Foreign Exchange Operations - Lecture Notes

Jai Hind! Today's topic is Foreign Exchange Operations This is the first lecture of this topic We will study Foreign Exchange Operations in detail Basically, Foreign Exchange Operations is The people who are doing CAI and IIV, the bankers are also doing CAI and IIV. There is a subject in this, Banking Financial Management, BFM. The first module of BFM is International Banking. and that topic is only for foreign exchange operations if you read this whole lecture then you will understand the first module of B.F.M secondly, the IIBF exam is conducted by CA IIBF there is a certificate course in the name of foreign exchange operations so this lecture will help you in that too thank you So, today we will understand what is Foreign Exchange Operations and I want to tell you again that this is the first lecture of this topic and there will be more videos coming up so you can watch it continuously So, let's start First of all, we will divide this into two parts One is Foreign Exchange Operations First is Foreign Exchange and second is its Operations So, basically what is Foreign Exchange and its Operations Thank you In world trade, the world trade has import or people go from one country to another country whether it is for travel or business purpose. Then we provide our services to other countries or take services from other countries. That means import of services or export of services or travel or business or cross border movement. For all these things we have to convert one country's currency into another country's currency So the conversion we do, the one country's currency into another country's currency This is called Foreign Exchange This is called Foreign Exchange So the business we are doing globally, suppose there is an exporter in India If someone is importing something from America, he will get the payment in USD. Now, he will convert the payment in USD and take it in Rupees. If we are importing something from Germany to India, the importer is paying in Rupees. But the exporter in Germany needs the payment in Euro. So, what is the value of the invoice? What is the conversion of the invoice into the home currency? Foreign exchange. Okay? Conversion of the value of the invoice into the home currency is called foreign exchange. You understood? All these activities, i.e. converting one country's currency into another country's currency is called foreign exchange. Okay? Let's go broadly. If we look at it in a broad sense, then foreign exchange is also called foreign exchange. If we are Indian, then any currency other than Indian currency is called foreign exchange. As well as the conversion of one currency of one country to that of other is also called foreign exchange. One is foreign currency and other is conversion of currency of one country into another. Conversion of currency of one country into another country is called foreign exchange. Foreign exchange is also called forex in short term or Fx. So we understood what is foreign exchange and what is the meaning of it. Foreign exchange means currency of any country other than India is called foreign currency and second is exchange of one currency into another country is called foreign exchange. So, this is the way of exchange. Now we will elaborate it slowly Now see I said that foreign exchange is a foreign currency Means We call foreign exchange as a foreign currency Means what is foreign exchange? Foreign currency Foreign currency is a foreign exchange Foreign means any country other than India It is called foreign And currency is another thing Now let's see what is currency What is currency? According to FEMA guidelines, currency includes the currency notes. What is currency? Currency includes currency notes. Currency notes are called currency. And what else do we call it? Like poster notes. Postal notes are also currency Postal order is also currency Money order is also currency Later on creditors are also currency currency is also called currency the bill of exchange or the promissory note or credit card or similar instruments are called currency now comes the second step what is currency note See, it seems like currency notes, what does it mean? It means the currency of the paper money. But it is not like that. What currency notes means is that it is also coins. Means cash in the form of coins and bank note. Cash in the form of coins and bank notes is called currency notes. Rest of the things like postal notes, postal order, money order, LC, BOE, promotional note, credit card or... Checks, Drafts, Traveller Checks, etc. All these are Currency. We will study about all these things. Like Traveller Checks, Drafts, LCs, Wheel of Exchange, Promissional Notes, Credit Cards etc. You will understand these things one by one. What is Currency? Currency comes from Postal Notes, Postal Order, Money Order, Traveller Checks etc. like currency, boe, credit cards, etc. and other instruments like H-per-day notification of RBI all these things will be called currency Secondly, currency notes includes cash in the form of coins and bank notes Now, let's talk about foreign currency When we are talking about foreign currency what does it mean? Is it a paper money for us? or is it just a paper money for us? Foreign currency means all the currencies Foreign currency means all the currencies and foreign currency so in foreign exchange what will be the meaning of foreign exchange? what does it mean? all those foreign currencies whatever foreign currency is will be a foreign exchange so all these things will come in foreign currency because in currency all these things are there so it will come in foreign exchange too to say it in big words foreign exchange includes Checks, drafts, traveler checks, letter of credit, or bill of exchange, or promissory notes, which are drawn outside India, outside India, and those tables in India. Foreign exchange is the conversion of one country's currency into another country's currency and the second is the foreign exchange of any country's currency to another country's currency We denote foreign exchange as Forex or FX Now let's talk about Foreign Exchange Now we know about Foreign Currency What is Foreign Currency for us? For us, US Dollar is Foreign Currency For us, GBP is Great British Pound or Australian dollar. All these are foreign currency for us. Similarly, Indian rupees for America is foreign currency for them. For America, Australia and Germany. In the same way, the foreign currency is the INR of other countries. Now let's come to the second part of this. The second part is operations. In foreign exchange, we have learned the conversion of currency of one country into another. So where does this work? So, where will the work be done? Where will the money be transferred? If there is a currency of one country, then we have to convert it to another country. Where will that work be done? So, where will that work be done and how will that work be done? Where will we study these two things? Where will that work be done? So, the work that we do in the foreign exchange market, which we call the forex market in short, where will that work be done? Now let's see what is forex market? Forex market is a market that is a Forex market is a global market. It means it has no boundary. Global market means it has no boundary. Like we see other markets like commodities market, fish market, vegetable market. Which is falling from four walls. There is a buyer, a seller, we come to buy and we become buyer. Or some dealers or some dealers that are willing to buy. This is a global market with no boundary. It works in different time zones and around the clock. This means it works 24 hours. This market is open 24 hours. 