. II. Account opening forms relating to NRE accounts should be kept in a separate file and under no circumstances, these should be kept with resident account opening forms. (b) PASS BOOK/DEPOSIT RECEIPT Pass Book, or Deposit Receipt issued to the depositor should be marked “NRE” for identification purposes. (c) SPECIAL SERIES OF CHEQUES For easy identification and quicker processing of cheques drawn on NRE accounts, special NRE cheque books have been prepared by Printing & Stationery Department. Branches shall upload data for issue of special NRE cheque books to Non-Resident(External) depositors. Under no circumstances domestic cheque books are to be issued to the Non-Resident depositors. (d) MAINTENANCE OF LEDGER Shall be maintained in the CBS. 25. MATURITY PERIOD OF TERM DEPOSITS Presently, the term deposits under the scheme shall be accepted only for the following three maturity periods, i) ii) iii) One year and above but less than two years Two years and above but less than three years Three years and above but upto five years. Page 8 of 27 26. RENEWAL OF OVERDUE DEPOSITS All overdue NRE deposits will be renewed from the date of maturity and applicable rate of interest on renewed deposits will be as under: a) Where overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days, the rate of interest payable on the amount of deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity. b) Where overdue period from date of maturity till date of renewal (both days inclusive) exceed 14 days, branches shall allow interest on overdue term deposit from the date of maturity of the deposit provided: (i) The total amount of the overdue deposit or a part thereof is renewed from the date of its maturity till some future date (at least 15 days beyond the actual date of renewal) provided the deposit remains with the bank for minimum period of one year. The interest allowed shall be at the appropriate rate operative on the date of maturity of such overdue deposit or the rate on the date of renewal of the deposit, whichever is lower and shall be payable only on the amount of the deposit so renewed. (ii) MATURITY AND RENEWAL Automatic renewal facility be allowed in the accounts to enable the depositor to give standing instructions to the bank to renew the deposit on maturity automatically so that he does not loose interest for overdue period. 27. ACCOUNTING PROCEDURE Same accounting procedure as in case of ordinary resident accounts, as laid down in Bank’s Book of Instructions will be followed for opening and operations in these accounts. 28. REPATRIATION Page 9 of 27 Balance in Non-resident (External) accounts along with interest thereon are permitted to be repatriated outside India at any time without the prior approval of Reserve Bank of India. 29. TAX EXEMPTION Income from interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Similarly balances held in such accounts are also exempted from wealth tax. Gifts made to close relatives only in India out of balances in such accounts are also free from Gift Tax. The balances held in these accounts however, are not exempted from Estate duty, if any. 30. LOANS AND OVERDRAFTS a) TO ACCOUNT HOLDER Loans/Overdrafts can be granted to the account holder in India in Indian Rupees against the security of funds held in Non–Resident (External) Rupee Term deposits for : • • • Personal purposes or for carrying on business activities except for the purpose of re-lending or carrying on agricultural/plantation activities or for investment in real estate business. The purpose of making direct investment in India on nonrepatriation basis by way of contribution to the capital of Indian firms/companies subject to the compliance of provisions of FEMA Acquisition of flat/house in India for his own residential use subject to the provisions of the relevant Regulations made under FEMA The repayment should normally be either by way of fresh inward remittance or by adjustment of the maturity proceeds of the relative fixed deposit offered as security. Repayment out of local Rupee resources held in NRO accounts of the borrower is also permissible. The provisions relating to rate of interest, margin, documentation etc for the loans /overdraft will be in terms of circulars issued by Risk Management Division, HO from time to time. b) TO THIRD PARTIES Branches may also grant any type of fund based and/or non-fund based facilities to resident individuals/firms/companies in India against the collateral of fixed deposits held in NRE accounts subject to the following Page 10 of 27 terms and conditions as laid down by Reserve Bank of India/Bank from time to time: • There should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/firm/company to obtain the facility. The loan should be utilised for personal purposes or for carrying on business activities other than agricultural/plantation activities or real estate. • The provisions relating to rate of interest, margin, documentation etc for the loans /overdraft shall be followed in terms of guidelines issued by Risk Management Division, HO from time to time. The loan shall be granted only when the depositor himself executes the loan documents in the presence of bank officials and a witness acceptable to the bank or the loan application may be forwarded through a bank branch situated in the country where the NRI deposit holder resides. It would be preferable if such requests are routed through the bank branch at which the concerned NRI is maintaining his accounts since this would presuppose due diligence/compliance with KYC (Know Your Customer) norms by the branch. A copy of the passport of NRI may also be called for, alongwith application for loan against NRI deposits. Loan against NRE deposit(s) to the depositor himself or to a third party is granted only under his specific request/mandate and after verifying the authenticity of the signature of the depositor. In no case, loan shall be granted by the branches on the basis of power of attorney. c) LOANS OUTSIDE INDIA Branches may agree to our overseas branches/Correspondents granting loans to non-resident depositors or to third parties at the request of the depositor for bonafide purpose against security of funds held in their NRE Accounts in India. Branches may also agree to remittances of funds from India, if necessary, for liquidation of the outstanding. 31. TRANSFER TO INOPERATIVE CATEGORY The guidelines as applicable to domestic accounts shall be followed mutatis mutandis for Non-Resident (External) Accounts. FOLLOW UP TO ENSURE THE CONTINUANCE OF NRI STATUS Page 11 of 27 In case of all NRE accounts, the branches shall take up the matter with the NRI account holder for providing the fresh details of passport i.e. Passport number, date of renewal, date of expiry, place of renewal and nationality along with one attested photo copy of the renewed passport in regard to those NRI accounts where passport has expired and shall keep the same along with the account opening form. The necessary modification shall also be made in the CBS system of the bank. The correspondence made in this matter may also be kept along with the Account opening form. In case of need, a final notice may also be sent to NRI account holder by the concerned branch stating that the account shall be re-designated as Resident Account in case the desired information regarding the valid/renewed passport is not submitted. Page 12 of 27 FOREIGN CURRENCY (BANKS) SCHEME GENERAL (NON-RESIDENT) ACCOUNTS Foreign Currency Non-resident Accounts Banks (FCNR (B)) can be opened and maintained by designated branches only. The accounts can be opened in five currencies i.e. Pounds Sterling, US Dollars, Euro, Canadian Dollars and Australian Dollars in the form of Fixed Deposits only. The opening, maintenance and operations in these accounts are subject to compliance of extant FEMA Regulations. 