1.5 Final - Edited

CHAPTER I
1.1 INTRODUCTION TO THE INDUSTRY
Banking is a major financial activity which provides life blood to an economy. The
Banking Regulation Act, 1949 defines banking as “accepting for the purpose of lending
or investment, of deposits, of money from the public repayable on demand or otherwise
and with drawable by cheque, draft and order or otherwise”.
In olden days the economy was unorganized. The rate of growth and stability was poor.
The Government didn’t have enough control over the economy. People had to suffer for
lack of cheap source of funds to carry on with their agriculture and trade. If they
needed any financial assistance, the only source was traditional money lenders. The
common man had to pay a high interest for the benefit he received. People were badly
exploited by the traditional system. Another aspect was wasteful competition between
the money lenders itself.
In order to bring an end to this situation the government intervened and began to set up
commercial banks and promote private investment in banking to make avail adequate
sources of funds. The Banking Regulation Act, 1949 was introduced in order to
regulate the working of banking sector in India.
One of the major milestones in banking in India was the nationalization of commercial
banks in 1969 and later again in 1980.
GOVERNMENT’S ROLE IN BANKING INUSTRY
1. Implementation of Banking Regulation Act 1949. (Scheduled Banks and Non-

Scheduled Banks)
2. Nationalization of 14 banks in 1969 in the first phase. And then in second
phase six more banks nationalized in 1980.
3. Brought about the liberalization in 1993.
The following diagram illustrates how the Banking Regulation Act classifies the
commercial banks in India.
1
The banking structure in India is as follows:
LIBERALISATION AND MODERN BANKING
In the early 1990s, the then Narasimha Rao government embarked on a policy
of liberalization, licensing a small number of private banks. These came to be known
as New Generation tech-savvy banks, and included Global Trust Bank (the first of such
new generation banks to be set up), which later amalgamated with Oriental Bank of
Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move,
along with the rapid growth in the economy of India, revitalized the banking sector in
India, which has seen rapid growth with strong contribution from all the three sectors of
banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in the
norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%,at present it has gone up
to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
Banking in India is generally fairly mature in terms of supply, product range and reach-
even though reach in rural India still remains a challenge for the private sector and
foreign banks. In terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets relative to other banks
in comparable economies in its region. The Reserve Bank of India is an autonomous
body, with minimal pressure from the government. The stated policy of the Bank on the
Indian Rupee is to manage volatility but without any fixed exchange rate-and this has
mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
2
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.
In recent years critics have charged that the non-government owned banks are too
aggressive in their loan recovery efforts in connection with housing, vehicle and
personal loans. There are press reports that the banks' loan recovery efforts have driven
defaulting borrowers to suicide.
Yet private sector Banks in India are witnessing immense progress. They are leaders in
Internet banking, mobile banking, phone banking, ATMs. On the other hand the Public
Sector Banks are still facing the problem of unhappy employees. There has been a
decrease of 20 percent in the employee strength of the private sector in the wake of the
Voluntary Retirement Schemes (VRS).
All great dynasties were built up from humble foundations.
1.2 INTRODUCTION TO THE COMPANY
3
The "South Indian Bank" came into being during the Swadeshi movement. The
establishment of the bank was the fulfilment of the dreams of a group of enterprising
men who joined together at Thrissur, a major town (now known as the Cultural Capital
of Kerala), in the erstwhile State of Cochin to provide for the people a safe, efficient
and service oriented repository of savings of the community.
South Indian Bank was registered as a private Limited Company under the companies
Act of 1913 and commenced business on 29-01-1929 at Round South, Thrissur. The
South Indian Bank Ltd., was formed by a group of 44 enterprising men of Thrissur who
contributed Rs.500/- each to the initial paid up capital of Rs.22,000/-. Their main
objective was to serve the merchant community of Thrissur by freeing them from the
clutches of the money lenders who charged exorbitant rates of interest.
The bank received very good support from the public at large. Initially the growth was
slow but steady. The number of branches opened each year testified its stability and
popularity. It was included in the second schedule of the Reserve Bank of India and
became a scheduled
Bank on 07-08-1946. SIB was the first scheduled Bank in the private sector in Kerala to
get the license under section 22 of the Banking Regulation Act 1949 from RBI on 17-
06-1957.
The Bank got license from RBI to deal in Foreign Exchange on 01-08-1975.It is an
authorized dealer in Foreign Exchange now and operates all types of foreign exchange
business. It has correspondent banking arrangements in all commercial centers of the
world. NRI’s can remit funds to an account in the bank either online or through draft
drawing arrangements.
Corporate Vision
“ To emerge as the most preferred bank in the country in terms of brand, values,
principles with core competence in fostering customer aspirations, to build high quality
assets leveraging on the strong and vibrant technology platform in pursuit of excellence
and customer delight and to become a major contributor to the stable economic growth
4
of the nation ”
Corporate Mission
“ To provide a secure, agile, dynamic and conducive banking environment to customers

with commitment to values and unshaken confidence, deploying the best technology,
standards, processes and procedures, where customer convenience is of significant
importance and to increase the stake holders’ value ”.
CURRENT STRUCTURE
The Bank has taken long strides in its expansion program and with 530 branches and 26
extension counters, it has struck its roots in 23 States and Union Territories. The Bank
has an ATM network at 280 centres. The bank also proposes to open 30 branches
including 11 branches in Delhi region so that SIB will have a CSB branch network of
560 branches by September 2009. With the opening of 3 more branches in the states of
Meghalaya, Tripura and Himachal Pradesh, SIB would expand its footprints to 26 states
and Union territories within two months.
The Bank had 4223 personnel on its rolls in 2010 as against 3868 as on 31st March
2009. Cadre - wise breakup is as under:
Officers 1932
Clerks 1616
Sub staff 675
Total 4223
CORE BANKING SOLUTION
SIB is the first Kerala based bank to implement the core banking system. The bank had
embarked upon a massive technology up-gradation project, by the name Sibertech, for
introduction of Core
Banking Solution. The Sibertech Project was formally launched on January 17,2001 by
Sri.N.R. Narayana Murthy, Chief Mentor, Infosys Technologies Ltd. in a colorful
function at Kochi. For this, a modern Data Center has been set up at Kochi, connecting
all the branches, the Departments at Head Office, Regional Offices, the Treasury
5
Department at Mumbai and the International Banking Division at Kochi. This robust
network facilitates anywhere banking, Networked ATMs, Internet Banking, Mobile
Banking, Global ATM cum debit card operations etc. The Sibertech project was
launched with a target of connecting the 200 odd branches in two phases by March,
2004.
Towards this endeavour, the bank concluded a technology partnership with M/s.Infosys
Technologies Ltd. for Finacle, the Core Banking Solution, M/s.HCL Infosystems Ltd.
for Network Integration and M/s.WIPRO for Data Centre set up and maintenance.
The bank has achieved 100 per cent conectivity by implementing Core Banking
Solution by 24th March, 2007. Further to strengthen the ATM reach and global
acceptability, Bank has introduced Global ATM-cum-Debit card, which can be used at
ATMs and merchant establishments all over the world. The Bank has also introduced
value added services such as mobile banking and internet banking.
The aim of the Bank is to offer the latest technology driven value added services to the
customers towards the realization of the motto – Experience Next Generation Banking.
SERVICES AND PRODUCTS
The main products and services of SIB are divided into three main heads:
PERSONAL BANKING
A. ACCOUNTS AND DEPOSITS
SIB initiates customers to begin a relationship by Opening an account as a window to

"experience next generation banking". With all their branches networked under Core
Banking System, SIBhas the latest product offerings, and value added services. SIB
offers :
Savings Account - For routing customers’ cash flow
Term Deposits - For high returns on customers’ investments
6
B. LOANS
As time changes, needs change and so does the spending solutions available. As a
result, mindset has also changed. Nowadays, loans are an integral part of personal
finance. It makes sense in today’s financial scenario. The South Indian Bank, foresees
every kind of need and offer various special packages as given.
Personal Loan - Easy general purpose loans
Vehicle loans - for private, commercial or agricultural purposes
Home Loans - for residents, NRIs and Senior Citizens
Gold Loans - Easy Loans against Gold
Educational Loans - for higher studies
Agriculture Loans - for various agricultural needs
Flexi loan - Loan against property (Residential/Non-residential)
C. MUTUAL FUNDS
Mutual Funds is one of the preferred investment options for all those who want to play
safe, yet save more than what traditional saving avenues offer.
South Indian Bank has tied-up with the leading Mutual Funds, so that customers may
pick and choose, as per their investment goals.
D. INSURANCE
At every point of life risks are many. Coverage for life and property are always
advisable to ensure protection. South Indian Bank offers its customers the most
beneficial policies from insurance majors. Whether for households or for businesses,
the bank has all kinds of policies:
7
General Insurance - tie-up with Bajaj Allianz Insurance
ECGC – Export Credit Guarantee Corporation joins hands with SIB under
bancassurance model
E. MONEY TRANSFERS
Fast, reliable and with minimal charges, money transfers with South Indian Bank is a
no-hassle affair. Be it within the country or abroad , the online money transfer services,
make the business of transferring money look one of the easiest jobs. With all branches
networked under the Core Banking system,customer can send and receive money in an
instant and meet their urgent needs.
Domestic Transfers - Transfer/Receive funds within India
International Transfers - Transfer/Receive funds to/from abroad.
F. VALUE ADDED SERVICES
Value Addition is the norm when customers open an account with SIB. SIB offers
different types of value added services to opt from, as per customer’s convenience, with
the power of online services
BUSINESS BANKING:
A) BUSINESS ACCOUNTS
SIB offers different types of Business Accounts such as Current Account,

Overdrafts(OD), Cash Credits(CC) and Mercantile Credits. These accounts allow
customers the convenience of conducting day-to-day banking operations, in addition to
offering working capital credit requirements.
B) DOMESTIC FINANCE
A business requires a constant flow of finance for its growth. The finance can be from
various sources, including Bank finance. With rich experience in this segment,SIB
8
helps customers understand each and every requirement of business, and provide the
right mix of finance.
Working capital finance: SIB extends short term finance by way of inventory limits in
the form of Overdraft, Cash Credit, Working Capital Term Loan, Mercantile Credit etc.
Post Sale limits are extended by way of discounting of bills or purchasing of cheques,
advances against book debts etc. The different types of accounts and limits offered are,
Long term finance: Long term finance requirements are met through term loans,to suit
cusotmer requirements.
The loans are either disbursed in lumpsum or in stages and the same is repaid in
instalments along with interest.
The loans are mostly given for a specific purpose/project. Such finances allow
customers to go in for capacity upgrades, purchase of assets, etc. The regular repayment
option, coupled with balloon payments in some cases, provides complete flexibility to
customers.
Non fund based finance: SIB offer different types of non-fund based credit facilities
to eligible borrowers,
• ILC (Inland Letter of Credit)

• Bank Guarantees
• Clubbing fund based and non-fund based credit limits
C) INTERNATIONAL FINANCE
Export Finance
To cater to the high growth export sector, SIB offers the following :
• A) Pre-shipment credit to take care of purchase and processing of raw materials, for
making the goods ready for export.
• B) Advances such as Packing Credits (against LC’s/ confirmed orders) shall help the
customer to maintain his cash flow.
9
• C) Post-shipment credit is extended to exporters against assured sale receivables, till
the actual sale proceeds are realized.
• D) Facilities such as Purchase/Discount of export documents under Export Orders,
Advances against export bills sent on collection, are few of such advances.
• SIB also offers foreign currency loans, advances against export incentives receivables
etc.
SIB SWIFT services help instant financial services for exporters.
• SIB facilitates insurance through Export Credit Guarantee Corporation (ECGC) .
Import Finance
• To help customers in Import finance, SIB offers Letter of Credit services, remittance
services, Import Bill collection services etc.
D) MONEY TRANSFERS
E) VALUE ADDED SERVICES
SIB offers best-of-the-breed technology based online services which would take care of
customer’s business needs. SIB also offers personalized value added services for the
owners and staff of every kind of business concern.
South Indian Bank had recorded the highest ever net profits in its 80 years history in
2008-09 with Rs.194.75 crores. This is an increase of 28.44% over the previous year’s
Rs.151.62 crores. The bank’s aggregate business surpassed Rs 30237 crores by 2009.
This performance reported by the bank is an encouragement to all stakeholders and also
provides impetus to the bank to continue delivering committed service and sustainable
results. The Board of Directors has recommended 30% dividend for the past fiscal year.
The Bank also has enhanced its shareholder value by improving the annualized value of
shares (EPS) to Rs.17.23 in March 2009.The net interest margin (NIM) has registered
an improvement to 2.92% this fiscal as against 2.62% last year.
10
FINANCIAL PERFORMANCE ANALYSIS OF SOUTH INDIAN
BANK LTD
KEY PARAMETERS % change 2008-‘09 2007-‘08 2006-‘07
2009 2010
NET INTEREST INCOME +34.06% +28.84% 1686.92 1309.24 976.6
NET INTEREST EXPENDED +50.24% +27.20% 1164.04 915.10 609.09
OPERATING PROFIT(before +87.51% 30.04% 301.37 231.75 123.59

tax)
NET PROFIT AFTER TAX +45.62% +28.44% 194.75 151.62 104.12
EARNINGS PER SHARE 18.77 14.79
NET WORTH 1160.98 723.96
DEPOSITS 23.83% 19.37% 18092 15156.00 12239
ADVANCES 29.44% 12.93% 12145 10754 8308
TOTAL BUSINESS 26.10% 16.70% 30237 25910 20547

NET NPA -56.34% 295.37% 134.31 33.97 77.82
RETURN ON ASSETS 1.09 1.01 0.88
SWOT ANALYSIS OF SOUTH INDIAN BANK
A. STRENGTHS
• Achieved 100% technology driven operations and core banking status.

