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FreeMockTestforJAIIB&CAIIB

FreeMockTestforJAIIB&CAIIB
UnderstandingTelegraphicTransfer(TT)Buying/SellingRate&BillsBuying/SellingRate
TTBuying/SellingRate&BillsBuying/SellingRatearerathercalledasMerchantexchangerate.
Merchantratesarelowerthanthespotratedefinitelyandsomewhataroundtheinterbankratewhichis
oneofthelowestrateinthemarket.Atmerchantratehighvolumeexportimporttransactiontakeplace,
becausethevolumeoftransactionoftheexporterimportersmaybemillionsofdollar,andtheygeta
comparablerategenerallyfavourabletothem.So,authorizeddealerthosewhoareprovidingexchange
ratetomerchantcompeteamongeachothertogivewhatiscalledalow,lowestratetothemerchant.
Andtheauthorizeddealerschargeverylowprofitformerchanttransactionbecausethetransactionis
huge,anymarginallevelofprofitcangivethemhugeamountofprofit.
Thetypesofmerchantratesaretelegraphictransferrate,whatyoucalledTTrates,andbillsrate.
TherearetwotypesofTRatesoneiscalledTTbuyingrate,anotheriscalledTTsellingrate.Whenas
acustomer,IgotoabankandasktoremitsomemoneytoapersoninUS,IpurchasewhatiscalledTT
selling,IsaleaTT.Whenasaexporter,Igotexporttransactionintheformofforeigncurrency,Iwantto
converttheforeigncurrencyintodomesticcurrency,therateapplicabletoiscalledTTbuyingrate.So,
TTsellingrateisnothingbutoutwardtransaction,TTbuyingratenothingbutinwardremittances.
TTBuyingRate
Ifyouwanttoconverttheforeigncurrencyintodomesticmoney,youhavetobuyaTT,theTTbuying
rateinwardremittancesapplicabletothem.Telegraphictransfer,moneytransfer,demanddraft,which
aregenerallydenominatedinforeigncurrencyconvertedintoIndiancurrencyordomesticcurrency.So,
wehavetopurchasewhatiscalledTTbuying.Conversionofproceedsofinstrument,manyexport
orientedinstruments,manyforeignbills,thosewhoaredenominatedinforeigncurrencyconvertsinto
domesticcurrencythroughTTbuyingrate.
Similarly,ifyouwanttocanceloutwardremittances,supposeyouhavebookedaforeignDD,foreign
currencyDD,butyouwanttoconvertintoIndiancurrencyorcancelit,thenyouhavetopurchasewhat
iscalledaTTbuyingrate.So,TTbuyingratesapplicabletoinwardremittances,foreigncurrency
demanddraft,foreigncurrencymoneytransfer,conversionofproceedsofforeigncurrency
denominatedinstrument,cancellationofoutwardremittancesintheformofDD,TT,MT.
TTsellingrate
Ifyouwanttosendforeigncurrencytooutsidethatisfromdomesticeconomy,theforeigncurrenciesare
goingoutwardtoothercountry,thenyouhavetosaleaTT.So,ifIwanttosendUSdollartoanyUS
citizeninUS,thenIhavetoconvertthedomesticrupeeintoUSdollar,thattimeIhavetosellaTT.So,
alloutwardremittancestransactionwhicharegenerallyconvertedbypayingdomesticmoneyinto
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FreeMockTestforJAIIB&CAIIB

foreigncurrencyarecalledTTsellingrate.
So,outwardremittances,telegraphictransfer,moneytransfer,foreigncurrencydenominatesDDthatis
demanddraft,conversionofproceedsofinstrumentthatisanyinstrumentindomesticmoneyconverted
intoaforeigncurrency,cancellationofinwardremittances,ifyouwanttoconvertanyforeigndomestic
DD,TT,MTintoforeigncurrency,thenTTsellingrateapplicable.Ifyouwanttoimportsomething,then
youhavetosellTT.TTsellingrateapplicabletoalloutwardtransactioninwhichanyforeigncurrency
purchasedbypayingdomesticcurrency.
BillsBuyingRate/BillsSellingRate
Billsareexportimportproceeds.Billsbuyingrateisnothingbutinwardremittances,billsellingrate
nothingbutoutwardremittances.Foreigncurrencyconvertedintodomesticcurrencythroughbillsbuying
ratedomesticcurrencyconvertedintoforeigncurrencythroughbillsellingrate.Herebillsareexport
importbill,andanyotherkindofforeign,foreigncurrencydenominatedinstruments.
TT/BillsBuying/SellingExamples:
1.InflowofUSD200,000.00byTTforcredittoyourexporter'saccount,beingadvancepaymentfor
exports(creditreceivedinNostrostatementreceivedfromNewYorkcorrespondent).Whatrateyouwill
taketoquotetothecustomer,ifthemarketis55.21/25?
Explanation:
ItwillbeapurchaseofUSDfromcustomerforwhichUSDwillhavetobesoldinthemarket.Saywhen
USD/Rsisbeingquotedas55.21/25,meaningthatmarketbuysUSDatRs55.21andsellsatRs55.25.
Weshallhavetoquoteratetothecustomeronthebasisofmarketbuyingrate,i.e.55.21,lessour
margin,asapplicable,toarriveattheTTBuyingRateapplicableforthecustomertransaction.
2.RetirementofimportbillforGBP100,000.00byTTMargin0.20%,ignorecashdiscount/premium,
GBP/USD1.3965/75,USD/INR55.16/18.ComputeRateforCustomer.
Explanation:
ForretirementofimportbillinGBP,weneedtobuyGBP,tobuyGBPweneedtogiveUSDandtoget
USD,weneedtobuyUSDagainstRupee,i.e.sellRupee.
Atthegivenrates,GBPcanbeboughtat1.3975USD,whileUSDcanbeboughtat55.18.TheGBP/INR
ratewouldbe77.1140.(1.3975x55.18),atwhichwecangetGBPatmarketrates.Thustheinterbank
rateforthetransactioncanbetakenas77.1140.
AddMargin0.20%0.1542.
Ratewouldbe77.1140+0.1542=77.2682foreffectingimportpayment.(BillSellingRate).

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