32. OPENING OF ACCOUNT The account can be opened in the name of non-residents Indians, provided funds for the purpose are transferred to India in an approved manner. Opening of FCNR (B) accounts in the names of individuals of Bangladesh/Pakistan nationality require prior approval of Reserve Bank of India. Indian staff posted at Indian Embassy in Pakistan/Bangladesh and their non-resident dependents may open these accounts. Remittances from abroad for opening FCNR(B) accounts should ordinarily be made only in the designated currency, in which the account is desired to be opened. In case remittance is received in other currencies the authorised Branches may convert foreign currency into the designated currency for placing deposit in FCNR (B) account scheme at the risk and cost of the depositor. Branches are advised to obtain cross rates from Foreign Exchange Office, New Delhi in case of such transactions. In case amount from existing NRE deposits is to be converted or remittances received in Indian rupees, the same will be converted into designated foreign currency at T.T. Selling rate ruling on the date of conversion. Funds meant for FCNR (B) accounts should be arranged to be transferred to the designated Nostro account of Foreign Exchange Office, New Delhi under intimation to them. Accounts may also be opened by proceeds of foreign currency Traveller Cheques, bank drafts and other foreign currency instruments such as personal cheques etc. tendered by eligible persons during their temporary visits to India. The same are to be sent to FEO, New Delhi clearly stating in the forwarding schedule that the instruments are meant for FCNR (B) deposits so that on realisation thereof, it is not converted into Page 13 of 27 Indian Rupees and in absence of the same the concerned branch will be held responsible for bearing the exchange loss, if any. In case of personal cheques, the deposit receipt shall be despatched / handed over after realisation of proceeds. Whenever foreign currency notes are tendered by NRIs during their visit to India for opening of FCNR (B) accounts, foreign currency draft is to be procured or Telegraphic Transfer is to be arranged against surrender of the same to full fledged money changers with whom tie up arrangement is made by the bank for off-loading the currency. This foreign currency draft is to be sent to FEO, New Delhi and charges incurred in connection with procuring such foreign currency drafts shall be debited to the bank’s revenue and are not to be recovered from NRI customers or from the proceeds of FCNR (B) deposit. The rate of interest shall start from the date of procuring foreign currency instrument i.e. when it is lodged in the books of the bank. While opening accounts, procedural safeguards as applicable to domestic accounts should be borne in mind. Branches are advised to follow the guidelines regarding know your customers (KYC) and Anti Money Laundering (AML) while opening accounts. Further, branches are advised to ensure that these accounts are opened after obtaining proper introduction as per details given in Account Opening Form (PNB-FEX-111) in order to prevent frauds. 33. JOINT ACCOUNTS Opening of joint accounts in the names of two or more nonresidents is permitted provided joint account holders are persons of Indian nationality or origin. However, opening of joint FCNR (B) account with a resident is not permitted. 34. TYPES OF ACCOUNTS FCNR (B) accounts may be opened / maintained in the form of term deposit accounts only. Recurring Deposit account cannot be opened under the scheme. 35. CHANGE OF STATUS Branches may allow FCNR (B) deposits of Non Resident Indian who returns to India for permanent settlement to continue till maturity at the contracted rate of interest, if desired. Such deposits shall be treated as Page 14 of 27 resident deposits from the date of return of account holder to India. Branches shall convert the FCNR (B) deposits on maturity into resident rupee deposit accounts at TT buying rate or RFC account at the option of account holder and interest on new deposit would be payable at the relevant rate applicable for such deposit. In case FCNR(B) deposits are withdrawn before maturity the instructions regarding levying of penalty would be applicable, but if converted in RFC, no penal interest is applicable. 36. OPERATIONS IN THE ACCOUNT All operations in the account are subject to compliance of FEMA/ Reserve Bank of India guidelines. 37. NOMINATION Nomination facility is permitted in respect of individual NRI account holders. Nominee can either be a resident in India or a resident outside India. The registration of nomination shall be in the same manner as in case of domestic deposit accounts. 38. MATURITY PERIOD The deposits under FCNR (B) Scheme shall be accepted only for the following five maturity periods: i) ii) iii) iv) v) One year and above but less than two years Two years and above but less than three years Three years and above but less than four years. Four years and above but less than five years. Five years only TAX EXEMPTION At present income earned by way of interest on deposits under FCNR (B) Scheme is exempted from income tax. The balances in the accounts are exempted from Wealth Tax. Gifts to close relatives only are free of Gift Tax. Balances held in these accounts however are not exempted from Estate Duty. Page 15 of 27 39. 1) RECORDS ACCOUNT OPENING FORM Branches are advised to obtain Account Opening Form (FEX-111) for opening single/joint accounts. The Account Opening form shall be kept in a separate binder. 2) MAINTENANCE OF REGISTERS Accounts will be maintained in the CBS system. 