• Excellent and faithful employee base is the prime strength of south Indian bank.
• Average age of employees is low.
• Efficient management team that leads the bank from forefront.
• Strong clientele base in south India.

• Stakeholder satisfaction at all levels.
B. WEAKNESS
• The technology driven core banking fails at times of system failures.

• Average age of customers is high.
• Inability to compete with other commercial banks in case of tie ups with public sector
undertakings for providing utilities like railway ticket reservations and so forth.
11
C. OPPORTUNITIES
• Expand operations to all states in India.

• Act as distribution channel for value services like distribution of application forms for
national level competitive examinations.
• Act and provide payment gateways for online reservations and online mobile
recharges.
D. THREATS
• Growth of other private sector new generation banks.

• Threat of take-over by larger commercial banks.
MILESTONES
• The FIRST among the private sector banks in Kerala to become a scheduled bank in
1946 under the RBI Act.
• The FIRST bank in the private sector in India to open a Currency Chest on behalf of
the RBI in April 1992.
• The FIRST private sector bank to open a NRI branch in November 1992.
• The FIRST bank in the private sector to start an Industrial Finance Branch in March
1993.
• The FIRST among the private sector banks in Kerala to open an "Overseas Branch" to
cater exclusively to the export and import business in June 1993.
• The FIRST bank in Kerala to develop an in-house, a fully integrated branch
automation software in addition to the in-house partial automation solution operational
since 1992.
• The FIRST Kerala based bank to implement Core Banking System.
• The THIRD largest branch network among Private Sector banks, in India, with all its
branches under Core BAKING SYSTEM.
1.3 INTRODUCTION TO STUDY:
12
The foreign market is a worldwide decentralized over-the-counter financial market for
the trading of currencies. Like a domestic firm, a multinational firm’s goal is to
maximise the shareholder value on a global basis. It acquires assets that have present
value more than their initial investment. These firms however, operate more than one
country and their operations involve multiple foreign currencies. Their operations are
influenced by politics and the laws of the countries where they operate. As a result they
face higher degree of risk compared to domestic firms. International firms, who
compete in the international market have to analyse the implications of the changes in
the interest rates, inflation rates and exchange rates on their decisions and to minimise
the foreign exchange risk.
The foreign exchange markets deals with large volume of funds as well as a large
number of currencies belonging to various countries for this reason they are not only
worldwide markets but also the world largest financial market. Though there are
foreign exchange markets in virtually all countries, London, Newyork and Tokyo are
the nerve centres of foreign exchange activity. The large commercial/investment banks
and central bank of the countries are the principal participants in the foreign exchange
markets. In general, business firms do not operates on their own they normally buy and
sell currencies through a commercial bank.
While the primary objective of commercial bank, investment bankers and brokers in
dealing with foreign exchange market is commercial in nature, whether they deal on
their own account or for others, the central bank’s operations in the market are
regulatory in nature otherwise the principal central bank of the country intervenes in the
foreign exchange market to regulate the volatility of foreign exchange rates.
TERMS USED IN FOREIGN EXCHANGE MARKET:
THE FOREGIN EXCHANGE MARKET:
It is the market where the currency of one country is exchanged for the currency of
another country.
INTER BANK MARKET:
13
Is the whole sale market in which major banks trade with each other.
ARBITRAGEUS:
They seek to earn risk-less profits by taking advantage of differences in exchange rates
among countries.
TRADERS:
Traders engage in the export of import of goods to number of countries.
HEDGERS:
Hedgers operate in the exchange market to protect against the risk of fluctuation in the
foreign exchange rates.
SPECULATORS:
They trade in foreign currencies to benefit from the exchange rate fluctuations.
FOREGIN EXCHANGE RATES:

A foreign exchange rates is the price of one currency quoted in terms of another
currencies.
DIRECT QUOTE:
When the exchange rate is quoted per unit of the domestic currency it is referred to as
direct quote.
INDIRECT QUOTE:
When exchange rate is quoted as units of domestic currency per unit of the foreign
currency it is referred as indirect quote.
CROSSS RATES:
A cross rate is an exchange rates between the currencies of two country that are not
quoted against each other but quoted against one common currencies.
SPOT EXCHANGE RATES:
14
It is the rate at which the currency can be bought or sold for immediate delivery, which
is within two business days after the day of the trade.
BID-ASK SPREAD:
The foreign exchange dealers are ready to buy or sell foreign currencies. The quotations
are given as a bid-ask price. The difference between buying(bid)and selling (ask)rates is
the bid-ask spread.
FORWARD EXCHANGE RATES:
It is the rate that is currently paid for the delivery of currencies at some future date.
FORWARD PREMIUM/DISCOUNT:
Forward rates are generally quoted as a “margin” against the spot rate for the currency
concerned. The margin may represent either a premium or discount or may be at par.
When the forward margin is a premium it is added to the spot rate to make it dearer.
Similar when the forward margin is at discount it is deducted from the spot rate to make
it cheaper. This applies only when the rates quoted on the direct basis.
FORWARD CONTRACTS:
Entering into a contract for buying foreign currency on a future date.
FOREGIN CURRENCY OPTION:
It is the right to buy or sell a currency at agreed exchange rates on or before an agreed
maturity period.
1.4 OBJECTIVES OF THE STUDY:
15
PRIMARY OBJECTIVE
 To study the forward contract as an instrument to hedge currency exchange

risk.
SECONDARY OBJECTIVES
 To study the benefits gained by the customer’s while importing commodities

through forward booking.
 To study the cancellation option in forward contract.
 To study the strength of the currency using forward premium/discount.
 To study the notional expenses incurred by the customers on forward booking.
1.4 NEED FOR STUDY:-
16
Volatility of exchange rates makes it necessary for companies engaged in
international operations to make measures for covering against exchange rate risk.
Several techniques are used internal and external. A number of techniques are available
such as hedging in forward rate, money market, currency futures, options, swaps. This
study on one of the hedging tool to reduce risk is forward contract.
1.5 SCOPE FOR STUDY:-
17
Foreign Exchange Risk Management constitutes an integral part of all
major corporate decisions, to manage foreign exchange exposure, given the global
business scenario in which the business firms operates. Of all the major external
techniques available for hedging the risk, Forward Contract is tailor made, easy to
operate tool which being widely used in the business. Therefore, traders take advantage
of this derivative to hedge their risk.
1.6 LIMITATIONS OF THE STUDY:
18
 The currency market is volatile an exact predictions cannot be made due to
macro economic factors.
 The hedging techniques suggested are not exclusive and the macro economic
factors have not been considered as it is very difficult to calculate in qualitative form.
 The data used are secondary.
 The first hand information was lacking
 The sampling period’s calculation is restricted to three years.
CHAPTER II
REVIEW OF LITERATURE
19
Anuradha Sivakumar and Runa Sarkar, Industrial and Management
Engineering Department Indian Institute of Technology, Kanpur has submitted a
project on “Corporate Hedging for Foreign Exchange Risk in India” This project
attempts to evaluate the various alternatives available to the Indian corporate for
hedging financial risks. By studying the use of hedging instruments by major Indian
firms from different sectors, the paper concludes that forwards and options are
preferred as short term hedging instruments while swaps are preferred as long term
hedging instruments. The high usage of forward contracts by Indian firms as compared
to firms in other markets underscores the need for rupee futures in India
John E.S Chanfelbuger, University of Washington has submitted a
project on “Managing Foreign Exchange Risk on International construction project”
managing the Foreign Exchange market is critical to achieve financial success on many
international construction project every transaction risk that crosses national borders
result in exposure to foreign exchange risk without proper management a small
movement in the currency exchange rates can turn an international project from a profit
to a loss this paper address the primary foreign exchange risk transaction and
translation risks and suggests strategic for managing these risks.
Rahul.J, in partial fulfillment of award of MBA degree has submitted a
project on “FOREIGN EXCHANGE And RISK MANAGEMENT”. This project
attempts to evaluate the present scenario of economy is self sufficient, so there is need
for exchange of goods and services amongst the different countries. So in this global
village, unlike in the primitive age the exchange of goods and services is no longer
carried out on barter basis. Every sovereign country in the world has a currency that is
legal tender in its territory and this currency does not act as money outside its
boundaries. So whenever a country buys or sells goods and services from or to another
country, the residents of two countries have to exchange currencies. So we can imagine
that if all countries have the same currency then there is no need for foreign exchange.
The Foreign Exchange Committee November 2004, has submitted a project

on “Management of operational risk in the foreign exchange”. This paper has reviewed
the entire foreign exchange process flow and best practices for maintaining a properly
20
controlled environment. However, as noted in the introduction, several trends in the industry
will affect a bank’s ability to implement the best practices as listed in this document.
Although the market will continue to evolve and develop mitigating controls, and any set of
recommendations will eventually require revision, management should consider the
practices suggested here as helpful responses to recent developments in technology,
instruments, and innovations in the marketplace.
CHAPTER III
RESEARCH METHODOLOGY
21
Research methodology is a way to systematically solve the research problems.
It may be understood as a science of studying how the research is done scientifically. In
it we study the various steps that are generally adopted by the researcher in studying his
research problem along with the logic behind them. It is necessary for the researcher to
know not only the research methods/techniques but also the methodology. Researcher
also need to understand the assumptions underlying various techniques and they need to
know the criteria by which they can decide the certain techniques and procedures will
applicable to certain problem and others will not.
Research design is needed because it facilitates the smooth sailing of various

research operations, thereby making research as efficient as possible yielding maximal
information with expenditure of effort, time and money. Research design stands for
advance planning of the methods to be adopted for collecting the relevant data and the
techniques to be used in analysis, keeping in view of objective of the research and the
availability of time and money.
Nature of the study:
The nature of the study is descriptive research.
Descriptive research includes surveys and fact-findings enquires of different kinds.

