Normal transit period comprises of the average period normally involved from the date of
negotiation/purchase/discount till the receipt of bill proceeds.
It is not to be confused with the time taken for the arrival of the goods at the destination.
Normal transit period for different categories of export business are laid down as below
a) Fixed Due Date
In the case of export usance bills, where due dates are fixed or are reckoned from date of shipment or date of bill
of exchange etc, the actual due date is known. Therefore in such cases, normal transit period is not applicable.
b) Bills in Foreign Currencies – 25 days
c) Exports to Iraq under United Nations Guidelines – Max. 120 days
d) Bills drawn in Rupees under Letters of Credit (L/C)
i) Reimbursement provided at centre of negotiation - 3 days
ii) Reimbursement provided in India at centre different
from centre of negotiation - 7 days
iii) Reimbursement provided by banks outside India - 20 days
iv) Exports to Russia under L/C where reimbursement is provided by RBI - 20 days.
e) Bills in Rupees not under Letter of Credit - 20 days
f)TT reimbursement under Letters of Credit (L/C)
i) Where L/C provides for reimbursement by electronic means - 5 days
ii) Where L/C provides reimbursement claim after
certain number of days from the date of negotiation - 5 days + this additional period.
2.4. Substitution/Change in Tenor
a) In case of change in the usance of a bill, interest on post shipment credit shall be charged to the customer, as
per RBI guidelines. In addition, the bank shall charge or pay notional swap difference. Interest on outlay of funds
for such swaps shall also be recovered from the customer at rate not below base rate of the bank concerned.
b) It is optional for banks to accept delivery of bills under a contract made for
purchase of a clean TT. In such cases, the bank shall recover/pay notional swap
difference for the relative cover. Interest at the rate not below base rate of the
bank would be charged on the outlay of funds.
2.5. Export Bills sent for collection:
a) Application of exchange rates
The conversion of foreign currency proceeds of export bills sent for collection or of goods sent on consignment
basis shall be done at prevailing TT buying rate or the forward contract rate, as the case may be. The conversion to
Rupee equivalent shall be made only after the foreign currency amount is credited to the nostro account of the
b) On receipt of credit advice/statement of nostro account and compliances of guidelines, requirements of the Bank
and FEMA, the Bank shall transfer funds for the credit of exporter’s account within two working days.
c) If the above stipulated time limit is not observed, the Bank shall pay compensation for the delayed period at the
minimum interest rate charged on export credit. Compensation for adverse movement of exchange rate, if any,
shall also be paid as per the compensation policy of the bank.
Rule 3 : IMPORT TRANSACTIONS
3.1 Application of exchange rate:
a) Retirement of import bills - Exchange rate as per forward sale
contract, if forward contract is in place.
Prevailing Bills selling rate, in case there is
no forward contract.
b) Crystallisation of Import - same as above
bill (vide para 3.3 below)
c) For determination of stamp - As per exchange rate provided by the
duty on import bills authority concerned.
3.2. Application of Interest:
a) Bills negotiated under import letters of credit shall carry commercial rate of interest as applicable to banks’
domestic advances from time to time.
b) Interest remittable on interest bearing bills shall be subject to the directive of Reserve Bank of India in this
3.3. Crystallisation of Import Bill under Letters of Credit.
Unpaid foreign currency import bills drawn under letters of credit shall be crystallised as per the stated policy of the
bank in this respect
4.1. Outward Remittance:
Outward remittance shall be effected at TT selling rate of the bank ruling on that date or at the forward contract
4.2. Encashment of foreign currency notes and instruments
Foreign currency travelers’ cheques, currency notes, foreign currency in prepaid card, debit/credit card will be
encashed at Authorised Dealer’s option at the appropriate buying rate ruling on the date of encashment.
4.3. Payment of foreign inward remittance
Foreign currency remittance up to an equivalent of USD 10,000/- shall be immediately converted into Indian
Rupees. Remittance in excess of equivalent of USD 10,000 shall be executed in foreign currency. The beneficiary
has the option of presenting the related instrument for payment to the executing bank within the period prescribed
4.4. The applicable exchange rate for conversion of the foreign currency inward remittance shall be T T buying rate
or the contracted rate as the case may be.
4.5. Compensation for delayed payment : Authorised Dealers shall pay or send
Intimation, as the case may be, to the beneficiary in two working days from the date
of receipt of credit advice / nostro statement.
In case of delay, the bank shall pay the beneficiary interest @ 2 % over its savings bank interest rate. The bank
shall also pay compensation for adverse movement of exchange rate, if any, as per its compensation policy.
Rule 5 Foreign Exchange Contracts
5.1. Contract amounts
Exchange contracts shall be for definite amounts and periods.
When a bill contract mentions more than one rate for bills of different deliveries,
the contract must state the amount and delivery against each such rate.
5.2. Option period of delivery
Unless the date of delivery is fixed and indicated in the contract, the option period may be specified at the
discretion of the customer subject to the condition that such option period of delivery shall not extend beyond one
If the fixed date of delivery or the last date of delivery option is a known holiday; the last date for delivery shall be
the preceding working day.