40. A.1 ACCOUNTING PROCEDURE AT THE TIME OF ISSUING FIXED DEPOSIT RECEIPT (I) Debit Credit (II) Debit Credit Suspense for rupee equivalent of foreign currency amount of relative currency at current notional rate. Fixed Deposit-FCNR(B) On receipt of reimbursement from FEO, New Delhi, following entries will be passed: HO A/c FEO New Delhi Suspense Any shortfall or excess in amount of reimbursement received will be adjusted to the debit/credit of Fixed Deposit Account. A.2 ISSUING FDR TO THE DEBIT OF NRE ACCOUNT (I) Debit Credit (II) Debit NRE account(at TT Selling Rate) HO A/C FEO New Delhi Suspense for rupee equivalent of foreign currency amount of relative currency at current notional rate. Fixed Deposit FCNR(B) Page 16 of 27 Credit (III) On receipt of reimbursement from FEO. New Delhi Debit Credit HO A/c FEO New Delhi Suspense This transaction should be reported to FEO, New Delhi and in RReturn as sale. B. REPAYMENT OF DEPOSITS ON OR BEFORE MATURITY At the time of payment of FDR the following entries will be passed: (i) IF PAYMENT IS TO BE MADE IN INDIAN RUPEES Debit Suspense for Rupee equivalent of the foreign currency amount of FD plus interest payable in foreign currency calculated at the TT Buying rate prevailing on the date of payment. Party/Cash Credit The reimbursement of the amount paid should be claimed from FEO New Delhi in order to adjust the suspense entry. This transaction should be reported as purchase to FEO New Delhi and the same should also be reported in R-Return. Branches not authorised to handle foreign exchange business should send particulars to an authorized branch for reporting. Debit FD A/c with the outstanding in Rupees, FD interest & FD interest accrued as the case may be at notional rate. FEO New Delhi under advise to them stating foreign currency amount of the principal and interest separately and the particulars of FD paid with a request to send the credit advice at TT buying rate for adjusting the Suspense Entry. Credit Page 17 of 27 (ii) IF PAYMENT IS TO BE MADE IN FOREIGN CURRENCY DRAFT/ TRAVELLER CHEQUE/SWIFT TRANSFER Debit FD A/c with Rupee equivalent outstanding and FD Interest/FD Interest accrued as the case may be at the Notional rate. FEO New Delhi in cover of the Draft/MT/TT issued in repayment of the deposit. Credit The transaction of payment of FCNR (B) Deposits shall be reported to FEO New Delhi for fund management. iii) IF PAYMENT IS TO BE MADE IN FOREIGN CURRENCY NOTES STEP I Debit Credit STEP II Debit Credit Suspense a/c (Rupee equivalent at inter bank rate of foreign currency notes) to be given to a/c holder FOBP FD A/c in Rupee equivalent HO A/cs FEO New Delhi (Purchase shall be reported to FEO, New Delhi at inter bank rate.) FEO, New Delhi shall quote a inter bank rate for this transaction) In case the branch is not holding adequate amount of currency notes, the same may be procured from nearby branch. Otherwise, the same may be purchased from full-fledged money changer (FFMC). The necessary credits may accordingly be given to HO A/c of nearby branch/cash order in favour of FFMC. STEP III After receipt of reimbursement from FEO New Delhi. Debit Credit HO A/c FEO New Delhi Suspense Page 18 of 27 NOTE - Any shortfall between the entries at step II and step III is to be debited to bank’s revenue and in no case, it should be recovered from customers C. RENEWAL & ISSUE OF FRESH FDR FOR PRINCIPAL AND INTEREST (i) At the time of renewal of FDR, the following entries should be passed: Debit i) FD A/c with Rupee equivalent outstanding ii) FD Interest with Rupee equivalent outstanding at notional rate. FEO New Delhi with the total of (i) and (ii) above Credit The credit advice as above will be sent to FEO New Delhi with a request to send the credit advice of renewed FDR at present notional rate. Entries of the renewed FD will be passed as under: Debit Credit Suspense with the Foreign Currency amount of Principal plus interest at current notional rate Renewed FCNR Deposit with Foreign Currency amount of Principal plus interest at current notional rate The above Suspense entry will be adjusted on receipt of credit advice from FEO New Delhi. The transaction is not to be reported in R-Returns. (ii) AT THE TIME OF ISSUE OF FRESH FDR FOR THE INTEREST AMOUNT: Debit Credit FD A/c for the interest amount with Rupee equivalent outstanding at notional rate. FEO New Delhi The credit advice will be sent to FEO New Delhi with a request to send the credit advice for new FCNR opened as under: Debit Credit Suspense A/c with Rupee equivalent at current notional rate of FC amount of Interest as above. Fixed Deposit FCNR (B) at current notional rate. Page 19 of 27 The above suspense entry will be adjusted on receipt of credit advice from FEO New Delhi. Fresh FDR should be issued for the amount of interest in foreign currency. 41. NOTIONAL EXCHANGE RATE 1) The designated branches, while opening the accounts under FCNR (B) scheme, will credit the fixed deposit account with the Rupee equivalent calculated at the prevailing notional rate advised by IBD, HO from time to time. 2) Whenever there is a change in notional rate of the foreign currency, the balance of FCNR(B) funds shall immediately be revalued in terms of revised notional rate and the Rupee balance be reconciled with FEO, New Delhi. 42. RECONCILIATION OF FCNR(B) DEPOSITS As FEO New Delhi is the link office for these deposits, the branches are also required to reconcile the balances under FCNR (B) with the records at FEO New Delhi. For this purpose, FEO New Delhi will send copies of A/c-wise statement to all branches maintaining these accounts every quarter for reconciliation. The reconciliation of FCNR (B) deposits need to be completed within 15 days from the close of concerned quarter. The branches opening/renewing FCNR (B) deposit accounts must report the transaction to F.E.O New Delhi on the same day of transaction and F.E.O New Delhi to ensure that the transaction is reflected in their mirror account on the date of reporting itself. 43. ISSUE OF FCNR FIXED DEPOSIT RECEIPT The branches shall issue the FCNR (B) FDR and send complete details thereof to FEO New Delhi, the Link Office for FCNR (B) deposits. Such details of the FDR are required to be sent to FEO New Delhi every time on issuance of new FDR/renewal of deposit. FEO New Delhi shall keep the record of all these FDR in a branch-wise record in the system and follow up with the concerned branches in case details are not reported/received at FEO New Delhi. Page 20 of 27 44. PROCEDURE FOR OBTAINING REIMBURSEMENT Reimbursement of the Rupee equivalent at the notional rate must invariably be claimed from FEO, New Delhi notwithstanding the fact that the amount in foreign currency has been credited to the account of any other Position Maintaining Office. For credits received in a foreign currency account of any other office, FEO, New Delhi shall arrange for transferring of funds to their account. 