The major purpose of descriptive research is descriptive of the state of affairs as it
exists at present. The data and information generated through this descriptive design
can provide the decision makers with evidence that it can lead the course of action.
Research design:-
The study is descriptive in nature and it is based on the forward rates and its effect on
the profitability of the company.
Source used for data collection is secondary data’s are :-
• Annual reports of South Indian Bank.
• Books of accounts pertaining to foreign exchange business.
• Documentary files.
Sampling period:-
22
The sample period is taken for 3years.
Period of study:-
The period of study is 45days.
CHAPTER IV
FACTORS AFFECTING EXCHANGE RATES & CURRENCY

FORECASTING
23
The influences in the exchange market are too numerous and diverse to give a single
explanation foe exchange movements. Several factors such as social, economic and
political influences affect the exchange rate movements. It is how ever possible to
identify some factors that affect considerably or more fundamentally the development
in the exchange market and influence in the exchange rate.
EXCHANGE CONTROL:
In a country it exchange control regulations, fixing of an exchange rate becomes policy

matter it is said that with the mechanisms of exchange control the actual degree of this
equilibrium present in a countries balance of payment position does not get revealed in
the exchange rate. The exchange rate is kept an artificial level, as the exchange rate
policy is required to be complimentary to the exchange control regulations which in
turn form the part of general economic policy. In India there was exchange control and
their used to be an administered exchange rate system. However, now the exchange
control regime stands largely dismantled exchange rate is allowed to be determining the
market forces in keeping with relaxations in an exchange control regulations.
BALANCE OF PAYMENT:
It is believed by some the balance of payment on current account influences a

currencies exchange rates vis-a –vis in another currencies. According to this point of
view, the demand for a particular currency is mainly dependent on the demand for good
and services respective country. A favourable balance of payment on current account
indicates a greater demand for goods and services of that country abroad as compared
to the demand for the foreign goods and services by the residence of the country. As the
demand for the currency abroad (i.e. supply of foreign currency at home) is greater than
the demand for the foreign currency at home, the home currency is likely to appreciate
in relation to foreign currency till and equilibrium is reached. As the goods of the
country with appreciating currencies are likely to be less competitive and demand
would thus get reduced, equilibrium will be struck after a period of time.
Normally, a phenomenon is obvious in case of the currency which servers as the

reserve currency for other countries. The reserve currency country can pursue an
expansionary monetary and fiscal policy and resort to deficit financing to support its
higher economic expansion. This can be managed with lesser degree of inflation if it
24
can shift some of its excess demand to the rest of the world and agree for an adverse
balance of trade. The adverse balance of trade, the other things being equal, should go
to deprecate the reserve currency vis-a-vis other currencies; but the countries which are
having balances in the reserve currency or who are exporting to that country would
intervene and try to maintain the valve of the reserve currency vis-a-vis home currency
so that the value of their financial assets is protected and the demand for their goods in
the reserve currency doesnot come down. In this process they keep their depreciated
level and allow their economies to become inflationary. In this process of adjustments
there is an all round movement in the exchange rates of different currencies.
RELATIVE PRICES:
The exchange rate movements between two currencies tend to offset the differential
movements in the relative price levels. If a country is having an inflation of say 10% to
20% and another country which is having, say ,only 2%to3%inflation , the country
which is having a lower level of inflation will be in position to maintain the prices of
its export commodities which will improve the demand for its goods and hence its
currency and thus the currency of the country which has higher inflation will deprecate
to the extent of differential in inflation.
The relative price supports the purchasing power parity theory that the exchange rate
levels in the long run vary with relative inflation performance.
ASSETS MARKET:
The demand for goods produced in a country explains partly the demand for the
currency of the particular country. It has to be recognized that the demand for the
currency also arises from the desire to hold stock of assets denominated in that
currency. Therefore, it become necessary to consider the factors affecting the demand
for and supply of financial instruments denominated in that currency in relation to the
factors affecting the demand for and supply of financial instruments denominated in
other currencies.
Since the demand for and supply of financial assets tend to get translated into demand
and supply of money the demand and supply positions of money in different countries
can be used as a yardstick for measuring their relative impact on exchange rates. Thus,
in a country with a moderate monetary growth, the exchange rates would tend to
25
strengthen as it would reduce the domestic inflationary pressures, improve the
competitive of the goods produced and exported, and also induce the inflow of capital
from other countries.
INTEREST RATES:
Exchange rate movements are often induced by imbalances between the demand and
supply position in the money markets; the significant factors in all such developments
being the interest rates differential. Interest rate differential can decisively influence the
relative attractiveness of the currencies- a sharp rise in the interest rates can be
anticipated to be accompanied by an increase in the demand for the currency resulting
in a market strengthening of the currency.
OTHER FACTORS:
There are large number of factors viz political developments like war, change in the
government, official intervention in the money exchange market, restrictions on the
capital flow, change in the productivity levels, fiscal and monetary policy of the
government concerned and the underlying psychology of the market operators.
The exchange rates get adjusted not only with the developments that have already taken
place but also are influenced by the changes in the variables that are expected to take
place in future. International investors and speculators move funds on the basis of such
expected changes and as a result, anticipatory adjustments take place in the currency
levels.
CURRENCY FORECASTING:
No dealer in foreign exchange can survive without forecasting, although he recognises

that even a well equipped system of forecasting can often be misleading. Decisions
taken in conjunction with well equipped system of forecasting can yield better results
than those based on no forecasts and strategies. An assiduous analysis such of the
factors determining the exchange rate movements can be used as a guide with
advantage by those dealers who adopt such a judicious approach. Those dealers who
have the support of or access to economic estimates of many input variables (eg:-
money supply, trade balance, interest rates, inflation rates, capital flows and many other
26
non-quantifiable factors)may use even computer programmes with diagnostic checks
and possibilities of exploring sensitivity of the forecasting exercises with advantage.
Different factors that influences the fluctuation in the exchange rates, explain different
aspects of currency price movements while no single factor can be used to predict the
changes, it has to be recognised that some of the actors are more valuable than the
others .
The some of the important features are:-
 Excessive monetary growth is the principal source of inflation,
 Inflation has a decisive influence on the balance of payment,
 Changes in interest rates,
 Changes in balance of payment result in a change in the demand/supply

relation of the currency involved and
 Increase in the inflation result in hardening of rates.
The following aspects of market behaviour should be noted while making any attempt
to predict the course of exchange rate movements:-
 No single factor provides reliable bases.
 The relative influence of each factor varies from time to time
 The exchange rates response quickly to the changes in some of the variables
(eg:- interest rate changes)
 If the Central Bank/ Government has a significant intervention policy the task
of forecasting becomes primary one of forecasting the action and the timing of Central
Bank/Government.
 The existences of international speculators who move funds from one market
to another can significantly change the short term movements.
 The day - today influences can move exchange rates substantially away from
the major trend in currencies / movements for short term periods.
27
 Most of the future developments are foreseen by the market operators causing
anticipatory adjustments in the market rates. As the developments cast their shadow
forward, the market discounts expected changes and after the occurrence of the event
the currency may not always move really in the same direction.
FOREIGN EXCAHNGE EXPOSURE AND RISK MANAGEMENT:-
The foreign exchange risk management constitutes an integral part of all major
corporate decisions to manage foreign exchange exposure, given the global business
scenario in which business firms operate. Therefore, it is imperative that the corporate
firms are known of the various types of the foreign exchange risk they are exposed to as
well as are fully conversant with various important FERM techniques to deal with such
risks.
Business firms, having international business operation primarily encounter three types
of exposure:
 Transaction exposure
 Translation exposure
 Economic exposure
TRANSACTION EXPOSURE
Transaction exposure involves gain/loss arising out of the various types of transaction
that require settlement in foreign currency. The transactions may relate to the cross-
border trade in terms of import or export of goods, borrowings or lending in foreign
currencies ,domestic purchases and sale of goods and services of foreign subsidiaries
and the purchase of assets or takeover of the liability involving the foreign currency.
TRANSLATION EXPOSURE:
The translation exposure results from the need to translate the foreign assets/liabilities
into local currency at time of finalising accounts.
ECONOMIC EXPOSURE
28
This exposure implies the change in the value of a company that accompanies an un
anticipated changes in the exchange rates.
OPERTAING EXPOSURE:
The operating exposure has the impact on firm’s future operating revenue, costs, and
cash flows.
FOREIGN EXCHANGE RISK MANAGEMENT- EXTERNAL TECHNIQUES:-
The foreign exchange risk is defined as the possibility of loss to the business unit on
unfavourable movement in foreign exchange rates. Foreign exchange risk management
is the process through which the finance managers try to eliminate/reduce the impact of
unfavourable changes in the foreign exchanges rates to tolerable level.
The four major external techniques of the FERM also called as derivatives. The
derivatives are
• Forward contracts
• Currency futures
• Currency options
• swaps
FORWARD CONTRACTS:-
Forward exchange contracts are widely used by business firms to hedge against
volatile exchange rates. Business firms enter into forward contract to buy or sell foreign
currency in exchange of home currency at a specific future date, at a predetermined
exchange conversion rate. Forward exchange contracts enable the firm to cover the
foreign exchange risk. They are ideally suited for hedging transaction exposure typical
forward contract specifies the contract amount forward exchange rate, parties to the
contract, the specified date of delivery, name of foreign currencies involved in
exchange and terms and conditions for cancellation.
Execution of forward contracts in foreign exchange market:-
A customer under forward exchange contract knows in advance the time and amount of
foreign exchange to be delivered and the customer is bound by this agreement. There
should not be any variation and on the due date of the forward contract the customer
29
will either deliver or take delivery of the fixed sum of foreign exchange agreed upon.
But, in practice, quite often the delivery under a forward contract may take place before
or after the due date, or delivery of foreign exchange may not take place at all. The
bank generally agrees to these variations provided the customer agrees to bear the loss,
if any, that the bank may have to sustain on account of the variation.
Though the delivery or take delivery of a fixed sum of foreign exchange under a
forward contract has to take place at the agreed time, quite often this does not happen
and it may either take place before or after the due date agreed upon. However, the
bank generally agrees to these variations provided the customer bears the loss if any on
account of this variation.
Based on the circumstances, the customer may end up in any of the following ways:
1. Delivery on the due date.

2. Early delivery.
3. Late delivery.
4. Cancellation on the due date.
5. Early cancellation.
6. Late cancellation.
7. Extension on the due date.
8. Early extension.
9. Late extension.
As per the Rule 8 of FEDAI, a request for delivery or cancellation or extension of the
forward contract should be made by the customer on or before its maturity date.
Otherwise a forward contract which remains unutilized after the due date becomes an
overdue contract. Rule 8 of FEDAI stipulates that banks shall levy a minimum charge
of Rs. 100 for every request from a merchant for early delivery, extension or
cancellation of a forward contract. This is in addition to recovery of actual loss incurred
by the bank caused by these changes.
Delivery on Due Date:
30
This is the situation envisaged when the forward contract was entered into. When the
foreign exchange is delivered on the due date, the rate applied for the transaction would
be the rate originally agreed, irrespective of the spot rate prevailing.
Early Delivery:
When a customer requests early delivery of a forward contract, i.e., delivery before its
due date, the bank may accede to the request provided the customer agrees to bear the
loss, if any, that may accrue to the bank.
Cancellation/Extension of forward contract:
The customer is having the right to cancel a forward contract at any time during the
currency of the contract. The cancellation is governed by Rule 8 of the FEDAI. The
difference between the contracted rate and the rate at which the cancellation is done
shall be recovered or paid to the customer, if the cancellation is at the request of the
customer. Exchange difference not exceeding Rs.50 shall be ignored. The spot rate is to
be applied for cancellation of the forward contract on due date. The forward rate is to
be applied for cancellation before due date. In the absence of any instruction from the
customer, contracts which have matured shall on the 15th day from the date of maturity
be automatically cancelled. If the 15th day falls on a holiday or Saturday the
cancellation will be done on the next succeeding working day. The customer is liable
for recovery of cancellation charges and in no case the gain is passed on to the
customer since the cancellation is done on account of customer‘s default. The customer
may approach the bank for cancellation when the underlying transaction becomes
infractions, or for any other reason he wishes not to execute the forward contract. If the
underlying transaction is likely to take place on a day subsequent to the maturity of the
forward contract already booked, he may seek extension in the due date of the contract.
Such requests for cancellations or extension can be made by the customer on or before
the maturity of the forward contract.
Cancellation of Forward Contract on Due date:
31
When a forward purchase contract is cancelled on the due date it is taken that the bank
purchases at the rate originally agreed and sells the same back to the customer at the
ready TT rate. The difference between these two rates is recovered from/paid to the
customer. If the purchase rate under the original forward contract is higher than the
ready T.T selling rate the difference is payable to the customer. If it is lower, the
difference is recoverable from the customer. The amounts involved in purchase and sale
of foreign currency are not passed through the customer‘s account. Only the difference
is recovered/paid by way of debit/credit to the customer‘s account. In the same way
when a forward sale contract is cancelled it is treated as if the bank sells at the rate
originally agreed and buys back at the ready T.T buying rate. The difference between
these two rates is recovered from/paid to the customer.
Early Cancellation of a Forward Contract:
Sometimes the request for cancellation of a forward purchase contract may come from
a customer before the due date. When such requests come from the customer, it would
be cancelled at the forward selling rate prevailing on the date of cancellation, the due
date of this sale contract to synchronize with the due date of the original forward
purchase contract. On the other hand if a forward sale contract is cancelled earlier than
the due date, cancellation would be done at the forward purchase rate prevailing on that
day with due date of the original forward sale contract.
Extension on Due date:
An exporter finds that he is not able to export on the due date but expects to do so in
about two months. An importer is unable to pay on the due date but is confident of
making payment a month later. In both these cases they may approach their bank with
whom they have entered into forward contracts to postpone the due date of the contract.
Such postponement of the date of delivery under a forward contract is known as the
extension of forward contract. The earlier practice was to extend the contract at the
original rate quoted to the customer and recover from him charges for extension. The
reserve bank has directed that, with effect from16.1.95 when a forward contract is
sought to be extended, it shall be cancelled and rebooked for the new delivery period at
the prevailing exchange rates. FEDAI has clarified that it would not be necessary to
load exchange margins when both the cancellation and re-booking of forwards
32
contracts are undertaken simultaneously. However it is observed that banks do include
margin for cancellation and rebooking as in any other case. Further only a flat charge of
Rs.100 (minimum) should be recovered and not Rs.250 as in the case of booking a new
contract.
Overdue Forward Contracts:
As we have already seen, the customer has the right to utilize or cancel or extend the
forward contract on or before its due date. No such right exists after the expiry of the
contract. FEDAI Rule 8 provides that a forward contract which remains overdue with
any instructions from the customer concerned on or before its due date shall on the 15th
day from the date of maturity be automatically cancelled by the bank. The customer
remains liable for the exchange difference arising there from but if it results in profit it
need not be passed on to the customer. In case of delivery subsequent to automatic
cancellation the appropriate current rate prevailing on such delivery shall be applied.
Roll over Forward Contracts:
When deferred payment transactions of imports/exports takes place, the repayment of

