BFM Module A, (Q & A) UNIT 1. Exchange Rate and Forex Business

 

BFM Module A

(Question-Answer)

UNIT 1. Exchange Rate and Forex Business

 

Fill in the blanks:

1. The term Foreign Exchange is used to denote ______ as well as the _______ of one currency into another.

2. The exchange rates of major currencies fluctuate every______ seconds.

3. Main factors affecting exchange rates are technical, _________ and speculation.

 4. In a spot contract, settlement of funds takes place on the_________ working day following the date of contract.

 5. If the currency is costlier in forward, it is said to be at a _________

 6. If the forward value of the currency is cheaper, it is said to be at a_________.

 7. The date of settlement of funds is known as_________ date.

 8. The rate at which the quoting party is ready to buy the currency is called_________ rate.

9. The dealers are officials, who are actually involved in the ________and________ of currencies.

10.  The section which handles processing of deals, reconciliation, etc., is called________ office.

11. Banks permitted to deal in foreign exchange are called ________ persons.

12. Unpaid Import bills drawn under Letters of Credit must be crystallized into Rupees as per the policy of the________.

13. In terms of FEDAI rules, besides, Japanese Yen, _______, and________ are the other currencies which are quoted as 100 units = so much Rupee

14. Exchange rate denotes a__________ at which one currency exchanged for another.

15. Foreign Exchange Markets are__________ Markets, with no barriers.

16. The currency appreciates due to inflow of overseas capital, if local interest rates are__________

17.  __________ deals provide depth and liquidity to the market.

18. Direct quotes are also called__________ currency quotations.

19.  The part of dealing room operations, which deals with risk management is called__________ office.

20. Risk of loss arising due to inability or unwillingness of the counter party to meet its obligations is called__________ risk.

21.  __________ guidelines prescribe code of conduct for dealers’ brokers.

 

State True or False:

1. The FOREX markets are dynamic and round the clock markets.

2. FOREX markets are not affected by government policies.  

3. A large part of the total global FOREX turnover results from global commodities trade

 

Terminal Questions.

1. Foreign Exchange markets are

 (a) regional markets.

(b) domestic markets.

(c) global markets.

(d) localized exchange traded markets.

 

2. Foreign exchange does not include:

(a) Deposits payable in foreign currency.

(b) Instruments drawn in foreign currency and payable in a foreign currency.

(c) instruments drawn in Indian rupees on a checking account of the drawer and payable abroad.

(d) instruments drawn in Indian rupees on a current account of an Indian company and payable in India.

 

3. Out of the several factors, the following factor does not have an effect in the movement of exchange rates:

(a) Political instability

(b) Increase in domestic interest rates

(c) Change in Taxation policy

(d) Increase in domestic tourism

 

4. Spot dealing in FX market means:

(a) Delivery of funds is on the 30th working day from the date of deal.

(b) Delivery of funds is on the second working day from the date of deal.

(c) Delivery of funds is next date from the date of deal.

(d) Delivery of funds is one week after the date of deal.

 

5. The rate at which the quoting bank is ready to sell the currency is called-

(a) Bid rate.

(b) Offer Rate.

(c) TT Buying Rate.

(d) Swap rate.

 

6. Operational Risk does not include:

(a) movement in exchange rates.

(b) Human errors.

(c) Technical Faults.

(d) Systemic failures.

 

7. Cancellation of forward contacts is to be done at:

(a) Opposite Bill rate.

(b) Opposite Cash rate.

(c) Opposite TT rate.

(d) Opposite TC rate.

 

8. Crystallization of export bills is to be done:

(a) On the 10th day from the due date of the bills.

(b) Before the due date.

(c) As per the policy of the Bank.

(d) On the due date itself.

 

 

Answer Key
Fill in the Blanks
1	Foreign currency, Exchange	8	Bid	15	Communication System based
2	Four	9	Buying & Selling	16	High
3	Fundamental	10	Back office	17	Speculative
4	Second	11	Authorized	18	Home
5	Premium	12	Bank	19	Credit
6	Discount	13	Indonesian Rupiah/Kenyan Shilling	20	FEDAI
7	Value	14	Price/Ratio/Value	21
True & False
1	True	2	False	3	False
Terminal Question
1	c	4	b	7	c
2	d	5	b	8	d
3	d	6	a

 

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Process for filing complaint with the Banking Ombudsman

 

Banking Ombudsman Scheme enable the people to file complain to resolve the banking issues. It is introduced with the objective of enabling resolution of complaints relating to certain services rendered by banks and to facilitate the satisfaction or settlement of such complaints.

