IIBF Forex for Individuals flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- FEMA 1999
- The Foreign Exchange Management Act governing foreign exchange dealings in India. It replaced FERA and regulates current and capital account transactions through rules and directions.
- Current account transaction
- A foreign exchange transaction that is not a capital account transaction, such as trade in goods and services, remittances for living expenses, education, medical treatment and travel.
- Capital account transaction
- A transaction that alters the assets or liabilities outside India of a person resident in India, or inside India of a person resident outside India, including investment in securities and property.
- Person resident in India
- Under FEMA, a person staying in India for more than the prescribed period in the preceding financial year, subject to specified exceptions for citizens going abroad.
- Liberalised Remittance Scheme
- A facility allowing resident individuals to remit foreign exchange up to a prescribed annual ceiling per financial year for permitted current and capital account purposes.
- NRE account
- A rupee account held by a non-resident Indian with an authorised dealer. The balance is repatriable and interest is exempt from Indian income tax.
- NRO account
- A rupee account for a non-resident Indian holding income earned in India. The principal is generally non-repatriable, though current income may be repatriated within limits.
- FCNR(B) account
- A foreign currency term deposit held by a non-resident Indian with an authorised dealer in India. The deposit and interest are repatriable in the same currency.
- EEFC account
- An Exchange Earners' Foreign Currency account allowing eligible resident individuals to retain a portion of specified foreign currency earnings in foreign currency with an authorised dealer.
- Underlying exposure
- A genuine existing or anticipated foreign currency receivable or payable that justifies booking a forward or derivative contract. Speculation without exposure is not permitted.
- Form A2
- The application-cum-declaration form used for foreign exchange remittances, stating the purpose and confirming compliance with the applicable scheme or limit.
- KYC Master Direction
- The RBI direction prescribing customer due diligence, identity and address verification, periodic updation and record retention obligations for regulated entities.
- PAN requirement
- A Permanent Account Number must be quoted for LRS remittances and most forex facilities. Form 60 may apply where PAN is not held in specified cases.
- Purpose code
- A standardised code describing the reason for a remittance. Accurate coding supports regulatory reporting and monitoring of foreign exchange transactions.
- FIU-IND
- The Financial Intelligence Unit of India, which receives suspicious transaction and cash transaction reports from reporting entities under the anti-money laundering framework.
- Sanctions screening
- Checking customers and beneficiaries against UN, OFAC and other applicable sanctions lists before processing a remittance, with hits escalated and reported.
- Card rate
- The exchange rate quoted by an authorised dealer to a retail customer, derived from the interbank rate plus a margin for the dealer.
- Exchange margin
- The markup added to or subtracted from the interbank rate when quoting a retail rate, compensating the dealer for risk and service.
- Cross rate
- An exchange rate between two currencies derived through a third currency, typically the US dollar or the rupee, rather than quoted directly.
- Forward premium
- The amount by which the forward rate exceeds the spot rate, generally reflecting the interest rate differential between the two currencies over the tenor.
- Value date
- The date on which the funds of a foreign exchange transaction are actually exchanged and available to the beneficiary, following market convention.
- SWIFT/BIC code
- A standard identifier for a bank in international payments, used to route remittances through the correspondent banking network to the correct beneficiary bank.
- GST on forex service
- Goods and services tax levied on the service fee or commission charged by an authorised dealer, distinct from the exchange margin embedded in the rate.
- Forward cancellation
- Closing a booked forward before maturity, which may attract cancellation charges and requires re-establishing the underlying exposure where applicable.
- Triangulation
- Deriving a cross rate by combining two exchange rates through a common intermediate currency, commonly the US dollar, to price a non-dollar pair.
- Ombudsman scheme
- The RBI Integrated Ombudsman Scheme providing redressal for customer complaints against regulated entities after the entity's internal grievance process is exhausted.
- FEMA penalty
- A civil penalty under Section 13 of FEMA, determined with reference to the sum involved in the contravention, imposed after adjudication by the Enforcement Directorate.
- Non-resident Indian
- A person resident outside India who is a citizen of India or a person of Indian origin, eligible for NRE, NRO and FCNR(B) facilities with authorised dealers.
- Travellers cheque
- A pre-printed, pre-denominated payment instrument issued in foreign currency for travel use, typically requiring the holder's counter-signature at encashment.
- Record retention
- The obligation to preserve KYC and transaction records for the prescribed period, currently five years after the transaction or cessation of the business relationship.
- Source of funds
- Documentation evidencing the origin of money remitted, such as salary, savings or sale proceeds, which may be required above prescribed thresholds.
- Interbank rate
- The wholesale exchange rate at which banks deal with each other, forming the base from which retail card rates are derived by adding a margin.