the installment and interests on foreign currency loans by the customer requires long
term forward cover where the period extends beyond six months. The bank may enter
into forward contract for long terms provided there is suitable cover is available in the
market. However the cover is made available on roll over basis in which cases the
initial contract may be made for a period of six months and subsequently each deferred
installments for the outstanding balance of forward contract by extending for further
periods of six months each. For these transactions the rules and charges for cancellation
/ extension of long term forward contracts are similar to those of other forward
contracts.
Interbank Deals:
Foreign exchange transactions involve transaction by a customer with the bank while
interbank deals refer to purchase and sale of foreign exchange between banks. In other
words, it refers to the foreign exchange dealings of a bank in interbank market.
33
Cover Deals:
The banks deal with foreign exchange on behalf of its customers. Purchase and sale of
foreign currency in the market undertaken to acquire or dispose of foreign exchange
required or acquired as a consequence of its dealings with its customers is known as the
‗cover deal‘. In this way that is through cover deal the bank gets insured against any
fluctuation in the exchange rates. While quoting a rate to the customer the bank is
guided by interbank rate to which it adds or deducts its margin, and arrives at the rate it
quotes to the customer. For example, if it is buying dollar from the customer special it
takes interbank buying rate, deducts its exchange margin and quotes the rate. This
exercise is done on the assumption that immediately on purchase from customer the
bank would sell the foreign exchange to interbank market at market buying rate.
Foreign currency is considered as peculiar commodity with wide fluctuations price, the
bank would like to sell immediately whatever it purchases and whenever it sells, it
immediately tries to purchase so that it meets it is commitment. The main reason for
this is that the bank wants to reduce exchange risk it faces to the minimum. Otherwise,
any adverse change in the rate would affect its profits. In the case of spot deals the
transaction is quite simple. If the bank purchased any foreign exchange, it would try to
find another customer to whom it can sell this and thus books profit. In this process the
profit would be the maximum because both buying and selling rates are determined by
the bank and the margin between the rates is the maximum. If it cannot find another
customer its sells in interbank market where the rate is determined by the market
conditions and the margin is narrower here.
CURRENCY FUTURES:-
A future contract is a standardised agreement to buy or sell a specified amount of

foreign exchange in future at some future date. Futures being standardised contract in
nature are traded on an organized exchange the clearing house of the exchange operates
as a link between the two parities of the contract, namely the buyer and the seller.
CURRENCY OPTIONS:-
Currency option is a financial instrument that provides its holder a right but no
obligations to buy or sell a pre-specified amount of a foreign currency at a pre-
34
determined rate in the future. While the buyer of an option wants to avoid the risk of
adverse changes in exchange rates, the seller of the option is prepared to assume the
risk. Options are of two types namely, call option and put option.
Call option:
In a call option the holder has the right to buy/call a specific currency at a specific price
on a specific maturity date or within a specified period of time the holder of the option
is under no obligation to buy the currency. Such an option is to be exercised only when
the actual price in the forex market, at the time of excising option is more than the price
specified in call option contract.
Put option:
A put option confers the right but no obligation to sell a specified amount of currency at
a pre – fixed price on or up to a specified date. Put option will be exercised when the
actual exchange rate on the date of maturity is lower than the rate specified in the put
option contract.
SWAPS:-
Swaps are exchange of debt obligations between two parties. Currency swaps are
arranged between two parties through bank .swaps are not financing instruments. they
comfort the parties involved not only in the terms of the desired currency involved in
the debt financing but also provides logistics conveniences in making specifies
payments of interest. Swaps are of two types interest swaps and currency swaps.
35
CHAPTER V
ANALYSIS AND INTERPRETATION

DATE BILL FORW DATE OF SPOT DIFFER BENEFITS
AMOUNT ARD UTILIZAT RATE ENCE IN INR
IN USD BOOK ION ON THE IN THE
ED UTILIA RATES
RATE TION
DATE
03.06.09 121604.90 47.04 01.07.09 48.24 1.20 145925.90
04.06.09 344066.80 47.06 29.06.09 48.34 1.28 442125.80
07.06.09 494879.90 47.24 17.07.09 48.92 1.68 831398.20
08.06.09 264492.70 47.06 30.06.09 48.06 1.00 264492.70
05.10.09 131959.80 47.65 27.10.09 47.10 -0.55 -71918.10*
Net 1612025.00
notional
gain#
TABLE:-5.1.1
Benefits gained by M/s Jayajothi Textile Mill (Pvt) Ltd, Aruppukottai during the
period 2009-2010 through one month forward contract .
36
(* all these contracts were cancelled by paying bank charges #actual
position if contract not
cancelled).
INFERENCE:-
The company gained an amount of Rs.16,83,942.60 due to favourable

exchange rate and incurred a notional loss of Rs.71,918.10 due to unfavourable
position. The net gain was Rs. 1612025.00 due to forward contract.
INTERPRETATION:-
With respect to the transaction dated 03.06.09, if the company hadn’t

optioned forward booking facility the cost of the imported commodity in terms of
Indian Rs would have been Rs.58,66,177.00. The currency exchange risk was hedged
and company paid an amount of Rs.57,20,252.00 gaining an amount of
Rs.1,45,925.00.like wise the company incurred lesser expenses for the import
transactions, taking advantage of the forward booking facility provided by the bank on
the other hand for the transaction dated 5.10.09 the company had to pay higher cost
since the exchange rate was unfavourable generally the company would have preferred
to cancel the contract and cover the loss.
37
CHART: - 5.1.1(A)
38
INFERENCE:-
From above chart we infer that irrespective of the period, the forward rates are
favourable for
importer.
TABLE:- 5.1.2
Benefits gained byM/s Jayajothi textile mill (Pvt) Ltd, Aruppukottai, during the
period 2009-2010 for two months forward contract.
39
DATE BILL FORW DATE SPOT DIFFER
AMOUN ARD OF RATE ON ENCE BENEFITS
T IN BOOK UTILIZ THE IN THE IN INR
USD ED ATION UTLIATI RATES
RATE ON DATE
03.06.09 274062.8 47.48 24.08.09 48.65 1.17 322023.7
03.06.09 194470 47.69 09.11.09 46.75 0.94 181829.5

03.06.09 256425 47.80 02.12.09 46.41 -1.39 -356431*
03.06.09 236954 47.80 02.12.09 46.41 -1.39 -329366*
06.10.09 314537 47.55 10.12.09 46.85 -0.70 -220176*
06.10.09 222815.6 47.50 07.12.09 46.68 -0.82 -182709*
06.10.09 299949 47.55 10.12.09 47.85 0.30 91984.36
06.10.09 310915 47.50 07.12.09 46.68 -0.82 -254950*
Net 747794.00
notional
loss#

position if contracts are not cancelled).
40
INFERENCE:-
The company gained an amount of Rs.5,95,837.56 due to forward

booking and incurred a notional loss of Rs.13,43,932.00 due to unfavourable market
position.
INTERPRETATION:-
Since, the company availed forward contract facility the company paid a lesser
money towards the cost of the commodity. For example the transaction dated 3.6.09
instead of paying Rs.1,33,33,155.22 the company paid only Rs.1,30,12,501.74.on the
other hand when the currency exchange rate turned unfavourable the company
cancelled the forward contract, incurring a nominal expenses towards bank charges.
41
CHART:- 5.1.2(B)
INFERENCE:-
favourable for importer.
42
DATE BILL FORWARD DATE SPOT DIFFEREN
AMOUNT BOOKED OF RATE ON CE IN THE BENEFITS
IN USD RATE UTILIZAT THE RATES IN INR
ION UTLIATI
ON DATE
02.04.09 300000 50.42 06.04.09 50.17 -0.25 -75000*
02.04.09 300000 50.48 06.04.09 50.17 -0.31 -93000*

02.04.09 200000 50.43 06.04.09 50.17 -0.26 -52000*
03.04.09 875000 50.34 03.04.09 50.42 -0.08 -70000*
10.09.09 200000 48.57 01.10.09 48 -0.57 -114000*
10.09.0 300000 48.63 01.10.09 48 -0.63 -189000*
9
15.09.09 200000 48.81 05.10.09 48 -0.81 -162000*
16.09.09 412700 48.69 01.10.09 47.79 -0.9 -371430*
16.09.09 39400 48.62 01.10.09 48 -0.62 -24428*
Net notional 1150858.0
loss# 0
TABLE:- 5.1.3
Benefits gained by M/s Uma Shankar Traders Erode, during the period 2009-
2010 through one month forward contract.
(* all these contracts were cancelled by paying bank charges #actual position if
contracts are not cancelled).
INFERENCE:-
The company incurred a notional loss of Rs.1150858.00.
INTERPRETATION:-
43
The unfavourable exchange rate compelled the company cancel the contract
due to market fluctuation.
CHART:- 5.1.3(C)
INFERENCE:-
44
TABLE:- 5.1.4
2010 through two months forward contract.
DATE BILL FORW DATE OF SPOT DIFFEREN

AMOU ARD UTILIZAT RATE ON CE IN THE BENEFITS
NT IN BOOK ION THE RATES IN INR
USD ED UTLIATI
RATE ON DATE
18.05.09 500000 48.61 06.07.09 48.27 -0.33 -167500*
18.05.09 500000 48.35 24.07.09 48.57 0.22 110000
18.05.09 500000 48.18 24.07.09 48.57 0.39 195000
19.05.09 200000 48.05 24.07.09 48.57 0.52 104000
19.05.09 270600 47.86 24.07.09 48.57 -0.29 -78474*
19.05.09 119600 47.86 06.07.09 48.39 0.53 63388
04.08.09 110010 47.85 05.10.09 46.96 -0.89 -97908.9*
05.08.09 200000 48.02 01.10.09 47.79 -0.23 -46000*
10.08.09 500000 48.05 01.10.09 46.96 -1.09 -545000*
16.09.09 525000 48.67 06.11.09 48 -0.67 -351750*
07.10.09 500000 47.21 09.01.10 48.95 1.74 870000
07.10.09 700000 47.07 07.01.10 48.95 1.88 1316000
06.01.10 500000 46.43 25.03.10 44.77 -1.66 -830000*
06.01.10 500000 46.36 25.03.10 46.8 0.44 220000

06.01.10 500000 46.29 25.03.10 46.8 0.51 225000
07.01.10 500000 46.1 25.03.10 46.8 0.7 350000
07.01.10 998400 46.22 04.05.10 44.75 -1.47 -1467648*
07.01.10 322300 46.28 17.05.10 44.79 -1.49 -480227*
07.01.10 200000 46.27 17.05.10 45.9 -0.37 -74000*

07.01.10 5687708 45.96 25.03.10 46.8 0.84 47771503
Net notional 47086383.00
gain#
45
INFERENCE:-
The company gained an amount of Rs.5,12,24,891.00 due to forward

booking and incurred a notional loss of due to unfavourable market position. The net
gain was Rs.47086383 due to forward contract.
INTERPRETATION:-
The forward contract facility enabled the company to import the commodity at
a lesser cost. For example the transaction dated 18.05.09, if the company hadn’t taken a
forward cover booking they might have paid Rs.2,42,85,00.00 but the company paid
only Rs.2,41,7500.00.on the other hand when the currency exchange rate turned
unfavourable the company cancelled the forward contract, incurring a nominal
expenses towards bank charges
46
CHART:- 5.1.4(D)
INFERENCE:-
47
TABLE:- 5.1.5
2010 through three months forward contract.
DATE BILL FORWA DATE OF SPOT DIFFERE

