Page 113 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes have to receive payment over a period of years for their exports, construction works, or
services.
Constructions Work Policy to provide cover to an Indian contractor who executes a civil
construction job abroad.
Specific Policy for Supply Contract to cover risks in respect of export of capital goods or
turnkey projects involving medium/long term credit.
5.5.6 Exchange Rate Fluctuation Risks

Both importers and exporters run the risk of loss due to fluctuations in the foreign exchange
rates in international business transactions. An exporter who agrees to a certain price in a
foreign currency today may find himself at a loss after a few months when he actually receives
the payment owing to a fall in the exchange rate of the contracted currency. Likewise, an
importer’s fortunes may also swing up or down with exchange rate movements. For example,
let us take an exporter in India who ships 5,000 shirts at US $ 4 each to an exporter in the US, and
expects to receive the payment after 60 days. In today’s date at $1.00 = `46.00, he expects a
payment of ` 9,20,0000. After the months, on actual receipt of payment, the US$ is equal to
` 45.30 and he, therefore, receives ` 9,06,000, incurring a loss of `14,000. This loss is actually due
to weakening of the US $ against the Indian rupee.
Exporters in India can avail of forward exchange covers provided by most commercial banks.
See the box 5.2:
Box 5.2: Treasury Products: Foreign Exchange

Treasury Products: Foreign Exchange

We have a state-of-the-art dealing room situated at Nariman Point, Mumbai. The dealing
room handles inter-bank transactions and corporate foreign exchange flows generated by
the various branches.

Products
Spot foreign exchange transactions (for value up to two business days).

Forward foreign exchange transactions (for value greater than two business days).
Inward/outward remittances.
Derivatives such as options, currency swaps, etc.
Services

Active dealings in the inter-bank market for major currencies, spot and forwards.
Quick and competitive dealing in prices in major currencies.
Customised solutions for specific client exposures.
Trading recommendations based on technical analysis.

Regular fundamental analysis.
Established correspondent banking relationships.
Source: www.kotak.com

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