Banking Ombudsman Scheme

Banking Ombudsman is a quasi judicial authority functioning under India’s Banking Ombudsman Scheme 2006. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. As on date, 22 Banking Ombudsmen have been appointed with their offices located mostly in state capitals.

How to file online complaint

You can approach the Banking Ombudsman if 

• You have not received a reply from your bank within one month from the date of receipt of complaint by the bank OR
• The bank has rejected your complaint OR
• You are not satisfied with bank's reply

Process for lodging an online complaint

• Visit ONLINE COMPLAINT
• Select BO office (Banking Ombudsman).
• You will be asked to fill Bank name, branch name, Complaint name, Mobile no.
• Fill up the form with necessary details and Click “SAVE”

After successfully submission of your application, user can upload supporting documents by clicking on upload option. Supporting document means copy of complaint, bank reply, evidence etc.

You will get acknowledgement of complaint once review is done by Ombudsman. Within 30 days from your complaint, Ombudsman will resolve the issue. They may contact you if any clarification require.

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Income Tax Rule that impact money and your pocket in FY 2021-22

A number of financial rules have already been changed. These changes are expected to impact money and your pocket in FY 2021-22.

The government has come up with several changes for the taxpayers as well as the general public.

Here is the list of changes that goes into effect from April 1. 

1. Reduction in the Deadline for Filing ITR of FY 2020-2021 to December 31, 2021

The deadline for filing Income Tax Return is reduced by 3 months along with a maximum penalty of up to Rs 10,000, with a deadline for filing belated and revised ITR for FY 2020-21 to December 31, 2021.

2. Modification in Interest Rate of Provident Fund

According to the new rules, the deposits in the EPF account should not be more than Rs 2.5 lakh.

3. TDS Filings

The finance ministry has decided to raise the tax deducted at source (TDS) and it would be done under the Sections 206AB and 206CCA inclusions in the IT act.

4. ITR Forms Now Comes Filled up in Advance

The government has finally come up with a decision to give a pre-filled form to the taxpayers for the easy and quick execution income tax filing. 

5. No Income Tax Filing for Senior Citizens Above 75 Years

The finance minister Nirmala Sitharaman has exempted the senior citizens having an age of more than 75 years and for this from the income tax filing with an exception that is only applicable to pension holders with no other income. 

6. Leave Travel Concession (LTC) Exemption

The government had given good benefits in terms of claiming the tax benefits on LTC. 

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How to do Bulk NEFT

Bulk NEFT is useful for credit the salary, Scholarship, different type of Govt. fund from one bank to other bank.

Step for Bulk NEFT

1. First prepare the .txt file as –

SR NO|DEBIT ACCOUNT|AMOUNT|IFSC|CREDIT ACCOUNT|ACCOUNT HOLDER NAME|SB

EX.-

0001|12340100005678|1000|SBIN0012345|9876543219876|ABC DEFGH|SB

0002|

0003|

..

..

..

( If you face difficulty for preparing the .txt file then write in comments Box. I will provide you the convertor from excel to text)

 

2. Save as the .txt file as debit account_yyyymmdd_01

If debit account number is 12340100005678 & date is 26-07-2020 then file name is as below

 12340100005678_20202607_01

3. for uploading in Finacle use menu – BULKNEFT

In Option 1 – upload

In Option 2 – browse (where the .txt file is locate)

In option 3 – write the debit account number.

And submit.

It is time bound menu and it will allow to upload up to 3:00 pm only and verification must be done up to 4:00pm only.

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Union Budget

RENVENUE RECEIPTS

The term “Revenue Receipt” is made up of two words revenue and receipts.

Those receipts which neither create any liability nor cause any reduction in the assets of the government. In other word, any income that does not generate a liability is revenue.

For example: if the Government borrows money from World Bank, it will increase its liabilities (because this money has to be paid back) - so cannot be called revenue. However, if the government gets the same money from grant (donation), its revenue receipt because grants are not to be paid back.

Taxes are the most important revenues receipts of the governments. However, some revenue receipts are non-tax revenues such as grants. On this basis, revenue receipts are of two types –

1. Tax Revenue

2. Non-tax revenue.

Tax Revenues

Ø  Tax revenues are either from direct taxes or indirect taxes.