AMOU RD UTILIZAT RATE NCE IN BENIFIT
NT IN BOOKE ION ON THE THE S IN INR
USD D RATE UTILIA RATES

TION
DATE
04.08.09 300000 47.92 06.11.09 46.96 -0.96 -288000*
04.08.09 200000 48.06 06.11.09 46.96 -1.1 -220000*
05.08.09 200000 48 06.11.09 48 - -
07.10.09 300000 47.1 09.01.10 45.96 -1.14 -342000*
08.10.09 500000 46.68 19.04.10 47.29 0.61 305000

Net 5,45,000
notional
loss#

INFERENCE:-
48
The company gained an amount of Rs.305000.00 due to forward
booking and incurred a notional loss of Rs.850000 due to unfavourable market position.
The net loss was Rs.5,45,000 due to forward contract.
INTERPRETATION:-
a lesser cost. For example the transaction dated, 08.10.09 if the company hadn’t taken a
forward cover booking they might have paid Rs.23645000 but the company paid
Rs.23,340,000 only .when the currency exchange rate turned unfavourable the company
CHART:- 5.1.5(E)
INFERENCE:-
49
TABLE:- 5.1.6
2010 through six months forward contract.
DATE BILL FORWA DATE OF SPOT DIFFERE

AMOU RD UTILIZAT RATE ON NCE IN BENIFITS
NT IN BOOKE ION THE THE IN INR
USD D RATE UTLIATI RATES
ON DATE
21.05.09 500000 48.08 06.11.09 46.96 -1.12 -560000*
21.05.09 100000 48.07 06.11.09 46.96 -1.11 -111000*
22.05.09 100000 47.88 06.11.09 46.96 -0.92 -92000*
Net 671000.00
notional
loss
50
INFERENCE:-
The company incurred a notional loss of Rs.671000.
INTERPRETATION:-
CHART:- 5.1.6(F)
51
INFERENCE:-
TABLE:- 5.1.7
Benefits gained by M/s KPS oils, Erode, during the period 2009-2010 through one
month forward contract.
52
DIFFER
BILL FORWARD ENCE
AMOUN BOOKED DATE OF SPOT IN BENIFITS
DATE T IN USD RATE UTILIZTAION RATE RATES IN INR
06.04.0
50.06
9 500000 49.76 05.05.09 0.3 150000
06.04.0
9 200000 49.76 05.05.09 50.14 0.38 76000
09.04.0
9 200000 49.76 05.05.09 50.15 0.39 78000
09.04.0
9 100000 49.76 05.05.09 50.05 0.29 29000
13.04.0
9 300000 49.99 05.05.09 49.99 0.23 69000
13.04.0
9 100000 49.76 05.05.09 49.97 0.21 21000
13.04.0
9 100000 49.76 05.05.09 50.03 0.27 27000
16.04.0
9 218000 49.76 05.05.09 49.55 0.21 45780
16.09.0
9 100000 46.96 06.11.09 48.49 1.53 153000
17.09.0
9 1460800 46.68 23.10.09 48.29 1.61 2351888
08.10.0
9 25968 46.43 23.10.09 46.43 0.25 6492
06.11.0
103000
9 100000 46.12 20.01.10 47.15 1.03
Net gain 3110160.00
INFERENCE:-
The company gained an amount of Rs.3110160 through forward contract.
INTERPRETATION:-
53
forward cover booking they might have paid Rs.25030000 but the company paid
Rs.24880000only.
CHART:- 5.1.7(G)
54
INFERENCE:-
TABLE:- 5.1.8
55
Benefits gained by M/s KPS oils Erode, during the period 2009-2010 through two
months forward contract.
DIFFER
BILL FORWARD ENCE IN
AMOUN BOOKED DATE OF SPOT THE BENIFITS
DATE T IN USD RATE UTILIZTAION RATE RATES IN INR
06.11.0
9 200000 47.13 20.01.10 46.12 -1.01 -202000*
09.11.0
9 500000 46.88 20.01.10 46.12 -0.76 -380000*
09.11.0
9 300000 46.8 20.01.10 46.12 -0.68 -204000*
09.11.0
9 448700 46.73 20.01.10 46.12 -0.61 -273707*
Net 1059707
notional
loss #
INFERENCE:-
The company incurred a notional loss of Rs.1059707.00.
56
INTERPRETATION:-
CHART:- 5.1.8(H)
INFERENCE:-
57
TABLE:- 5.1.9
Benefits gained by M/s Subramaniam Bro’s Pollachi during the period 2009-
2010, through three months forward contract.
SPOT RATE
BILL FORWARD ON THE DIFFERENCE
AMOUN BOOKED DATE OF UTILIZTIO IN THE BENIFITS
DATE T IN USD RATE UTILIZATION N RATES IN INR
11.03.1
0 337476.05 44.71 11.03.10 45.65 0.94 317227.49
29.03.1
0 197000.00 44.21 29.03.10 45.25 1.04 204880.00
Net gain 522107.49
INFERENCE:-
The company gained an amount of Rs.522107.49 through forward

contract.
INTERPRETATION:-
forward cover booking they might have paid Rs.15405781.68 but the company paid Rs.
15088554.19 only.
58
CHART:- 5.1.9(I)
INFERENCE:-
59
BILL SPOT
AMOUN FORWARD RATE OF
T IN BOOKED DATE OF UTILIZTIO DIFFERENCE IN BENIFITS
DATE USD RATE UTILIZATION N THE RATES IN INR
08.03.10 73735.75 46.04 08.03.10 45.62 -0.42 -30969
11.03.10 60891.73 46.08 11.03.10 45.65 -0.43 -26183.4
26.03.10 142109.8 45.9 26.03.10 45.57 -0.33 -46896.2
TABLE:- 5.1.10
Benefits gained by M/s Agni Steels, Erode, during the period 2009-2010 through
three months forward contract.
INFERENCE:-
The company incurred a notional loss of Rs. 104049
INTERPRETATION:-
60
CHART:- 5.1.10(J)
INFERENCE:-
61
TABLE:- 5.1.11
Benefits gained by M/s Agni Steels, Erode, during the period 2009-2010, through
one month forward contract.
BILL
AMOUN FORWARD SPOT RATE DIFFERENCE
T IN BOOKED DATE OF ON THE IN THE BENIFITS
DATE USD RATE UTILIZATION UTILIZTION RATES IN INR
08.04.0
9 4987.31 48.06 30.06.09 50.78 2.72 13565.5
08.04.09 33934.8 47.34 22.05.09 50.78 3.44 116736
18.05.0
9 79560 48.34 29.06.09 48.24 0.1 7956
Net gain 138257.50
INFERENCE:-
The company gained an amount of Rs. 138257.50 through forward

contract.
INTERPRETATION:-
a lesser cost. For example the transaction dated 08.04.09, if the company hadn’t taken a
forward cover booking they might have paid Rs.253255.60 but the company paid
Rs.239690.11only.
62
CHART:- 5.1.11(H)
INFERENCE:-
63
TABLE:- 5.1.12
Benefits gained by M/s Uma Shankar Traders Erode during the period 2008-2009,
through one month forward contract.
64
position if contracts are not
cancelled).
SPOT
BILL RATE ON
AMOUN FORWARD THE
T IN BOOKED DATE OF UTILIZTIO DIFFERNECE IN BENIFITS
DATE USD RATE UTILIZATION N THE RATES IN INR
05.11.0
8 500000 47.87 23.12.08 48.84 0.97 485000
10.11.0
8 300000 47.65 23.12.08 48.84 1.19 357000
11.11.0
8 200000 48.06 23.12.08 48.84 0.78 156000
08.12.08 200000 49.56 31.01.09 49.26 -0.3 -60000*

11.12.0
8 300000 48.84 31.01.09 49.26 0.42 126000
11.12.0
8 300000 48.74 31.01.09 49.26 0.52 156000
11.12.08 300000 48.61 31.01.09 49.26 0.65 195000

12.12.0
8 330000 48.59 31.01.09 49.26 0.67 221100
Net gain 1636100
INFERENCE:-
The company gained an amount of Rs.1576100 due to forward booking

and incurred a notional loss of Rs.60000 due to unfavourable market position. The net
gain was Rs.1636100 due to forward contract.
INTERPRETATION:-
forward cover booking they might have paid Rs.2,44,20,000 but the company paid Rs.
65
2,39,35,000 only .when the currency exchange rate turned unfavourable the company
66
CHART:- 5.1.12(L)
INFERENCE:-
67
TABLE:- 5.1.13
2009, through three months forward contract.
SPOT RATE
BILL FORWARD ON THE DIFFERNECE
AMOUNT BOOKED DATE OF UTILIZTIO IN THE BENIFITS
DATE IN USD RATE UTILIZATION N RATES IN INR
17.12.0
8 500000 48.37 06.04.09 50.17 1.8 900000
Net gain 90000
0.00
INFERENCE:-
The company gained an amount of Rs.900000.00 t hrough forward

contract.
INTERPRETATION:-
a lesser cost. For example the transaction dated17.12.08, if the company hadn’t taken a
forward cover booking they might have paid Rs.2,50,85,000 but the company paid Rs.
2,41,85,000 only.
68
CHART:- 5.1.13(M)
INFERENCE:-
69
TABLE:- 5.1.14
Benefits gained by M/s KPS oils, Erode, during the period 2008-2009 , through one
month forward contract.
BILL
AMOUN FORWARD
T IN BOOKED DATE OF SPOT DIFFERENCE IN BENIFITS
DATE USD RATE UTILIZATION RATE THE RATES IN INR
17.12.0
8 500000 48.37 05.05.09 48.76 0.39 195000
Net gain 195000.00
INFERENCE:-
The company gained an amount of Rs. 195000.00 through forward

contract.
INTERPRETATION:-
forward cover booking they might have paid Rs.2,43,80,000.00 but the company paid
Rs. 2,41,85,000.00 only.
70
CHART:- 5.1.14(N)
INFERENCE:-
71
TABLE:- 5.1.15
Benefits gained by M/sAgni Steels, Erode, during the period 2008-2009 through
two months forward contract.
BILL FORWARD DIFFERENCE

AMOUNT BOOKED DATE OF SPOT IN THE BENIFITS
DATE IN USD RATE UTILIZATION RATE RATES IN INR
17.03.09 56654.00 48.76 05.05.09 51.78 3.02 171095
19.03.09 50558.04 48.76 05.05.09 51.36 2.6 131451
Net gain 302546.00
INFERENCE:-
The company gained an amount of Rs302546.00 through forward

contract.
INTERPRETATION:-
forward cover booking they might have paid Rs.29,33,544.00 but the company paid Rs.
27,62,449.00 only.
72
CHART:- 5.1.15(O)
INFERENCE:-
73
TABLE:- 5.1.16
Benefits gained by M/s Subramaniam Bro’s Pollachi, during the period 2007-
2008 through three months forward contract.
BILL
AMOUN FORWARD
T IN BOOKED DATE OF SPOT DIFFERENCE IN BENIFITS IN
DATE USD RATE UTILZATION RATE THE RATES INR
11.01.0
8 1011000 40.67 21.03.08 43.12 2.45 2476950
11.01.0
8 136200 40.67 21.03.08 42.71 2.04 277848
11.01.0
8 376000 40.65 21.03.08 41.12 0.47 176720
Net Gain 2931518.00
INFERENCE:-
The company gained an amount of Rs 2931518.00through forward

contract.
INTERPRETATION:-
a lesser cost. For example the transaction dated11.01.08.00, if the company hadn’t
taken a forward cover booking they might have paid Rs.4,35,94,320.00 but the
company paid Rs. 4,11,17,370.00 only.
74
CHART:- 5.1.16(P)
INFERENCE:-
75
TABLE:-5.2.1
Details of forward contract cancelled by M/s Jayajothi textile mill (Pvt) Ltd,
during the period 2009-2010 for one month.
SPOT RATE
BILL ON THE DAY
AMOUN FORWARD OF
T IN BOOKED CANCELLATI HANDLING CANCELLATION
DATE USD RATE ON CHARGES CHARGES
08.03.1
0 73735.8 46.04 45.62 9795 552
11.03.1
0 60891.7 46.08 45.65 8496 552
26.03.1
0 142110 45.90 45.57 16695 552
INFERENCE:-
The company cancelled the forward contract to avoid incurring loss.
INTERPRETATION:-
For transaction dated 08.03.10 if the company didn’t opt for cancellation of
the contract it had to pay Rs. 46.04 per Dollar, where as in the market a Dollar was
available at Rs.45.62. Due to unfavourable contract, the company cancels the existing
forward contract and may opt for talking a fresh contract for minimising its loss.
76
TABLE:-5.2.2
Details of forward contract cancelled by M/s Jayajothi textile mill (Pvt) Ltd,
during the period 2009-2010 for two months.
BILL SPOT RATE ON