45. (a) INLAND MOVEMENT OF FUNDS: DEPOSITS RECEIVED BY MEANS OF DRAFTS DRAWN ON ANY OTHER BANK IN INDIA Payment of drafts in foreign currency drawn on other banks for opening FCNR (B) accounts should not be accepted in Rupees. While presenting drafts to the drawee banks, they should be requested to issue their own drafts in same foreign currency or for transferring the funds to our nostro account through SWIFT. Their charges are to be paid to the debit of bank’s revenue account by the branch where account is to be opened and such charges in any circumstances should not be recovered from the depositor or adjusted from the amount received for deposit. (b) DRAFTS DRAWN ON OUR BRANCHES AS PRESENTED BY OTHER BANK FOR OPENING FCNR (B) ACCOUNTS At the request of another authorised dealer, our branches may issue their own drafts/transfer funds by SWIFT, in lieu of drafts drawn on them for placing deposits under this scheme after receiving their charges as per guidelines issued by IBD from time to time. Authorised branches should invariably issue their own draft/ transfer funds by SWIFT from foreign currency account of the same correspondent in whose foreign currency account the amount is received under intimation to the concerned position maintaining office. Note No purchase or sale should be reported in the R-Return for inward remittances for opening of FCNR (B) accounts or foreign currency drafts Issued against them.However it should be reported to F.E.O New Delhi for funds management. Page 21 of 27 46. OPERATIONS BY RESIDENTS UNDER POWER OF ATTORNEY Operations in FCNR (B) Accounts in terms of Power of Attorney granted in favour of a resident may be allowed with the condition that operations by resident will be for local disbursement only. In addition, branches may allow a resident power of attorney holder to remit, through normal banking channels, funds out of the balance in FCNR (B) account to the non-resident account holder, provided specific powers for the purpose have been given to the Power of Attorney holder. The resident power of attorney holder shall not however be allowed to make payment by way of gift to a resident on behalf of the account holder or to transfer funds from the account to another NRE account. In cases where the account holder or a branch designated by him is eligible to make investments in India, the power of attorney holder may be permitted by the authorised branch to operate the account to facilitate such investment. 47. MANNER OF PAYMENT OF INTEREST The Interest on deposits accepted under FCNR (B) scheme shall be paid on the basis of 360 days a year. For deposits upto one year interest is payable at the applicable rate without any compounding effect. In respect of deposits for more than one year, interest is payable at intervals of 180 days each and thereafter for the remaining actual number of days. Interest is payable on half yearly rests in the same currency and can be repatriated or disposed off in any of the following ways as per the option of the depositors: i) ii) iii) iv) By compounding it with the principal Retaining it in separate account. Withdrawing it for local disbursement by converting it into rupee currency. Crediting to an existing/new NRE/NRO account in the name of the account holder. No additional interest shall be paid on FCNR(B) deposits in the name of Members of staff (Existing or Retired) Page 22 of 27 48. PAYMENT OF OVERDUE INTEREST Branches shall maintain proper due date diary and necessary steps shall be taken to seek the mandate of the depositors well in advance before the dates of maturity of their deposits to facilitate timely renewal of deposits. However, if renewal of FCNR (B) deposit is done after due date, following guidelines/procedure is to be followed: a) RENEWAL WITHIN A PERIOD OF 14 DAYS OF MATURITY Branches may allow renewal of deposit from the date of maturity if the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days. The rate of interest payable on the amount of deposit so renewed shall be appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal whichever is lower. b) RENEWAL BEYOND A PERIOD OF 14 DAYS OF MATURITY In cases where FCNR (B) deposits or part thereof is renewed, the following stipulations shall be applicable for payment of interest on overdue period based on rate of interest applicable on 1st maturity of FCNR (B) deposit (i.e. 1year to less than 2 years) prevailing on the date of maturity of deposit or on the date of renewal, whichever is lower:Currency of Overdue period of below one year Overdue period of one year & above Deposit USD GBP EURO CAD AUD Interest 0.50% Interest 1.00% Interest 0.75% Interest 0.50% Interest 1.00% on 1st maturity* minus Interest on 1st maturity* minus 0.25% on 1st maturity* minus Interest on 1st maturity* minus 0.50% on 1st maturity* minus Interest on 1st maturity* minus 0.40% on 1st maturity* minus Interest on 1st maturity* minus 0.25% on 1st maturity* minus Interest on 1st maturity* minus 0.50% * Interest prevailing on the date of maturity or on the date of renewal, whichever is lower. Page 23 of 27 Branches shall recover the interest paid for overdue period if the deposit is withdrawn before completion of minimum stipulated period of 1 year under FCNR(B) Scheme, after renewal. 49. i) PREMATURE WITHDRAWAL OF DEPOSITS In case of premature cancellation of FCNR (B) deposits for the purpose of renewing it further, interest can be paid at the rate applicable on the date of original deposit, for the period for which the deposit has remained with the Bank. No penalty shall be levied. This provision shall be applicable in cases where, the deposit is further renewed for a period, which is upto or more than the original maturity date. In case deposits under this scheme are withdrawn before maturity,the rate of interest payable on such deposits will be subject to a penalty of 1.00% on the rate applicable for the period for which the deposit has run. No interest shall be paid on deposits, which has not run for the minimum stipulated maturity period i.e. one year. Where FCNR (B) deposits are converted into NRE deposits before maturity, at the request of account holder, the rate of interest payable on such deposits will be subject to penalty of 1.00% on the rate applicable for the period for which the deposit has run. AUTOMATIC RENEWAL ii) iii) iv) 50. Automatic renewal facility be allowed in the accounts to enable the depositor to give standing instructions to the bank to renew the deposit on maturity automatically so that he does not lose interest for overdue period. To facilitate this, the necessary declarations have been incorporated in the account opening form FEX-111. The branches should ensure that wherever the depositor has opted for automatic renewal, the relative fact should be entered in CBS system. The concerned staff must ensure that the deposit is diarized in due date diary to ensure its timely renewal. The automatic renewal should be done on due date unless the instructions to the contrary are received by the branch from the depositor. Such renewal should be noted on the Fixed Deposit Receipt whenever the same is presented. Page 24 of 27 51. REPATRIATION Balance in FCNR (B) Accounts along with interest thereon are permitted to be repatriated outside India, at any time without the prior approval of RBI. The maturity proceeds of FCNR (B) deposits can be remitted to third parties outside India provided the transaction is specially authorised by account holder and the authorised branch is satisfied about the bonafides of the transaction. 52. LOANS AND OVERDRAFT TO ACCOUNT HOLDER AND THIRD PARTY IN INDIAN RUPEES The guidelines as applicable to NRE accounts shall be followed mutatis mutandis for loans and advances to account holder and third parties against the security of FCNR (B) Deposits. Margins shall be calculated on the Rupee equivalent of the deposit at the prevailing notional rate of exchange for the relative currency. In case the prescribed notional rate is lower than the prevailing market rates, the stipulated minimum margins may not be sufficient to cover the risk of the bank. In order to safeguard the bank’s interest, branches should maintain higher percentage of margins on notional rates in such a manner that minimum prescribed margin remain available to the bank even on the basis of prevailing TT Buying rate while granting advances against FCNR (B) deposits. 