24 hours means that suppose a market opens at 9 in the morning in India. But in India, it opens at 9 in the morning. In America, it opens at night. When the afternoon time of Indian market is over, the market of England is going to open. So this market works in different time zones and countries. In this way, this market is going to run 24 hours round the clock. This is a market which has no boundary. So this market is not a boundary, it is a global market. How will it work? Who will buy and how will it sell? Because there is no physical presence somewhere. This total market is a communication system based market. What is the market? It is a communication system based market. Communication system based Communication system based means This market is OTC based OTC means it works over the counter Over the counter means It works over the counter This is used for telephone, other electronic mediums like internet, mobile phones, apps. and other electronic modes. So, what is Forex market? It is a communication system based market, a global market, a very large market, which works 24 hours in different time zones. It is an over the counter market, because most of the trades, maximum trades are done through telephone or through other electronic mediums. Now, how is it dealing? from where we will deal and who are the major participants in this market so in this market, there will be a buyer, seller, and the market maker so who are the market makers This is Central Bank Every country has a Central Bank It has a participant Who is the RBI of our country Its work is that RBI is a regulator Who has the reserve of foreign exchange RBI has So, keep an eye on the market because RBI regulates the market. Keep an eye on the market so that the value of Indian currency does not decrease from the value of other currency. And it also follows the guidelines related to it. Second is commercial banks. Commercial banks, like private banks or PSBs, government banks, participate in this. Third is investment funds, big companies. Investment Funds companies or Investment Banks participate in this. Then there are Forex Brokers who do the Brokery of Forex. The Forex Brokers participate in this. And then who participate in this? The big large corporations participate in this. And then who participate in this? Individuals. Come up. who are the market makers and who are the participants Central Bank, Commercial Bank, Investment Funds, Investment Banks, Forex Brokers, Corporations and Individuals All these people participate in this market. This is also called market makers. Now, next time, we will see what are the features of this forex market. First feature is that this market works 24 hours. That means it works round the clock. Second feature is that it works in different time zones. Different time zones, different countries are located. And it is working in every country. That's why it works round the clock. Second feature is that this market is very dynamic. Dynamic market means that the value of currency is value changes every 4 seconds. That means if we are looking at the exchange value of a foreign currency and after 4 seconds the value of that currency changes. This is a very dynamic market. This is a global market. There are no boundaries. This is an OTC based market. It works on telecommunication. other electronics, mediums, mobile phones, internet, they work through this. This is not a market with physical boundaries. Second, it is highly liquid market. It has a lot of flow. It has large trade, large capital base in this market. And this market is affected by government policies. This is affected by the government policies. The market will run as per the government policy. The government policy affects the market. This is about the forex market where we operate the foreign exchange. We operate the foreign exchange in the forex market. What did we learn in this? First, we learned what is a foreign exchange? What is a foreign exchange? Currency includes currency notes, postal orders, money orders, bill of exchange, letter of credit, property notes and drafts. like Cards, Cakes, Credit Cards etc. All these instruments are called Currency After that, we will discuss about Currency Notes Currency Notes means Cash in the form of Coins and Bank Notes that are called Currency Notes After that, what is Foreign Currency? As we have studied about Foreign Currency We will call any other country's Currency as Foreign Currency What is Foreign Exchange? It is a currency that is in the form of Credits, Deposits etc. Balance which is payable in foreign exchange means which is payable in other country's currency that too we will call foreign exchange. Second, check, drafts, traveler checks or bill of exchange or which are drawn outside India, which are drawn by a bank, individuals or corporations and those are paid in India and in Indian Rupees so we call it a foreign exchange. Suppose, if I go to visit some foreign country, I will have Indian rupees. So, I have to convert my money to go to that country. So, what will I have to do? Suppose, I go to visit Europe. I have INR. So, what will I do in Europe? I have to convert my money to go to that country. So I needed this type of foreign exchange. Now the second thing is operations. Now this foreign exchange means to change. Now suppose I am going somewhere in the country. So where will I exchange it? So where I am, I will exchange money there. So money exchanger is also a part of foreign market. Or suppose if my relative goes to study abroad in the US and I have to send him a fund. So I will send fund through my bank. But I will have the fund in Indian Rupees. But we have to send it in USD. So we will see the value of USD. We will transfer that much rupees. Then bank will convert that much rupees in USD. And then send it there, in US. So in this way, I took help of bank. So what happened with bank? Commercial bank is for retailers and customers. Now, what are the operations? Forex market, who makes the forex market? As I said, these are all market makers, Central Bank, Commercial Bank, Investment Funds, Forex corporations, individuals, all of them create the forex market. And in the same market, foreign exchange is done, operations are done. So, what are the things in operations? In operations, the subject is a very big subject. What is in operations? For example, if I have relatives in US or Australia and I need to send fund to them So, what I will do is, the fund that I will send is also an operation This is also a part of operations, I am doing operations of foreign exchange If I want to import something, if I want to import something from outside I don't have to import anything from outside, like big celebrities import things from outside So they also have to do the operations of foreign exchange. And where all the operations are done? In the forex market. Because forex market is the market where we do currency conversion. If we export or import in another country, then we will need foreign currency. We will need to exchange it. So we will take help of foreign market. And we will do all these activities in the operations. Thank you. So, today's lecture you have understood what is form exchange and how we need it. What are the things we will study in operations and what is this market and where does this operation take place. So, that's all for today. Jai Hind.