AMOUN FORWARD THE DAY OF HANDLING CANCELLATION
DATE T IN USD RATES CANCELLATION CHARGES CHARGES
03.06.0 256425 47.8 46.41 552
9 29345.2
03.06.0 236954 47.8 46.41 552
9 27292.04
06.10.0 314537 47.55 46.85 552
9 35299.45
06.10.0 222816 47.5 46.68 552
9 25653.73
06.10.0 310915 47.5 46.68 552
9 34885.23
INFERENCE:-
INTERPRETATION:-
For transaction dated 03.06.09 if the company didn’t opt for cancellation of the
contract it had to pay Rs. 47.80 per Dollar, where as in the market a Dollar was
available at Rs.46.41. Due to unfavourable contract, the company cancels the existing
77
TABLE:- 5.2.3
Details of forward contract cancelled by M/s Uma Shankar Traders, during the
period 2009-2010 for one month.
SPOT RATE CANCELLATI

BILL FORWA ON THE DAY HANDLI ON
AMOUN RD OF NG CHARGES
T IN BOOKE CANCELLATI CHARGE
DATE USD D RATE ON S
02.04.09 300000 50.42 50.17 35673.9 552
6
02.04.09 300000 50.48 50.17 35713.6 552
6
02.04.09 200000 50.43 50.17 24555.7 552
2
03.04.09 875000 50.34 50.42 99474.7 552
9
10.09.09 200000 48.57 48 55305.1 552
5
10.09.09 300000 48.63 48 23735.0 552
8
15.09.09 200000 48.81 48 23840.9 552
7
16.09.09 412700 48.69 47.79 46634.1 552
6
16.09.09 39400 48.62 48 6531.87 552
5
78
INFERENCE:-
INTERPRETATION:-
contract it had to pay Rs.50.42 per Dollar, in the market a Dollar is available at
Rs.50.17. Due to unfavourable contract, the company cancels the existing forward
contract and may opt for talking a fresh contract for minimising its loss.
TABLE:- 5.2.4
79
period 2009-2010 for two months.
DATE BILL FORWARD SPOT RATE ON CANCELLATIO

AMOUN BOOKED THE DAY OF HANDLING N
T IN USD RATE CANCELLATION CHARGES CHARGES
18.05.0 500000 48.61 48.27 552
9 55922.83
19.05.0 270600 47.86 48.57 552
9 30875.72
04.08.0 110010 47.85 46.96 552
9 13918.34
05.08.0 200000 48.02 47.79 552
9 23492.42
10.08.0 500000 48.05 46.96 552
9 55305.15
16.09.0 525000 48.67 48 552
9 58673.16
06.01.1 500000 46.43 44.77 552
0 53518.29
07.01.1 998400 46.22 44.75 552
0 104104.2
07.01.1 322300 46.28 44.79 552
0 35210.79
07.01.1 200000 46.27 45.9 552
0 22720.32
INFERENCE:-
INTERPRETATION:-
For transaction dated 18.05.09if the company didn’t opt for cancellation of the
contract it had to pay Rs.48.61per Dollar, in the market a Dollar is available at
80
TABLE:- 5.2.5
period 2009-2010 for three months.
DATE BILL FORWARD SPOT RATE ON

AMOUNT BOOKED THE DAY OF HANDLING CANCELLATION
IN USD RATE CANCELLATION CHARGES CHARGES
04.08.09 300000 47.92 46.96 34019.46 552
200000 48.06 46.96 23510.07 552
05.08.09 200000 48 48 23483.6 552
07.10.09 300000 47.1 45.96 33476.78 552
INFERENCE:-
INTERPRETATION:-
contract it had to pay Rs.47.92 per Dollar, in the market a Dollar is available at
81
TABLE:- 5.2.6
period 2009-2010 for six months.
DATE BILL FORWARD SPOT RATE ON

AMOUN BOOKED THE DAY OF HANDLING CANCELLATION
T IN USD RATE CANCELLATION CHARGES CHARGES
21.05.0 500000 48.08 46.96 552
9 55338.24
21.05.0 100000 48.07 46.96 552
9 12910.24
22.05.0 100000 47.88 46.96 552
9 12868.33
INFERENCE:-
INTERPRETATION:-
82
TABLE:- 5.2.7
Details of forward contract cancelled by M/s KPS oils, during the period 2009-
2010 for two months.
BILL FORWARD SPOT RATE ON

DATE IN USD RATE CANCELLATION CHARGES CHARGES
06.11.09 200000 47.13 46.12 23099.76 552
09.11.09 500000 46.88 46.12 54014.64 552
09.11.09 300000 46.8 46.12 33278.24 552
09.11.09 448700 46.73 46.12 48560.86 552
INFERENCE:-
INTERPRETATION:-
For transaction dated 06.11.09if the company didn’t opt for cancellation of the
83
TABLE:- 5.2.8
Details of three months forward contract cancelled by M/sAgni Steels, during the
period 2009-2010.

08.03.10 73735.8 46.04 45.62 9795 552
11.03.10 60891.7 46.08 45.65 8496 552
26.03.10 142110 45.9 45.57 16695 552
INFERENCE:-
INTERPRETATION:-
84
If the company didn’t opt for cancellation of the contract, pertaining to the
transaction dated 08.03.10 it had to pay Rs.46.04 per Dollar, in the market a Dollar is
available at Rs. 45.62. Due to unfavourable contract, the company cancels the existing
TABLE:- 5.2.9
Details of one month forward contract cancelled by M/s Uma Shankar Traders
Erode during the period 2008-2009.

08.12.08 200000 49.56 49.26 24171 522
INFERENCE:-
85
INTERPRETATION:-
If the company didn’t opt for cancellation of the contract, pertaining to the
transaction dated 08.12.08 it had to pay Rs 49.56 per Dollar, in the market a Dollar is
available at Rs. 49.26. Due to unfavourable contract, the company cancels the existing
TABLE:- 5.3.1
Forward Premium/Discount as an annualised deviation from the spot rate.

M/s Jayajothi textile mill (Pvt) Ltd, through forward booking, during the period
2009-2010.
SPOT
RATE ON
BILL FORWARD THE DAY
PERIOD OF AMOUN BOOKED OF FORWARD
DATE CONTRACT T IN USD RATE BOOKING PREMIUM/DISCOUNT
03.06.09 1 MONTH 121604.9 47.04 47.96 -23.019
03.06.09 1 MONTH 344066.8 47.06 47.96

-22.519
03.06.09 1 MONTH 494879.9 47.24 47.96
-18.015
86
03.06.09 1 MONTH 264492.7 47.06 47.96
-22.519
03.06.09 2 MONTH 274062.8 47.48 47.96
-6.005
05.10.09 1 MONTH 131959.8 47.65 47.79
-3.515
05.10.09 2MONTH 194470 47.69 47.79 -1.255
05.10.09 2MONTH 256425 47.8 47.79 0.1255
05.10.09 2MONTH 236954 47.8 47.79 0.1255
06.10.09 2MONTH 314537 47.55 47.29 3.2988
06.10.09 2MONTH 222815.6 47.5 47.29 2.6644
06.10.09 2MONTH 299949 47.55 47.29 3.2988
06.10.09 2MONTH 310915 47.5 47.29 2.6644
INFERENCE:-
The positive figure indicates the trading of dollar at a premium relative to the Indian
rupee and the negative figures indicate discount.
INTERPREATION:-
The premium on one country’s currency implies discount on another country’s

currency. For transaction dated 03.06.09, at one month forward, the USD is at discount
vis-a-vis the Indian Rupee, it obviously indicate that the Indian Rupee is at premium.
The importer can purchase USD at Rs.47.96, on the day of forward booking, the
company has to pay only Rs.47.24 per Dollar it indicate that the forward Dollar is less
expensive than spot Dollar. Hence, the dollar is said to be trading at discount relative to
Indian rupee.
87
TABLE:- 5.3.2
Forward Premium/Discount as an annualised deviation from the spot rate. M/s

Uma Shankar Traders, through forward booking, during the period 2009-2010.
SPOT
RATE ON
BILL FORWARD THE DAY
PERIOD OF AMOUNT BOOKED OF FORWARD
DATE CONTRACT IN USD RATE BOOKING PREMIUM/DISCOUNT
02.04.09 1 MONTH 300000 50.42 50.57
-3.559
02.04.09 1 MONTH 300000 50.48 50.57
-2.136
02.04.09 1 MONTH 200000 50.43 50.57
-3.322
03.04.09 1MONTH 875000 50.34 50.42 -1.904
18.05.09 2MONTH 500000 48.61 48.16 5.6063
18.05.09 2MONTH 500000 48.35 48.16 2.3671
18.05.09 2MONTH 500000 48.18 48.16 0.2492
19.05.09 2MONTH 200000 48.05 47.63 5.2908
19.05.09 2MONTH 270600 47.86 47.63 2.8973
88
19.05.09 2MONTH 119600 47.86 47.63 2.8973
21.05.09 6MONTH 500000 48.08 47.61 1.9744
21.05.09 6MONTH 100000 48.07 47.61 1.9324
22.05.09 6MONTH 100000 47.88 47.3 2.4524
04.08.09 3MONTH 300000 47.92 47.71 1.7606
04.08.09 3MONTH 200000 48.06 47.71 2.9344
04.08.09 2MONTH 110010 47.85 47.71 1.7606
05.08.09 2MONTH 200000 48.02 47.81 2.6354
05.08.09 3MONTH 200000 48 47.81 1.5896
10.08.09 2MONTH 500000 48.05 47.86 2.3819
10.09.09 1MONTH 200000 48.57 48.53 0.9891
10.09.09 1MONTH 300000 48.63 48.53 2.4727
15.09.09 1MONTH 200000 48.81 48.79 0.4919
16.09.09 1MONTH 412700 48.69 48.5 4.701
16.09.09 1 MONTH 39400 48.62 48.5
2.9691
16.09.09 2 MONTH 525000 48.67 48.5
2.1031
16.09.09 4 MONTH 281000 48.62 48.5
0.7423
07.10.09 3 MONTH 300000 47.1 46.86
2.0487
07.10.09 2 MONTH 500000 47.21 46.86

4.4814
07.10.09 2 MONTH 700000 47.07 46.86
2.6889
08.10.09 3 MONTH 500000 46.68 46.54
1.2033
06.01.10 2 MONTH 500000 46.43 46.27
2.0748
06.01.10 2 MONTH 500000 46.36 46.27
1.1671
06.01.10 2 MONTH 500000 46.29 46.27
0.2593
07.01.10 2 MONTH 500000 46.1 45.95
1.9587
07.01.10 2 MONTH 998400 46.22 45.95
3.5256
07.01.10 2 MONTH 322300 46.28 45.95
4.309
07.01.10 2 MONTH 200000 46.27 45.95
4.1785
07.01.10 2 MONTH 5687708 45.96 45.95
0.1306
INFERENCE:-
89
INTERPREATION:-

currency. For transaction dated 02.04.09 USD is at discount vis-a-vis the Indian Rupee,
it obviously indicate that the Indian Rupee is at premium vis-a –vis. The importer can
purchase USD at Rs.50.57 where as at one month forward booking the company has to
pay only Rs.50.42 per Dollar it indicate that the forward Dollar is less expensive than
spot Dollar. Hence, the dollar is said to be trading at discount relative to Indian rupee.
TABLE:- 5.3.3

M/s KPS oils, through forward booking, during the period 2009-2010.
90
SPOT
RATE ON
BILL FORWARD THE DAY FORWARD
PERIOD OF AMOUN BOOKED OF PREMIUM
DATE CONTRACT T IN USD RATE BOOKING /DISCOUNT
06.04.09 1 month 500000 49.76 50.12 -8.619
06.04.09 1 month 200000 49.76 50.12 -8.619
09.04.09 1 month 200000 49.76 50.17 -9.807
09.04.09 1 month 100000 49.76 50.17 -9.807
13.04.09 1 month 300000 49.76 50 -5.76
13.04.09 1month 100000 49.76 50 -5.76
13.04.09 1 month 100000 49.76 50 -5.76
16.04.09 1 month 218000 49.76 50 -5.76
16.09.09 1month 1000000 46.96 48.5 -38.103
17.09.09 1 month 1460800 46.68 48.21 -38.083
08.10.09 1month 25968 46.68 46.54 3.6098
06.11.09 1 month 1000000 46.12 46.96 -21.465
06.11.09 2month 200000 47.13 46.96 2.1721
09.11.09 2month 500000 46.88 46.61 3.4756
09.11.09 2month 300000 46.8 46.61 2.4458
09.11.09 2month 448700 46.73 46.61 1.5447
91
INFERENCE:-
INTERPREATION:-