53. FOREIGN CURRENCY LOAN IN INDIA TO ACCOUNT-HOLDER Branches can allow foreign currency loan in India to Account holders only against the security of their FCNR(B) deposits. These will be sanctioned in the currency of FCNR(B) deposits and will be disbursed by way of demand loan only. No overdraft facility is to be permitted by the branches. The rate of interest, margin amount, period of loan etc will be in terms of circulars issued by International Banking Division, Head Office from time to time. 54. FOLLOW UP TO ENSURE THE CONTINUANCE OF NRI STATUS In case of all FCNR accounts, the branches shall take up the matter with the NRI account holder for providing the fresh details of passport i.e. Passport number, date of renewal, date of expiry, place of renewal and nationality along with one attested photo copy of the renewed passport in regard to those NRI accounts where passport has Page 25 of 27 expired and shall keep the same along with the account opening form. The necessary modification shall also be made in the CBS system of the bank. The correspondence made in this matter may also be kept along with the Account opening form. In case of need, a final notice may also be sent to NRI account holder by the concerned branch stating that the account shall be re-designated as Resident Account in case the desired information regarding the valid/renewed passport is not submitted 55. INOPEREATIVE ACCOUNTS The guidelines as applicable for domestic accounts shall be followed mutatis mutandis for FCNR(B) accounts. 56. SUBMISSION OF MONTHLY STATEMENT OF FCNR (B) TO RBI FEO New Delhi will submit a statement of inflow and outflow of FCNR (B) deposits under the scheme on monthly basis by 10th of the month following the month to which it relates, in form STAT 5. 57. BROKERAGE / COMMISSION As per extant Reserve Bank of India guidelines, no brokerage, commission or incentives is to be paid on deposits mobilized under FCNR (B) in any form to any individual, firm, company, association, institution or any other person. Page 26 of 27 58. PNB GLOBAL DEPOSIT SCHEMES (subject to change from to time) Our Bank has introduced 2 Schemes i.e PNB Global Foreign Currency Deposit Scheme (FCNR-B) and Global Rupee Deposit Scheme (NRE). Under these Schemes, NRIs are entitled to following additional benefits/concessions provided minimum deposit equivalent to USD 5000 in FCNR (B) scheme or INR 2,50,000 in Rupee Deposit Scheme is maintained. 1) Free remittance up to Rs.1 lac per annum from his account to anywhere in India, subject to recovery of out of pocket expenses. 2) No collection charges on any instrument collected in account holder’s account, up to Rs.1 lac per annum, from anywhere in India subject to recovery of out of pocket expenses. 3) Depository services: 50% concessions on service charges of our bank till the deposits remain with our bank. 4) Free multicity cheque book for CBS branch customers. 5) Free Lockers facility for the customers maintaining a minimum balance of US$ 10000 or its equivalent under FCNR(B) Scheme or Rs. 5,00,000 under rupee deposit scheme. 6) No Inter-branch (Inter-sol) transaction charges for the account holders, in the CBS branches. 7) Free Internet Banking, ATM/Debit Card facility. 8) Bank will bear foreign bank charges on transfer of funds to our nostro accounts subject to minimum deposit of USD 10000 or its equivalent. 9) Foreign Currency funds will be converted into Rupees with exchange margin of only 2 paise per unit of foreign currency in case remittance is received through SWIFT for opening accounts under Rupee Deposit Scheme. 10)Facility of automatic renewal of Fixed Deposits on maturity. 11)Linkage with saving account for family at home by allowing overdraft by marking lien in their FCNR account. Page 27 of 27               10. FOREIGN CURRECY  ACCOUNTS OF RESIDENTS    CHAPTER 10 : FOREIGN CURRENCY A/CS OF RESIDENTS 1. This chapter deals with foreign currency accounts which can be maintained by persons resident in India. The opening, maintenance and operations in these accounts are subject to compliance of FEMA Regulations/Bank guidelines. The guidelines regarding “Know Your Customer” issued by Inspection and Audit Division, Head Office are to be followed. EXCHANGE EARNER'S FOREIGN CURRENCY (EEFC) ACCOUNTS 2. OPENING OF EEFC ACCOUNT A person resident in India may open, hold and maintain Foreign Currency Account known as Exchange Earner’s Foreign Currency (EEFC) Account with authorized/ Special Export Promotion(SEP) branches. In case of non authorized branches for opening of account, the same may be opened at the nearest authorized branch. 3. TYPES OF ACCOUNTS EEFC Account shall be maintained only in form of non-interest bearing current account. EEFC Accounts are permitted to be maintained in three currencies i.e. US Dollar, Pound Sterling and EURO. The rupee equivalent in books is reflected by conversion of Foreign Currency at prevailing notional rate of respective foreign currency. 4. OPERATIONS IN EEFC ACCOUNT All operations in these accounts are subject to compliance of FEMA/Reserve bank of India guidelines issued from time to time. 5. CHANGE OF STATUS Branches may allow transfer of balances in the EEFC accounts to NRE/ FCNR(B) accounts, at the option/request of the account holder consequent upon change of their residential status from resident to nonresident. Page 1 of 17 6. WITHDRAWAL FROM EEFC ACCOUNT There is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount withdrawn in rupees shall not be eligible for conversion into foreign currency and for re-credit to the account. Funds held in EEFC accounts can be freely converted into Indian Rupees at the prevailing exchange rates. However, these funds are not permitted to be sold / transferred to accounts of other residents in India. 7. CREDIT FACILITY Branches, shall not grant any credit facilities both fund-based and nonfund-based, against the balances held in EEFC account. 8. CHEQUE BOOK FACILITY Branches may issue Cheque books to EEFC account holders for making payments from such accounts for eligible purposes. In order to facilitate easy identification branches are advised to issue Cheque books specially marked with the prefix “EEFC account ". Separate Cheque books are to be issued for each currency. If the customer has EEFC accounts in USD,GBP, & EURO, then separate cheque books are to be issued for each of these accounts. Letter of request for issuance of Cheque book is to be taken as per annexure- 1. Branches should advise the account holder that while issuing cheques for making payments in foreign exchange out of funds held in EEFC account, they must ensure that the Cheque are issued for payments covering approved purposes in terms of extant FEMA/Bank guidelines. Cheque books in EEFC Accounts may be issued to the customers subject to maintenance of minimum balance (presently USD 10,000/- or its equivalent) in the account. 