Ø  Direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.

Ø  Income Tax, Gift Tax, Wealth Tax and Property tax etc. are direct taxes.

Ø  Indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).

Ø  Sales tax, Value Added Tax (VAT), Goods and Services tax (GST) or any other such tax is an indirect tax.

Ø  Largest chunk of tax revenues of government of India currently comes from Corporation Tax, followed by Income Tax, followed by Union Excise duties, customs and thereafter service tax.  

Non-Tax Revenue

Ø  Non Tax Revenue Receipts are those revenue receipts which are not generated by taxing the public.

Ø  Money which the Government earns as  “Dividends and profits” from its profit making public enterprises (PSUs).

Ø  Interest which the Government earns on the money lent by it to external or internal borrowers , Thus this revenue receipts may be in foreign currency as well as Indian Rupees.

Ø  The money which the government receives out of its fiscal services such as stamp printing, currency printing, medal printing etc .

Ø  Money which the Government earns from its “General Services” such as power distribution, irrigation, banking services, insurance, and community services etc. which make the part of the Government business.

Ø  Money which the government accrues as fees, fines, penalties etc .

Ø  Grants the Government of India receives from the external sources. 

REVENUE RECIEPTS
Tax Revenue	Non Tax Revenue
Gross Tax Revenue	1. Interest Receipt
1. Corporation Tax	2. Dividend & Profits
2. Income Tax	3. External Grants
3. Other Taxes & Duties	4. Other Non Tax Revenue
4. Customs	5. Receipts of Union Territories.
5. Union Excise Duties
6. Service tax
7. Tax of the Union Territories

Net Tax Revenue: Gross tax Revenue – NCCD transferred to the National Calamity Contingency Fund – State’s Share

Total Revenue Receipts: Net Tax Revenue + Total Non Tax Revenue

Capital Receipts

Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows.

Loans from the general public, foreign governments and the Reserve Bank of India (RBI) form a crucial part of capital receipts.

All capital receipts are tax-free, unless there is a proviso to tax it. Capital receipts can be both non-debt and debt receipts.

Non-debt capital receipts

Ø  Non-debt receipts are those which do not incur any future repayment burden for the government. Almost 75 per cent of the total budget receipts are non-debt receipts.

Ø  Recovery of loans and advances, disinvestment, issue of bonus shares, etc

Debt capital receipts

Ø  Debt Receipts have to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing. A reduction in debt receipt (or borrowing) can be a big leap for the economy's financial health. Most of the capital receipts of the government are debt receipts

Ø  Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, treasury bills, securities against small savings, state provident funds, relief bonds, saving bonds, gold bonds, external debt, etc, are all example of debt capital receipts.

EXPENDITURE

Ø  Expenditure refers to payments made or liabilities incurred in exchange for goods or services.

Ø  There are two component of Expenditure – Non Plan Expenditure and Plan Expenditure.

Ø  Non-plan expenditure is what the government spends on the so-called non-productive areas, such as salaries, subsidies, loans and interest, while plan expenditure pertains to the money to be set aside for productive purposes, like various projects of ministries.

EXPENDITURE
NON PLAN EXPENDITURE		PLAN EXPENDITURE
REVENUE	CAPITAL	REVENUE	CAPITAL
1. Interest payment and prepayment of premium	1. Defense	1. Central Plan	1. Central Plan
2. Defense	2. Other non plan capital outlay	2. Central assistance for state and union territory plan	2. Central assistance for state and union territory plan
3. Subsidies	3. Loan to Public Enterprises
4. Grant to State and U.T. Governments	4. loan to State & U.T. Govt.
5. Pension	5. loan to foreign Govt.
6. Police	6. Others
7. Assistance to State from NCCF
8. Economic Services
9. Other Gen Services
10. Social Services
11. postal Deficit
12. Expenditure of U.T
13. Amount met from NCCF
14. Grant of Foreign Govt.

DEFICIT

A budget deficit occurs when expenses exceed revenue.

Revenue Deficit: Excess of Revenue Expenditure over Revenue Receipts.

Gross Fiscal Deficit: Excess of Total Expenditure including loans, net of recoveries over revenue receipts (including external grants) and non-debt receipts

Net fiscal deficit: Difference between Gross Fiscal Deficit and Net Lending.

Gross primary deficit: Difference between the Gross Fiscal Deficit and interest payments.

Net primary deficit: Net fiscal deficit - Net interest payments

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