Some Aspects of Exchange Quotation
Exchange Rates for Non-Trade Transactions
The method of calculation of exchange rates relates to trade-related transactions. Banks for the following transactions quote separate rates:
- Issue and encashment of foreign travelers cheques;
- Purchase of personal cheques; and
- Purchase of foreign currency notes and coins.
2. Rounding off the rate to the advantage of the customer instead of to the banker or to the nearest multiple of 0.0025. That is, the rate may be rounded off to higher multiple for buying and lower multiple for selling.
3. The exchange margin may be reduced to the minimum.
4. The rate may be based on the cheapest market rate. Moreover, the current prevailing market rates may be verified to see if any favorable shift is there and the rate may be based on on-going market rates.
Instead of rounding off the premium / discount to the whole month, proportionate forward margin up to the exact due date of the bill may be conceded in favor of the customer.
Rounding Off for Card Rates
For transactions of smaller value, say less than the equivalent of USD 1000, banks do not calculate the rates for each transaction separately. The rates calculated at the beginning of the day are applied to all transactions taking place during the day, unless the movement in the exchange rates in the market warrant otherwise. These rates are known as ‘Card Rates’. The card rates are quoted to the nearest paise.