9. RECORDS The guidelines applicable to domestic current accounts regarding opening of accounts, Account Opening Form and obtention of other documents etc. shall be followed mutatis mutandis for EEFC Accounts. Account opening forms should be kept in a separate binder. Page 2 of 17 The branches shall use relevant Current Account opening forms with suitable amendments under the caption "Account opening form for Exchange Earner's Foreign Currency-CA account. 10. REPORTING IN WEEKLY STATEMENT OF AFFAIRS The balances of EEFC accounts are to be included under the respective general ledger deposit head i.e. current account. The balances of EEFC accounts are also to be shown in Table No. 6 - Annexure 'A' against item II .1 of weekly statement of affairs. 11. PROCEDURAL GUIDELINES AT AUTHORIZED BRANCHES (A). In case of Export Bills submitted by the exporter, branch while sending the copy of forwarding schedule to the concerned PMO , shall mention the amount of foreign currency that is to be retained for credit to EEFC account. (B). In case of clean foreign currency inward remittances in favour of persons resident in India, the extant FEDAI /Bank guidelines for payment of inward remittances shall be followed. In case the beneficiary desires to keep the amount in EEFC account as prescribe under FEMA, the branch while reporting the transaction to concerned PMO shall inform the amount of foreign currency to be retained for credit to EEFC account. The branch, after receiving the credit advice from PMO, shall respond the same by adjusting their outstanding entry and credit the EEFC account. Eligible payments out of the EEFC account shall be made by the branch by issuing drafts, travelers Cheque or TT etc and send the credit advice to PMO by debiting the amount to EEFC account with notional amount. As these payments are being made out of the foreign currency account, they shall be reported for management of funds at the PMO. In case of remittances received in currencies other than the designated currency, the authorized branches may convert foreign currency into the designated currency for placing deposit in EEFC account scheme at the risk and cost of the depositor. Branches are advised to obtain cross rates from the concerned PMO in case of such transactions. Page 3 of 17 If the beneficiary of the inward remittance desires to retain certain amount of remittance in foreign currency subsequent to the conversion into rupees, the authorized dealer may permit the beneficiary to do so by reconverting the rupee equivalent of the foreign currency amount of remittance at the current market rate subject to the condition that the reconverted amount into the foreign currency is within the permitted limit for the amount to be kept in EEFC account. Foreign exchange transactions where no exchange commission is earned by the bank like credits or debits to EEFC accounts, Commission is to be recovered as per the rates mentioned in the IBD Circular on service charges – Foreign business/transactions. AT POSITION MAINTAINING OFFICE PMO shall maintain branch wise Notional Nostro EEFC account ledger through which each Debit / Credit entry (in rupee and foreign currency) shall be passed and balance taken out. 12. ACCOUNTING PROCEDURE i) AT THE TIME OF OPENING OF ACCOUNT On receipt of advice from PMO, branch shall pass the vouchers as under at notional rates. Debit : Position Maintaining Office Credit : EEFC A/c (Name of the beneficiary) ii) a) AT THE TIME OF PAYMENT IN INDIAN RUPEES Debit: EEFC Account (Rupees at notional rates and actual in foreign currency) Credit: PMO concerned (Which is maintaining the EEFC A/c). For providing funds to the beneficiaries pass the vouchers as under: Debit: Suspense Account at current TT buying rate. Credit: Beneficiary's account. Page 4 of 17 b) Branches shall report purchase to PMO concerned on telephone/fax if the amount exceeds the prescribed amount (presently equivalent to Rs.250000/-) as per usual procedure and simultaneously branches shall also claim reimbursement from the concerned PMO. Upon receipt of reimbursement from PMO, the branches shall pass following voucher: c) Debit: Head Office A/C PMO Credit: Suspense iii) AT THE TIME OF PAYMENT IN FOREIGN CURRENCY DRAFT / SWIFT TRANSFER/ TRAVELLER CHEQUE: When funds are required to be remitted abroad by issuing drafts, traveller cheques or SWIFT transfers etc. in foreign currency, following vouchers should be passed: Debit: EEFC Account (Rupees at notional rates and actual in foreign currency) Credit: PMO concerned (Which is maintaining the EEFC A/c). The transaction shall be reported to concerned PMO for fund management 13. RECONCILIATION OF EEFC DEPOSITS At the end of each month, the PMO shall send the statement of EEFC Accounts as per their records to each branch, for reconciliation purpose. The branch upon receiving these details/data from individual PMOs shall tally the same with respective PMO and place reconciliation sheets on record. Simultaneously branch shall also tally customer wise accounts maintained by them to ensure that the aggregate of the same tally with balances shown by the respective PMO against that branch. Whenever there is a change in notional rate of the foreign currency, the balance of EEFC funds shall immediately be revalued in terms of revised notional rate and the rupee balance be reconciled with respective PMOs. Page 5 of 17 RESIDENT FOREIGN CURRENCY ACCOUNT (RFC ACCOUNT) 14. ELIGIBILITY The person eligible to open an RFC account should be a citizen of India or a person of Indian origin; who have been residing outside India for continuous period of not less than one year and has become a person resident in India on or after 18th April 1992 (hereinafter called “Eligible Person”). In case of person who had returned to India prior to 18th April 1992 after having been a non-resident for a continuous period of not less than one year, they become “Eligible Person” provided: (a) They hold a valid specific permission / license from RBI as on 17th July 1992 to maintain foreign currency accounts or to hold other foreign currency assets like shares, securities or immovable properties abroad. Or (b) They are in receipt of pension or other monetary benefits from their overseas employers subsequent to their return to India even if they did not maintain foreign currency accounts or hold other foreign currency assets abroad. Notes: For the purpose of this scheme a person (other than Pakistani/Bangladeshi citizen) shall be deemed to be of Indian origin, if:a) he at any time held an Indian passport Or b) he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955), Or c) the person is the spouse of a Indian or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh) 15. Eligible Assets ‘Eligible Assets” means foreign exchange assets acquired or held otherwise than in contravention of the Act by an eligible person, while he was resident outside India (non-resident), in the form of deposits in banks outside India, investments in foreign currency shares or securities or immovable properties situated outside India or investments in Page 6 of 17 business etc, outside India and include foreign exchange earnings through employment, business or vocation outside India taken up or commenced by such person while he was resident outside India. 