Then we provide our services to other countries or take services from other countries. That means import of services or export of services or travel or business or cross border movement. For all these things we have to convert one country's currency into another country's currency So the conversion we do, the one country's currency into another country's currency This is called Foreign Exchange This is called Foreign Exchange So the business we are doing globally, suppose there is an exporter in India If someone is importing something from America, he will get the payment in USD. Now, he will convert the payment in USD and take it in Rupees. If we are importing something from Germany to India, the importer is paying in Rupees.

But the exporter in Germany needs the payment in Euro. So, what is the value of the invoice? What is the conversion of the invoice into the home currency? Foreign exchange.

Okay? Conversion of the value of the invoice into the home currency is called foreign exchange. You understood? All these activities, i.e. converting one country's currency into another country's currency is called foreign exchange. Okay?

Let's go broadly. If we look at it in a broad sense, then foreign exchange is also called foreign exchange. If we are Indian, then any currency other than Indian currency is called foreign exchange. As well as the conversion of one currency of one country to that of other is also called foreign exchange.

One is foreign currency and other is conversion of currency of one country into another. Conversion of currency of one country into another country is called foreign exchange. Foreign exchange is also called forex in short term or Fx.

So we understood what is foreign exchange and what is the meaning of it. Foreign exchange means currency of any country other than India is called foreign currency and second is exchange of one currency into another country is called foreign exchange. So, this is the way of exchange.

Now we will elaborate it slowly Now see I said that foreign exchange is a foreign currency Means We call foreign exchange as a foreign currency Means what is foreign exchange? Foreign currency Foreign currency is a foreign exchange Foreign means any country other than India It is called foreign And currency is another thing Now let's see what is currency What is currency? According to FEMA guidelines, currency includes the currency notes. What is currency? Currency includes currency notes.

