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Foreign ExchangeForeign Exchange

FOREXFOREX

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7. How to settle Forex Transaction in IB Market7. How to settle Forex Transaction in IB Market

For this purpose each party opens account in Foreign For this purpose each party opens account in Foreign currency.currency.

Nostro A/c Vostro A/c Loro A/c Nostro A/c Vostro A/c Loro A/c

My a/c with You Your A/c with us Third Party A/cMy a/c with You Your A/c with us Third Party A/c

These are A/c for settlement of interbank transactions.These are A/c for settlement of interbank transactions.

Example on the next slide : >Example on the next slide : >

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SBI CITI BANK HSBCSBI CITI BANK HSBCMumbaiMumbai New York LondonNew York London

i)i) SBI will call this A/c as SBI will call this A/c as NostroNostro with respect to CITI BANK. with respect to CITI BANK.

ii)ii) CITI BANK will call this A/c CITI BANK will call this A/c VostroVostro with respect to SBI. with respect to SBI.

iii)iii) SBI will call HSBC as SBI will call HSBC as LoroLoro A/c as it Nostro to CITI Bank. A/c as it Nostro to CITI Bank.

Summary :Summary : Bank which open cash credit in FC will call it Nostro Bank which open cash credit in FC will call it Nostro andand Bank where A/c is opened will call it Vostro. Bank where A/c is opened will call it Vostro.

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Types of Authorizations ( License)Types of Authorizations ( License)

In India RBI Gives 3 types of Licenses for dealing in In India RBI Gives 3 types of Licenses for dealing in FOREX Market.FOREX Market.

License Type of TransactionLicense Type of Transaction

Category A IB Transaction Category A IB Transaction

Category B Category B Money Changer + Export Import Transaction Money Changer + Export Import Transaction

Category C Money ChangerCategory C Money Changer