16. Branches Authorized to maintain RFC Accounts RFC accounts are permitted to be maintained at our branches authorized to handle foreign exchange business independently (Bcategory branches). 17. PERMITTED CURRENCIES The Scheme stipulates opening of RFC accounts in any convertible currency. However, for operational convenience, RFC accounts are permitted to be maintained in five currencies only viz. US Dollars (USD), Pound Sterling (GBP), EURO (EUR), Canadian Dollars (CAD) and Australian Dollar (AUD). Current accounts (Non-interest bearing) may be opened in other permitted currencies after obtaining specific prior permission from International Banking Division, Head Office. 18. TYPES OF ACCOUNT These accounts can be maintained in the form of current, saving or fixed deposit accounts. However, only individuals can maintain saving accounts. 19. OPENING OF RFC ACCOUNT Branches shall obtain Account Opening Form as per Annexure – II duly supported by required documents. No minimum amount is stipulated in case of Current and Savings Account. However, fixed deposits can be maintained presently with minimum amount of USD 5,000 or its equivalent. No Cheque book facility is allowed for operations on the RFC accounts. 20. JOINT ACCOUNT RFC Account can be held singly or jointly in the name/s of the eligible person/s. Page 7 of 17 21. NOMINATION Nomination facility is available to the account holder like any other domestic rupee account. 22. OPERATIONS IN THE ACCOUNT All operations in these accounts are subject to compliance of guidelines issued by RBI / Bank, from time to time. 23. UTILIZATION OF FUNDS LYING IN RFC ACCOUNT. The funds in a RFC are free from all restrictions regarding utilization of foreign currency balance including any restriction on investment in any form by what ever name called, outside India. 24. RATE OF INTEREST Rate of interest applicable on savings and term deposits are circulated by International Banking Division, Head Office vide foreign exchange circulars from time to time. 25. CHANGE OF STATUS The balance in the RFC accounts may be allowed to be credited to NRE/FCNR (B) account, at the option/request of the account holder consequent upon change of his residential status from resident to nonresident. 26. PRE-MATURE WITHDRAWAL / CONVERSION OF NRE/FCNR (B) ACCOUNTS INTO RFC ACCOUNTS Pre-mature withdrawal of FCNR/NRE deposits for the purpose of conversion to RFC accounts are subject to applicable prevailing provisions about penalty. Similarly, on prematurely withdrawn FCNR (B)/NRE deposits for the purpose of conversion into RFC accounts even if the same has not run for the stipulated minimum maturity periods, interest payment will be as per applicable provisions. Branches should ensure that the request for such conversion is received from the NRI account holder immediately on return to India. Page 8 of 17 27. PRE-MATURE CANCELLATION OF RFC TERM DEPOSITS In case deposits under this scheme are withdrawn before maturity the rate of interest payment on such deposits will be subject to prevailing penalty provisions applicable thereon. In case the deposit is cancelled before the minimum stipulated maturity period (which at present is one month), the interest payment will be subject to provisions applicable thereon. In case of premature cancellation of RFC deposits for the purpose of renewing it further, for a period, which is up-to or more than the original maturity date, interest may be paid at the rate applicable on the date of original deposit, for the period for which the deposit has remained with the Bank, without imposing any penalty. 28. LOANS/OVERDRAFTS No loan/overdraft shall be permissible, whether directly or indirectly against balances held in an RFC Account. 29. REPORTING IN WEEKLY STATEMENT OF AFFAIRS Branches are advised to show the figures of RFC deposits correctly in the Annexure to the Weekly Statement of Affairs against the relevant item. The deposit figures should not be clubbed with the NRE/FCNR (B) deposit figures. 30. ACCOUNTING PROCEDURE The accounting procedure for maintenance of the RFC accounts shall be the same as applicable to FCNR (B) accounts. Notional rates of foreign currencies are used for accounting of RFC transactions. The notional rates are circulated from time to time by the International banking Division, Head Office. 31. RECONCILIATION OF RFC BALANCES At the end of each quarter, PMOs shall send the statement of RFC accounts as per their books to the concerned branches for reconciliation purpose. The branches, upon receiving these details / data from the PMO shall tally the same PMO-wise and account-wise with their books and in case of any difference/discrepancy, the matter should be taken up by the branch with the concerned PMO immediately. Page 9 of 17 Whenever there is a change in notional rate of the foreign currency, the balance of RFC funds shall immediately be revalued in terms of revised notional rate and the rupee balance be reconciled with respective PMOs. Page 10 of 17 RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT 32. ELIGIBILITY Resident individuals can open, hold and maintain a foreign currency account i.e. Resident Foreign Currency (RFC) (Domestic) Account with authorized branches. 33. PERMITTED CURRENCIES RFCD accounts at present can be opened in three currencies i.e. Pounds Sterling, US Dollars and Euro. 34. OPENING OF ACCOUNTS Branches authorized to handle foreign exchange business can maintain RFCD Accounts. In case, request for opening of RFCD Account is received by other branches, the same may be opened at the nearest authorized branch or at the designated link branch. The Account Opening Form for opening of Current Account of individuals in rupees is to be used for opening these Accounts by affixing a stamp “RFCD Account”. 35. TYPES OF ACCOUNTS The Account can be opened in form of Current Account and no interest will be payable on this account. 