Currency notes are called currency. And what else do we call it? Like poster notes.

Postal notes are also currency Postal order is also currency Money order is also currency Later on creditors are also currency currency is also called currency the bill of exchange or the promissory note or credit card or similar instruments are called currency now comes the second step what is currency note See, it seems like currency notes, what does it mean? It means the currency of the paper money. But it is not like that. What currency notes means is that it is also coins. Means cash in the form of coins and bank note.

Cash in the form of coins and bank notes is called currency notes. Rest of the things like postal notes, postal order, money order, LC, BOE, promotional note, credit card or... Checks, Drafts, Traveller Checks, etc.

All these are Currency. We will study about all these things. Like Traveller Checks, Drafts, LCs, Wheel of Exchange, Promissional Notes, Credit Cards etc.

You will understand these things one by one. What is Currency? Currency comes from Postal Notes, Postal Order, Money Order, Traveller Checks etc. like currency, boe, credit cards, etc. and other instruments like H-per-day notification of RBI all these things will be called currency Secondly, currency notes includes cash in the form of coins and bank notes Now, let's talk about foreign currency When we are talking about foreign currency what does it mean?

Is it a paper money for us? or is it just a paper money for us? Foreign currency means all the currencies Foreign currency means all the currencies and foreign currency so in foreign exchange what will be the meaning of foreign exchange?

what does it mean? all those foreign currencies whatever foreign currency is will be a foreign exchange so all these things will come in foreign currency because in currency all these things are there so it will come in foreign exchange too to say it in big words foreign exchange includes Checks, drafts, traveler checks, letter of credit, or bill of exchange, or promissory notes, which are drawn outside India, outside India, and those tables in India. Foreign exchange is the conversion of one country's currency into another country's currency and the second is the foreign exchange of any country's currency to another country's currency We denote foreign exchange as Forex or FX Now let's talk about Foreign Exchange Now we know about Foreign Currency What is Foreign Currency for us?

For us, US Dollar is Foreign Currency For us, GBP is Great British Pound or Australian dollar. All these are foreign currency for us. Similarly, Indian rupees for America is foreign currency for them. For America, Australia and Germany. In the same way, the foreign currency is the INR of other countries.

Now let's come to the second part of this. The second part is operations. In foreign exchange, we have learned the conversion of currency of one country into another. So where does this work? So, where will the work be done?

Where will the money be transferred? If there is a currency of one country, then we have to convert it to another country. Where will that work be done? So, where will that work be done and how will that work be done? Where will we study these two things?

Where will that work be done? So, the work that we do in the foreign exchange market, which we call the forex market in short, where will that work be done? Now let's see what is forex market?

Forex market is a market that is a Forex market is a global market. It means it has no boundary. Global market means it has no boundary. Like we see other markets like commodities market, fish market, vegetable market.

Which is falling from four walls. There is a buyer, a seller, we come to buy and we become buyer. Or some dealers or some dealers that are willing to buy.

This is a global market with no boundary. It works in different time zones and around the clock. This means it works 24 hours.

This market is open 24 hours. 24 hours means that suppose a market opens at 9 in the morning in India. But in India, it opens at 9 in the morning.

In America, it opens at night. When the afternoon time of Indian market is over, the market of England is going to open. So this market works in different time zones and countries.

In this way, this market is going to run 24 hours round the clock. This is a market which has no boundary. So this market is not a boundary, it is a global market.

How will it work? Who will buy and how will it sell? Because there is no physical presence somewhere. This total market is a communication system based market. What is the market?

It is a communication system based market. Communication system based Communication system based means This market is OTC based OTC means it works over the counter Over the counter means It works over the counter This is used for telephone, other electronic mediums like internet, mobile phones, apps. and other electronic modes. So, what is Forex market? It is a communication system based market, a global market, a very large market, which works 24 hours in different time zones.

It is an over the counter market, because most of the trades, maximum trades are done through telephone or through other electronic mediums. Now, how is it dealing? from where we will deal and who are the major participants in this market so in this market, there will be a buyer, seller, and the market maker so who are the market makers This is Central Bank Every country has a Central Bank It has a participant Who is the RBI of our country Its work is that RBI is a regulator Who has the reserve of foreign exchange RBI has So, keep an eye on the market because RBI regulates the market.

Keep an eye on the market so that the value of Indian currency does not decrease from the value of other currency. And it also follows the guidelines related to it. Second is commercial banks.