92
TABLE:- 5.3.4

M/sAgni Steels, through forward booking , during the period 2009-2010.
SPOT
BILL RATE ON
AMOUN FORWARD THE DAY FORWARD
PERIOD OF T IN BOOKED OF PREMIUM/
DATE CONTRACT USD RATE BOOKING DISCOUNT
08.04.09 1 MONTH 4987.31 48.06 50.57 -59.561
08.04.09 1MONTH 33934.8 47.34 50.57 -76.646
18.05.09 1MONTH 79560 48.34 48.16 4.485
21.05.09 3 MONTH 30756.96 47.8 47.61 2.3945
08.03.10 3 MONTH 73735.75 46.04 45.57 3.0941
11.03.10 3MONTH 60891.73 46.08 45.65 2.8258
26.03.10 3MONTH 142109.8 45.9 45.21 4.5786
INFERENCE:-
INTERPREATION:-
93
TABLE:- 5.3.5

M/s Subramaniam Bro’s,through forward booking , during the period 2009-
2010.
SPOT
RATE ON
PERIOD BILL FORWARD THE DAY FORWARD
OF AMOUN BOOKED OF PREMIUM/
DATE CONTRACT T IN USD RATE BOOKING DISCOUNT
11.03.1
0 3MONTH 337476.1 44.71 44.45 2.3397
29.03.1
0 3MONTH 197000 44.21 44.12 0.816
INFERENCE:-
INTERPREATION:-

currency. For transaction dated 11.03.10 USD is at premium vis-a-vis the Indian Rupee,
94
it obviously indicate that the Indian Rupee is at discount vis-a –vis. The importer can
purchase USD at Rs. 44.45 where as at three month forward booking the company has
to pay only Rs 44.71per Dollar it indicate that the forward Dollar is more expensive
than spot Dollar. Hence, the dollar is said to be trading at premium relative to Indian
rupee.
SPOT
RATE ON
PERIOD OF AMOUNT BOOK OF PREMIUM/
DATE CONTRACT IN USD RATE BOOKING DISCOUNT
17.03.09 2MONTH 56654 51.78 52.12 -3.942746
19.03.09 2MONTH 50558.04 51.36 52.47 -12.96523
TABLE:- 5.3.6

M/sAgni Steels, through forward booking , during the period 2008-2009.
INFERENCE:-
95
INTERPREATION:-

purchase USD at Rs. 52.12 where as at two months forward booking the company has
to pay Rs 51.78 per Dollar it indicate that the forward Dollar is less expensive than spot
Dollar. Hence, the dollar is said to be trading at discount relative to Indian rupee.
TABLE:- 5.3.7

M/s KPS oils, through forward booking, during the period 2008-2009.
SPOT
BILL RATE ON
AMOUN FORWARD THE DAY FORWARD
PERIOD OF T IN BOOKED OF PREMIUM/
17.12.08 3MONTH 500000 48.37 49.21 -10.9423
96
INFERENCE:-
INTERPREATION:-

purchase USD at Rs. 49.21 where as at three months forward booking the company has
TABLE:- 5.3.8

M/s Uma Shankar Traders, through forward booking, during the period 2008-
2009.
97
SPOT
BILL RATE ON
PERIOD AMOUN FORWARD THE DAY FORWARD
OF T IN BOOKED OF PREMIUM/
05.11.08 1 MONTH 500000 47.87 48.12 -3.13
10.11.08 1 MONTH 300000 47.65 48.27 -7.80
11.11.08 1 MONTH 200000 48.06 48.31 -3.12
08.12.08 1 MONTH 200000 49.56 49.41 1.816
11.12.08 1 MONTH 300000 48.84 49.43 -7.24
11.12.08 1 MONTH 300000 48.74 49.45 -8.74
11.12.08 1 MONTH 300000 48.61 49.45 -10.36
12.12.08 1 MONTH 330000 48.59 49.32 -7.04
17.12.08 3MONTH 500000 48.37 48.74 -4.55
INFERENCE:-
INTERPREATION:-

98
purchase USD at Rs. 48.12 where as at three months forward booking the company has
TABLE:- 5.3.9

M/s Subramaniam Bro’s,through forward booking , during the period 2007-2008.
SPOT
RATE ON
PERIOD OF AMOUNT BOOKED OF PREMIUM/
DATE CONTRACT IN USD RATE BOOKING DISCOUNT
11.01.08 2MONTH 1011000 40.67 41.11 -6.49
11.01.08 2MONTH 136200 40.67 41.11 -6.49
11.01.08 2MONTH 376000 40.65 41.11 -6.78
INFERENCE:-
INTERPREATION:-
99
purchase USD at Rs.41.11 where as at two months forward booking the company has
to pay only Rs.40.67 per Dollar it indicate that the forward Dollar is less expensive than
TABLE:- 5.4.1
Expenses incurred by M/s Jayajothi textile mill (Pvt) Ltd, Aruppukottai, for
forward booking, during the pe riod 2009-2010.
100
DATE BILL FORWA BILL COMMISS SERVIC FOREX SWIFT EXPENS
AMOUN RD AMOUNT IN ION (RS) E TAX SERVIC CHARG ES (RS)
T IN USD BOOKED INR (RS) E ES (RS)
RATE CHARG
E (RS)
03.06.09 121604.9 47.04 5720294.5 11440.59 1178.381 100 2206 14924
344066.8 47.06 16191783.6 32383.57 3335.507 100 2206 38025
494879.9 47.24 23378126.5 46756.25 4815.894 100 2206 53878
264492.7 47.06 12447026.5 24894.05 2564.087 100 2206 29764
274062.8 47.48 13012501.7 26025.00 2680.575 100 2206 31011
05.10.09 131959.8 47.65 6287884.47 12575.77 1295.304 100 2206 16177
194470 47.69 9274274.3 18548.55 1910.501 100 2206 22765
256425 47.8 12257115 24514.23 2524.966 100 2206 29345
236954 47.8 11326401.2 22652.8 2333.239 100 2206 27292
06.10.09 314537 47.55 14956234.4 29912.47 3080.984 100 2206 35299
222815.6 47.5 10583741 21167.48 2180.251 100 2206 25653
299949 47.55 14262575 28525.15 2938.09 100 2206 33769
310915 47.5 14768462.5 29536.93 3042.303 100 2206 34885
3,92,792.
00
INFERENCE:-
The expenses incurred by the company towards bank charges for availing the forward
booking facility is Rs3,92,792.00. On an average this works out to 0.23% of total
import made by the company.
101
TABLE:- 5.4.2
Expenses incurred by M/s Uma Shankar Traders Erode, for forward booking,
during the period 2009-2010.
102
DATE BILL FORWAR BILL COMMIS SERVIC FORE SWIFT EXPEN
AMOU D AMOUN SION E TAX X CHARG SES
NT IN BOOKED T IN INR (RS) (RS) SERVI ES (RS) (RS)
USD RATE CE
CHAR
GE
(RS)
02.04. 30000 50.42 151260 3115.9
09 0 00 30252 56 100 2206 35673
30000 50.48 151440 3119.6
0 00 30288 64 100 2206 35713
20000 50.43 100860 2077.7
0 00 20172 16 100 2206 24555
03.04. 87500 50.34 440475 9073.7
09 0 00 88095 85 100 2206 99474
18.05. 50000 48.61 243050 5006.8
09 0 00 48610 3 100 2206 55922
50000 48.35 241750 4980.0
0 00 48350 5 100 2206 55636
50000 48.18 240900 4962.5
0 00 48180 4 100 2206 55448
19.05. 20000 48.05 961000 1979.6
09 0 0 19220 6 100 2206 23505
27060 47.86 129509 25901.8 2667.8
0 16 3 89 100 2206 30875
11960 47.86 572405 11448.1 1179.1
0 6 1 56 100 2206 14933
21.05. 50000 48.08 240400 4952.2
09 0 00 48080 4 100 2206 55338
10000 48.07 480700 990.24
0 0 9614 2 100 2206 12910
22.05. 10000 47.88 478800 986.32
09 0 0 9576 8 100 2206 12868
04.08. 30000 47.92 143760 2961.4
09 0 00 28752 56 100 2206 34019
20000 48.06 961200 1980.0
0 0 19224 72 100 2206 23510
11001 47.85 526397 10527.9 1084.3
0 8.5 6 8 100 2206 13918
05.08. 20000 48.02 960400 1978.4
09 0 0 19208 24 100 2206 23492
20000 48 960000
0 0 19200 1977.6 100 2206 23483
10.08. 50000 48.05 240250 4949.1
09 0 00 48050 5 100 2206 55305
10.09. 20000 48.57 971400 2001.0
09 0 0 19428 84 100 2206 23735
30000 48.63 145890103 3005.3
0 00 29178 34 100 2206 34489
15.09. 20000 48.81 976200 2010.9
09 0 0 19524 72 100 2206 23840
16.09.0 412700 48.6 2009436 40188.7 4139.43
9 9 3 3 9 100 2206 46634
39400 48.6 1915628 3831.25 394.619
2 6 4 100 2206 6531
525000 48.6 2555175 5263.66
7 0 51103.5 1 100 2206 58673
281000 48.6 1366222 27324.4 2814.41
2 0 4 7 100 2206 32444
07.10.0 300000 47.1 1413000
9 0 28260 2910.78 100 2206 33476
500000 47.2 2360500
1 0 47210 4862.63 100 2206 54378
700000 47.0 3294900 6787.49
7 0 65898 4 100 2206 74991
08.10.0 500000 46.6 2334000
9 8 0 46680 4808.04 100 2206 53794
06.01.1 500000 46.4 2321500
0 3 0 46430 4782.29 100 2206 53518
500000 46.3 2318000
6 0 46360 4775.08 100 2206 53441
500000 46.2 2314500
9 0 46290 4767.87 100 2206 53363
07.01.1 500000 46.1 2305000
0 0 46100 4748.3 100 2206 53154
998400 46.2 4614604 9506.08
2 8 92292.1 6 100 2206 104104
322300 46.2 1491604 29832.0 3072.70
8 4 9 5 100 2206 35210
200000 46.2 9254000 1906.32
7 18508 4 100 2206 22720
568770 45.9 2614070 522814. 53849.8
8 6 77 2 6 100 2206 578970
Total 208406
7
INFERENCE:-
booking facility is Rs. 2084067.00. On an average this works out to 0.23% of total
import made by the company.
104
TABLE:- 5.4.3
DATE BILL FORWA BILL COMMISSI SERVIC FOREX SWIFT EXPEN
Expenses incurred by M/s KPS Oils, for forward booking, during the period 2009-
AMOUN RD AMOUNT ON (RS) E TAX SERVIC CHARGE SES
T IN BOOKE IN INR (RS) E S (RS) (RS)
USD D RATE CHARG
E (RS)
06.04.09 500000 50.06 25030000 50060 5156.18 100 2206 57522
06.04.09 200000 50.14 10028000 20056 2065.768 100 2206 24427
09.04.09 200000 50.15 10030000 20060 2066.18 100 2206 24432
09.04.09 100000 50.05 5005000 10010 1031.03 100 2206 13347
13.04.09 300000 49.99 14997000 29994 3089.382 100 2206 35389
13.04.09 100000 49.97 4997000 9994 1029.382 100 2206 13329
13.04.09 100000 50.03 5003000 10006 1030.618 100 2206 13342
16.04.09 218000 49.55 10801900 21603.8 2225.191 100 2206 26134
16.09.09 1000000 48.49 48490000 96980 9988.94 100 2206 109274
17.09.09 1460800 48.29 70542032 141084.1 14531.66 100 2206 157921
1205694.2
08.10.09 25968 46.43 4 2411.388 248.373 100 2206 4965
06.11.09 1000000 47.15 47150000 94300 9712.9 100 2206 106318
06.11.09 200000 47.13 9426000 18852 1941.756 100 2206 23099
09.11.09 500000 46.88 23440000 46880 4828.64 100 2206 54014
09.11.09 300000 46.8 14040000 28080 2892.24 100 2206 33278
09.11.09 448700 46.73 20967751 41935.5 4319.357 100 2206 48560