In case of suddenly declared holidays, the contract shall be deliverable on the next working day.
Contracts permitting option of delivery must state the first & last dates of delivery.
For Example: 18th January to 17th February, 31st January to 29th Feb. 2012.
“Ready” or “Cash” merchant contract shall be deliverable on the same day.
“Value next day” contract shall be deliverable on the working day immediately succeeding the contract date.
A spot contract shall be deliverable on second succeeding working day following the contract date.
A forward contract is a contract deliverable at a future date, duration of the contract being computed from spot
value date at the time of transaction”.
5.3. Place of delivery
All contracts shall be understood to read “to be delivered or paid for at the Bank” and “at the named place”.
5.4. Date of delivery
Date of delivery under forward contracts shall be :
i) In case of bills/documents negotiated, purchased or discounted - the date of negotiation/purchase/ discount and
payment of Rupees to the customer.
However, in case the documents are submitted earlier to, or later than the original delivery date, or for a different
usance, the bank may treat it as proper delivery, provided there is no change in the expected date of realisation of
foreign currency calculated at the time of booking of the contract. No early realisation or late delivery charges shall
be recovered in such cases.
ii) In case of export bills/documents sent for collection - date of payment of Rupees to the customer on realisation
of the bills.
iii) In case of retirement/crystallisation of import bills/documents - the date of
retirement/ crystallisation of liability, whichever is earlier.
5.5. Option of delivery
In all forward merchant contracts, the merchant, whether a buyer or a seller, will have the option of delivery.
5.6. Option of usance
The merchant purchase contract should state the tenor of the bills/documents.
Acceptance of delivery of bills/documents drawn for a different tenor will be at the discretion of the bank.
5.7. Merchant quotations
The exchange rate shall be quoted in direct terms i.e. so many Rupees and
Paise for 1 unit or 100 units of foreign currency.
5.8. Rounding off Rupee equivalent of the foreign currency
Settlement of all merchant transactions shall be effected on the principle of rounding off the Rupee amounts to the
nearest whole Rupee i.e. without paise.
RULE 6 Early Delivery, Extension and Cancellation of Foreign Exchange Contracts
i) At the request of a customer, unless stated to the contrary in the provisions of
FEMA, 1999, it is optional for a bank to:
a. Accept or give early delivery; or b. Extend the contract.
ii) It is the responsibility of a customer to effect delivery or request the bank for extension / cancellation as the case
may be, on or before the maturity date of the contract.
6.2. Early delivery
If a bank accepts or gives early delivery, the bank shall recover/pay swap difference, if any.
Foreign exchange contracts where extension is sought by the customers shall be cancelled (at an appropriate selling
or buying rate as on the date of cancellation) and rebooked simultaneously only at the current rate of exchange.
The difference between the contracted rate, and the rate at which the contract is cancelled, shall be recovered
from/paid to the customer at the time of extension. Such request for extension shall be made on or before the
maturity date of the contract.
i) In case of cancellation of a contract at the request of a customer, (the request shall be made on or before the
maturity date) the Authorised Dealer shall recover/ pay, as the case may be, the difference between the contracted
rate and the rate at which the cancellation is effected. The recovery/payment of exchange difference on
cancellation of forward contracts before the maturity date may be either upfront or back-ended at the discretion of
ii) Rate at which cancellation is to be effected:
a. Purchase contracts shall be cancelled at T.T. selling rate of the contracting
b. Sale contracts shall be cancelled at T.T. buying rate of the contracting
c. Where the contract is cancelled before maturity, the appropriate forward T.T. rate shall be applied.
iii) Notwithstanding the fact that the exchange contract between the customer and the bank becomes impossible of
performance, for whatever reason, including Government prohibitory orders, the exchange contract shall not be
deemed to have become void and the customer shall forthwith apply to the Authorised Dealer for cancellation, as
per the provisions of paragraph 6.4.(i) and
iv) a. In the absence of any instructions from the customer, vide para 6.1(ii), a contract which has matured shall be
cancelled by the bank on the 7th working day after the maturity date.
b. Swap cost, if any, shall be recovered from the customer under advice to him.
c. When a contract is cancelled after the maturity date, the customer shall not be entitled to the exchange
difference, if any, in his favour, since the contract is cancelled on account of his default. He shall, however, be liable
to pay the exchange difference, against him.
6.5. Swap cost/gain
i) In all cases of early delivery of a contract, swap cost shall be recovered from the customer, irrespective of
whether an actual swap is made or not. Such recoveries should be made either back-ended or upfront at discretion
of the bank.
ii) Payment of swap gain to a customer shall be made at the end of the swap period.
6.6. Outlay and Inflow of funds
Authorised Dealer shall recover interest on outlay of funds for the purpose of arranging the swap, in addition to the
swap cost in case of early delivery of a contract.
If such a swap leads to inflow of funds, interest shall be paid to the customer. Funds outlay / inflow shall be arrived
at by taking the difference between the original contract rate and the rate at which the swap could be arranged.
The rate of interest to be recovered / paid should be determined by banks as per their policy in this regard.
Documents you may be interested
Documents you may be interested