Commercial banks, like private banks or PSBs, government banks, participate in this. Third is investment funds, big companies. Investment Funds companies or Investment Banks participate in this.

Then there are Forex Brokers who do the Brokery of Forex. The Forex Brokers participate in this. And then who participate in this?

The big large corporations participate in this. And then who participate in this? Individuals.

Come up. who are the market makers and who are the participants Central Bank, Commercial Bank, Investment Funds, Investment Banks, Forex Brokers, Corporations and Individuals All these people participate in this market. This is also called market makers.

Now, next time, we will see what are the features of this forex market. First feature is that this market works 24 hours. That means it works round the clock. Second feature is that it works in different time zones. Different time zones, different countries are located.

And it is working in every country. That's why it works round the clock. Second feature is that this market is very dynamic.

Dynamic market means that the value of currency is value changes every 4 seconds. That means if we are looking at the exchange value of a foreign currency and after 4 seconds the value of that currency changes. This is a very dynamic market. This is a global market.

There are no boundaries. This is an OTC based market. It works on telecommunication. other electronics, mediums, mobile phones, internet, they work through this. This is not a market with physical boundaries.

Second, it is highly liquid market. It has a lot of flow. It has large trade, large capital base in this market.

And this market is affected by government policies. This is affected by the government policies. The market will run as per the government policy. The government policy affects the market.

This is about the forex market where we operate the foreign exchange. We operate the foreign exchange in the forex market. What did we learn in this? First, we learned what is a foreign exchange?

What is a foreign exchange? Currency includes currency notes, postal orders, money orders, bill of exchange, letter of credit, property notes and drafts. like Cards, Cakes, Credit Cards etc. All these instruments are called Currency After that, we will discuss about Currency Notes Currency Notes means Cash in the form of Coins and Bank Notes that are called Currency Notes After that, what is Foreign Currency?

As we have studied about Foreign Currency We will call any other country's Currency as Foreign Currency What is Foreign Exchange? It is a currency that is in the form of Credits, Deposits etc. Balance which is payable in foreign exchange means which is payable in other country's currency that too we will call foreign exchange. Second, check, drafts, traveler checks or bill of exchange or which are drawn outside India, which are drawn by a bank, individuals or corporations and those are paid in India and in Indian Rupees so we call it a foreign exchange. Suppose, if I go to visit some foreign country, I will have Indian rupees.

So, I have to convert my money to go to that country. So, what will I have to do? Suppose, I go to visit Europe. I have INR. So, what will I do in Europe?

I have to convert my money to go to that country. So I needed this type of foreign exchange. Now the second thing is operations.

Now this foreign exchange means to change. Now suppose I am going somewhere in the country. So where will I exchange it? So where I am, I will exchange money there.

So money exchanger is also a part of foreign market. Or suppose if my relative goes to study abroad in the US and I have to send him a fund. So I will send fund through my bank. But I will have the fund in Indian Rupees.

But we have to send it in USD. So we will see the value of USD. We will transfer that much rupees. Then bank will convert that much rupees in USD. And then send it there, in US.

So in this way, I took help of bank. So what happened with bank? Commercial bank is for retailers and customers.

Now, what are the operations? Forex market, who makes the forex market? As I said, these are all market makers, Central Bank, Commercial Bank, Investment Funds, Forex corporations, individuals, all of them create the forex market.

And in the same market, foreign exchange is done, operations are done. So, what are the things in operations? In operations, the subject is a very big subject.

What is in operations? For example, if I have relatives in US or Australia and I need to send fund to them So, what I will do is, the fund that I will send is also an operation This is also a part of operations, I am doing operations of foreign exchange If I want to import something, if I want to import something from outside I don't have to import anything from outside, like big celebrities import things from outside So they also have to do the operations of foreign exchange. And where all the operations are done?

In the forex market. Because forex market is the market where we do currency conversion. If we export or import in another country, then we will need foreign currency. We will need to exchange it. So we will take help of foreign market.

And we will do all these activities in the operations. Thank you. So, today's lecture you have understood what is form exchange and how we need it.

What are the things we will study in operations and what is this market and where does this operation take place. So, that's all for today. Jai Hind.

Transcript for:Foreign Exchange Operations - Lecture Notes

Transcript for:
Foreign Exchange Operations - Lecture Notes