105
Total 747671
INFERENCE:-
booking facility is Rs.747671.00. On an average this works out to 0.23% of total import
made by the company.
106
TABLE:- 5.4.4
Expenses incurred by M/S Agni steels, for forward booking, during the period
2009-2010.
DATE BILL FORW BILL FOREX

AMOUNT ARD AMOUNT SERVIC SWIFT
IN USD BOOK IN INR E CHAR
ED COMMISSI SERVICE CHARG GES EXPENSE
RATE ON (RS) TAX (RS) E (RS) (RS) S (RS)
08.04. 253255.6 52.1706

09 4987.31 50.78 02 506.5112 5 100 2206 2864
08.04.0 1723209. 354.981

9 33934.8 50.78 14 3446.418 1 100 2206 6107
18.05. 3837974. 790.622

09 79560 48.24 4 7675.949 7 100 2206 10772
21.05. 30756.9 1470182. 302.857

09 6 47.8 69 2940.365 6 100 2206 5549
08.03. 73735.7 3394793. 699.327

10 5 46.04 93 6789.588 5 100 2206 9794
11.03. 60891.7 2805890. 578.013

10 3 46.08 92 5611.782 5 100 2206 8495
26.03. 142109. 6522839. 1343.70

10 8 45.9 36 13045.68 5 100 2206 16695
Total 62585.00
INFERENCE:-
107
TABLE:- 5.4.5
Expenses incurred by M/S Subramaniam Bro’s, for forward booking, during the
period 2009-2010.
DATE BILL FORWA BILL FOREX

AMOUN RD AMOUNT SERVIC
T IN BOOKE IN INR SERVIC E SWIFT
USD D RATE COMMISSI E TAX CHARG CHARGE EXPENS
ON (RS) (RS) E (RS) S (RS) ES (RS)
11.03. 337476 1508855 3108.2

10 .1 44.71 4.2 30177.11 42 100 2206 35591
29.03. 8709370 1794.1

10 197000 44.21 17418.74 3 100 2206 21518
Total 57112.00
INFERENCE:-
108
TABLE:- 5.4.6
Expenses incurred by M/s Uma Shankar Traders, for forward booking, during the
period 2008-2009.
BILL FORWAR BILL

AMOUN D AMOUN SERVIC FOREX SWIFT
T IN BOOKED T IN INR COMMISSI E TAX SERVIC CHARG EXPENSE
DATE USD RATE ON (RS) (RS) ES ES (RS) S (RS)
05.11. 239350 4930.6

08 500000 47.87 00 47870 1 100 2206 55106
10.11. 142950 2944.7

08 300000 47.65 00 28590 7 100 2206 33840
11.11. 961200 1980.0

08 200000 48.06 0 19224 72 100 2206 23510
08.12. 991200 2041.8

08 200000 49.56 0 19824 72 100 2206 24171
11.12. 146520 3018.3

08 300000 48.84 00 29304 12 100 2206 34628
11.12. 146220 3012.1

08 300000 48.74 00 29244 32 100 2206 34562
11.12. 145830 3004.0

08 300000 48.61 00 29166 98 100 2206 34476
12.12. 160347 3303.1

08 330000 48.59 00 32069.4 48 100 2206 37678
17.12. 241850 4982.1

08 500000 48.37 00 48370 1 100 2206 55658
Total 333635.
00
109
INFERENCE:-
TABLE:- 5.4.7
Expenses incurred by M/s KPS Oil, for forward booking, during the period 2008-
2009.
BILL FORWA BILL SERVI

AMOUN RD AMOUN CE FOREX SWIFT
T IN BOOKE T IN INR COMMISSI TAX SERVIC CHARG EXPENS
DATE USD D RATE ON (RS) (RS) ES ES (RS) ES (RS)
17.12. 241850 4982.

08 500000 48.37 00 48370 11 100 2206 55658
Total 55658.00
INFERENCE:-
booking facility is Rs. 55658.00. On an average this works out to 0.23% of total import
110
TABLE:- 5.4.8
Expenses incurred by M/S Agni steels, for forward booking, during the period
2008-2009.
BILL FORWA BILL

AMOUN RD AMOUNT SERVIC FOREX SWIFT
T IN BOOK IN INR COMMISSI E TAX SERVIC CHARG EXPENSE
DATE USD RATE ON (RS) (RS) ES ES (RS) S (RS)
17.03.0 2933544. 604.31

9 56654 51.78 12 5867.088 01 100 2206 8777
19.03.0 50558. 2596660. 534.91

9 04 51.36 93 5193.322 22 100 2206 8034
Total 16812
INFERENCEINFERENCE:-
booking facility is Rs. 55658.00. On an average this works out to 0.23% of total import
111
TABLE:- 5.4.9
Expenses incurred by M/S Subramaniam Bro’s, for forward booking, during the
period 2007-2008.
BILL FORWAR BILL FORE SWIFT

AMOUN D AMOUNT X CHAR
T IN BOOKED IN INR COMMISSI SERVICE SERVI GES EXPENSE
DATE USD RATE ON (RS) TAX (RS) CES (RS) S (RS)
11.01.0 101100 4111737

8 0 40.67 0 82234.74 8470.178 100 2206 93010
11.01.0 5539254
8 136200 40.67 11078.51 1141.086 100 2206 14525
11.01.0 1528440
8 376000 40.65 0 30568.8 3148.586 100 2206 36023
Total 143559.
00
INFERENCE:-
112
CHAPTER-VI
6.1 FINDINGS
1. M/s Jayajothi Textile Mills for the period 2009-2010,
• Through one month contract the company has gained Rs. 16,12,025.00
• Through two months contract the company has incurred a notional loss of Rs.
747794.00
• During this period six contracts were cancelled since forward currency rates were at
premium being import transaction.
• The company incurred expenses for the remittance Rs. 392792.00
2. M/s Uma Shankar Traders Erode for the period 2009-2010,
• Through one month contract the company has incurred a notional loss of gained Rs.
(1150858)
(47086383)
113
• Through three months contract the company has incurred a notional loss of Rs.
(545000)
• Through six months contract the company has incurred a notional loss of Rs.
(671000)
• During this period twenty five contracts were cancelled since forward currency rates
were at premium.
• The company incurred expenses for the remittance Rs. 2084067
3. M/s KPS oils, for the period 2009-2010,
• Through one month contract the company has gained Rs. 3110160.00
(1059707)
• During this period four contracts were cancelled since forward currency rates were at
premium.
4. M/s Subramaniam Bro’s, for the period 2009-2010,
• Through three months contract the company has gained Rs. 522107.49
• During this period no contracts were cancelled since forward currency rates were at
discount.
• The company incurred expenses for the remittance Rs. 57112.00.
5. M/s Agni Steels for the period 2009-2010,
• Through one month contract the company has gained Rs. 18257.50
• Through three months contract the company has gained Rs.104049
114
• During this period three contracts were cancelled since forward currency rates were at
premium.
6. M/s Uma Shankar Traders for the period 2008-2009,
• Through one month contract the company has gained Rs. 1636100
• Through three months contract the company has gained Rs. 900000.00
• During this period one contract was cancelled since forward currency rates were at
premium.
7. M/s KPS oils, for the period 2008-2009,
• Through one month contract the company has gained Rs. 195000.00.
discount.
8. M/s Agni Steels for the period 2008-2009,
• Through two months contract the company has gained Rs.302546.00
discount.
9. M/s Subramaniam Bro’s, for the period 2007-2008,
• Through three months contract the company has gained Rs. 2931518.00.
discount.
115
6.2 SUGGESTION
• The bank can suggest the customers who are dealing with foreign exchange to have a
cross currency forward contract instead of booking in one currency.
• They can also suggest hedging the risk by booking the contract on different dates and
for different currencies, taking advantage of the market position.
116
`
6.3 CONCLUSION
To conclude, forward foreign exchange contracts are useful for managing

exposures beyond spot contracts. Forward contracts allow the traders to secure an
exchange rate now, for settlement at a future date. This hedging instrument can protect
117
profit margins and increase company's competitive standing internationally.
Anticipated foreign payables or receivables can be contracted at today's market levels
to protect against currency fluctuations. In case of unfavourable currency exchange
rate, traders have an option to cancel the contract at any point of time even beyond due
date but within 15days restricting their exchange risk.
In this study, it is observed that the traders have hedged the transaction risk on
greater degree by availing the facility of forward booking from the South Indian Bank.
CHAPTER-VI
BIBLIOGRAPHY
BOOKS
118
• Pandey I.M, “Financial Management”, Vikas, Ninth Edition.
• Kothari C.R., “Research Methodology Methods and Techniques” Wishwa

Prakashan, Second Edition.
• Sharan Vyuptakesh, “International Financial Management”, Prentice-Hill,
Second Edition.
• Jain P.k and Khan M.Y, “Financial Management”, Tata Mcgraw Hill, Fourth
Edition.
• Jain P.k, Josette Peyrard, Surendra.s Yadav , “International Financial
Management”, Macmillian , Second Edition.
JOURNAL
FEDAI roles and rules of FEDAI & Foreign Exchange Rates & Risk Management
(Foreign Exchange Dealers Association of India)
WEBSITE
• www.realtimeforex.com
• www.moneyinstuctor.com
• www.indianetzone.com
• www.southindainbank.com
119

1.5 Final - Edited

Diunggah oleh

Informasi Dokumen

Deskripsi Asli:

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

1.5 Final - Edited

Diunggah oleh

Hak Cipta:

Format Tersedia

CHAPTER I

1.1 INTRODUCTION TO THE INDUSTRY

GOVERNMENT’S ROLE IN BANKING INUSTRY

1. Implementation of Banking Regulation Act 1949. (Scheduled Banks and Non-

LIBERALISATION AND MODERN BANKING

All great dynasties were built up from humble foundations.

1.2 INTRODUCTION TO THE COMPANY

“ To provide a secure, agile, dynamic and conducive banking environment to customers

CORE BANKING SOLUTION

SERVICES AND PRODUCTS

A. ACCOUNTS AND DEPOSITS

SIB initiates customers to begin a relationship by Opening an account as a window to

Savings Account - For routing customers’ cash flow

Term Deposits - For high returns on customers’ investments

Personal Loan - Easy general purpose loans

Vehicle loans - for private, commercial or agricultural purposes

Home Loans - for residents, NRIs and Senior Citizens

Gold Loans - Easy Loans against Gold

Educational Loans - for higher studies

Agriculture Loans - for various agricultural needs

Flexi loan - Loan against property (Residential/Non-residential)

Domestic Transfers - Transfer/Receive funds within India

International Transfers - Transfer/Receive funds to/from abroad.

F. VALUE ADDED SERVICES

SIB offers different types of Business Accounts such as Current Account,

• ILC (Inland Letter of Credit)

E) VALUE ADDED SERVICES

KEY PARAMETERS % change 2008-‘09 2007-‘08 2006-‘07

NET INTEREST INCOME +34.06% +28.84% 1686.92 1309.24 976.6

NET INTEREST EXPENDED +50.24% +27.20% 1164.04 915.10 609.09

OPERATING PROFIT(before +87.51% 30.04% 301.37 231.75 123.59

TOTAL BUSINESS 26.10% 16.70% 30237 25910 20547

SWOT ANALYSIS OF SOUTH INDIAN BANK

• Achieved 100% technology driven operations and core banking status.

• Strong clientele base in south India.

• The technology driven core banking fails at times of system failures.

• Expand operations to all states in India.

• Growth of other private sector new generation banks.

1.3 INTRODUCTION TO STUDY:

TERMS USED IN FOREIGN EXCHANGE MARKET:

THE FOREGIN EXCHANGE MARKET:

INTER BANK MARKET:

Traders engage in the export of import of goods to number of countries.

FOREGIN EXCHANGE RATES:

SPOT EXCHANGE RATES:

FORWARD EXCHANGE RATES:

Entering into a contract for buying foreign currency on a future date.

FOREGIN CURRENCY OPTION:

1.4 OBJECTIVES OF THE STUDY:

 To study the forward contract as an instrument to hedge currency exchange

 To study the benefits gained by the customer’s while importing commodities

1.4 NEED FOR STUDY:-

1.5 SCOPE FOR STUDY:-

1.6 LIMITATIONS OF THE STUDY:

The Foreign Exchange Committee November 2004, has submitted a project

Research design is needed because it facilitates the smooth sailing of various

Nature of the study:

The nature of the study is descriptive research.

Descriptive research includes surveys and fact-findings enquires of different kinds.

Source used for data collection is secondary data’s are :-

• Annual reports of South Indian Bank.

• Books of accounts pertaining to foreign exchange business.

The period of study is 45days.