36. JOINT ACCOUNTS The account can be opened in the name of Residents individuals singly or in joint names with eligible persons 37. NOMINATION The accounts will be subject to provisions for nominations, applicable on resident accounts. Page 11 of 17 38. OPERATIONS IN THE ACCOUNT PERMISSIBLE CREDITS Foreign exchange acquired in the form of currency notes, bank notes and travellers’ cheques from the sources specified hereunder: a. was acquired by him while on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India; or b. was acquired by him, from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; c. was acquired by him by way of honorarium or gift while on a visit to any place outside India. d. represents the unspent amount of foreign exchange acquired by him from an authorized person for travel abroad. e. As gift from a close relation, as defined in section 6 of the Companies Act, 1957. f. By way of earning through export of goods/services or as royalty, honorarium or by any other lawful means. g. Representing the disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the sponsored ADR/GDR Scheme approved by the Foreign Investment Promotion Boards of Government of India. h. By way of earnings received as the proceeds of life insurance policy claims/maturity/surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority. PERMISSIBLE DEBITS Debits to the account shall be for the payment towards current/capital account transactions in accordance with existing regulations under FEMA applicable to resident Individuals. Page 12 of 17 39. MINIMUM BALANCE The RFCD Account may be opened subject to maintenance of minimum balance of USD1000 or its equivalent, presently. There will be no upper ceiling on balances held in these accounts. 40. CHEQUE BOOK FACILITY Branches shall issue cheque book to RFCD Account holders for making payments for permitted purposes in terms of existing provisions of Foreign Exchange Management Act 1999. Cheque book facility may be permitted subject to maintenance of minimum balance of USD 1000 or its equivalent, presently in these accounts. Branches shall issue rupee cheque book to RFCD account holder by affixing a stamp on top of the cheques “RFCD Account”. 41. LOANS/OVERDRAFTS No loan/overdraft shall be permissible against balances held in RFCD Accounts. 42. ACCOUNTING PROCEDURES The accounting procedure for maintenance of RFCD account shall be the same, which is applicable to FCNR (B) accounts. Notional rates of foreign currencies circulated by International Banking Division are to be used for maintaining these accounts. 43. PROCEDURAL GUIDELINES Funds held in RFCD Accounts can be freely converted into Indian Rupees at the prevailing TT buying rate. However, these funds are not allowed to be sold or transferred to accounts of other residents in India. The branches shall report purchase of currency to the Position Maintaining Offices. Branches shall make all eligible payments in foreign currency by issuing drafts, traveller cheques or TT etc. by debiting the RFCD Account with the notional amount. In case of remittances received in currencies other than the designated currency, the authorised branches may convert foreign currency into the designated currency for placing deposit in RFCD Page 13 of 17 account scheme at the risk and cost of the depositor. Branches are advised to obtain cross rates from the concerned PMO in case of such transactions. In case, a customer surrenders foreign currency notes for opening of RFCD Account, charges for issuing drafts in foreign currency by surrendering the currency notes to Full Fledged Money Changers will be borne by the customer. In case of remittances made in foreign currency where Bank does not earn any exchange income, commission (in lieu of Exchange profit) may be recovered, as applicable in EEFC accounts, in terms of service charges – Forex. business transactions. 44. CHANGE OF STATUS Balances in these accounts may be allowed to be credited to NRE/ FCNR(B) account, at the option /request of the account holders consequent upon change of their residential status from resident to non resident. 45. REPORTING IN WEEKLY STATEMENT OF AFFAIRS The funds held in these accounts should be shown alongwith figures of RFC deposits in the Annexure to the Weekly Statement of Affairs. The deposit figures should not be clubbed with NRE/FCNR(B) deposits. 46. RECONCILIATION OF BALANCES At the end of each quarter, PMOs shall send a statement of RFCD Accounts as per their records to the concerned branches for reconciliation purposes. The branches upon receiving the statement shall tally the same as per their records and in case of any difference/discrepancy, the matter shall be taken up with the concerned PMO. Whenever there is a change in notional rate of the foreign currency, the balance of RFCD funds shall immediately be revalued in terms of revised notional rate and the rupee balance need to be reconciled with respective PMOs. Page 14 of 17 Annexure-I LETTER OF REQUEST FOR ISSUANCE OF CHEQUE BOOK IN EEFC ACCOUNT Date:______________ The Manager Punjab National Bank BO: Reg: Exchange Earners Foreign Currency (EEFC) Account No............... Issue of Cheque Book. Please allow me cheque facility in the above Account and issue me cheque Book. time. Further, I/We agree that the bank shall be entitled to return the cheques (i) in respect of which I/We have not submitted appropriate Form A-1/A-2, with the bank or (ii) the purpose/transaction as mentioned in Form A-1 / A-2, is not permissible under FEMA Regulation in force The bank shall not be liable in any manner whatsoever for such return of the cheques. I/We will abide by the FEMA Regulations as in force from time to Yours faithfully. Authorised Signatory Page 15 of 17 Annexure-II APPLICATION FOR OPENING AN RFC ACCOUNT The Manager ……………… ……………… Please open an RFC Account in my name. The relevant particulars are as under: 1. Name and address of the applicant 2. Nationality : : 3. Origin (state whether you are of Indian origin): 4. Passport particulars No. Issuing Authority Expiry date 5. Date of arrival in India to become a resident in India. 6. Particulars of residence outside India Country Period From : : : : : Nature of occupation To (An attested copy of the relevant pages of the passport must be enclosed) 7. Do you continue to have any employment or business or vocation outside India? If so, please give : full particulars 8. Foreign currency/ies in which RFC a/cs is/are To be opened Page 16 of 17 : 9. Type of a/c desired (state whether fixed deposit, Currency or saving a/c) : I hereby declare that I have gone through the provisions of the RFC accounts Scheme. I declare that the particulars stated hereinabove are correct and I am eligible to open and maintain RFC a/c under the scheme as applied. I agree that the RFC a/c shall be governed by the RFC a/cs scheme and the directions issued by Reserve Bank Of India under Foreign Exchange Management Act, 1999 from time to time. Signature Place Date : : Instructions to the Applicant 1. Applicant is advised to read carefully the RFC Accounts Scheme before making the application. 2. Account will not be opened unless full particulars are furnished in the application form. 3. Application form duly filled in and signed must be accompanied by copies of the relevant pages of the passport duly certified by the applicant as true copies. The passport should be submitted along with the application for verification. 4. Furnishing any false information in the application amounts to contravention of the provisions of Foreign Exchange Management Act, 1999 5. Applicant should furnish such other particulars or documents, as may be required by the authorized dealer for the latter to satisfy him that the applicant is an eligible person and the funds proposed to be credited to the RFC a/c are eligible for the purpose. 6. Nomination facility is available to the RFC a/cs as in the case of resident rupee a/cs. ******************** Page 17 of 17