• Vadilal Market
  • Vadilal Market
vadilalmarkets It's all about managing risk...

Foreign Exchange business in India was confined to few foreign banks only till the period 1959. The said group banks were known as Exchange Banks. They had formed an Association, which was known as the "Exchange Banks' Association". It was mainly covering the areas of activities within Bombay (now Mumbai), Calcutta (now Kolkata), Madras (now Chennai), Delhi and Amristsar. On introduction of the exchange control in India during 1939, the said Association was functioning within rules framed by RBI. The rules and regulations - introduced and practiced were also covered by RBI approval. On account of expansion in the foreign trade, and business, RBI allowed schedule commercial banks also to undertake foreign exchange transactions. Those banks which were allowed and permitted by RBI to deal in foreign exchange transactions. The banks are known as AD - Authorized Dealers. The FEDAI - Foreign Exchange Dealers' Association of India was formed with approval of RBI during August 1958. It was under ECM-RBI directives under reference ECS / 298 / 86 / 58-Gen.20 dated 16th August, 1958, whereupon, Ads, i.e. authorized banks were granted with open permission to handle foreign exchange business. The body, known as EXCHANGE BANKS ASSOCIATION, was changed to be known as FOREIGN EXCHANGE DEALERS’ ASSOCIATION OF INDIA’.

All Public sector banks, foreign banks, private sector and co-operative banks and certain Financial institutions are the members of FEDAI. FEDAI is a non-profit making Association and relative expenses are shared by all its member banks.

FEDAI acts as a facilitating body and in consultation with Reserve Bank of India, frames rules / regulations for ADs in India for conduct of the foreign exchange business related transactions.

FEDAI is the Association of the member Banks. Naturally, the guidelines and rules prepared were of interest of the member Banks. However, on account of liberalization and reforms introduced during 1991 to boost the foreign trade to and fro India, it becomes imperative by FEDAI to review Rules and Guidelines. FEDAI has also taken due care of the interest of both Importers and Exporters while revising rules and guidelines. The present revised rules are effective 1st September, 2004. [amendments are periodically being made to suit both, banks and EXIM communities, also reading with RBI directives whenever changed]
The Objective :
The main objective of the Association as defined in its Memorandum is to further the interests and regulate the dealings of and between Ads in Foreign Exchange both inter se, and with the public, forex brokers, the Reserve Bank of India and other bodies. Although the Memorandum specifies further incidental or ancillary offshoots therefrom, the main objective as above encapsulates the fundamental role.

THE MANAGEMENT : The Association has :        A/   Chairman;     B/   Vice Chairman;     C/    Additional Vice Chairman,  and  D/   Managing Committee, 
          all of whom are member banks of the Association.
The FEDAI Rules :
The fourth edition which has come into effect from 1st September 2004, is the result of the due care taken into account by FEDAI both in the interest of banking industry and business communities. In the revised FEDAI guidelines, various Rules are made mandatory. Though no deviation is made permissible, the specific discretion is vested in the relevant rule itself with member banks.

The revised general guidelines / instructions on recovery of charges have been framed - prescribed in such a manner to suit both banking and business and trade. The flexibility accounted as also mandatory rule prescribed under head "charges", offers benefits to both banking and business community. Besides, the FEDAI also carry periodical reviews / amendments to the Rules.

Reading with few of the directives of Expert Group on Forex Market in India (Sodhani Committee), FEDAI has undertaken few of the projects, viz., :

Training :
Undertaking various sessions / workshops / seminars with the help of the regional prime banks, on all India basis, with the main objective to educate the Exporters in their day-to-day operations with the Banks.

Introduction :
New systems like derivative, exchange formalities, exchange rate mechanism system, etc., for ultimate benefits to Exporters;
The 4th Edition of FEDAI Rules is now in force effective 1st September 2004. 
Removal of chapter : "Charges" :
This issue was discussed with various authorities like RBI, IBA (Indian Banks Association) and FEDAI, which was reviewed by the RRA (Regulations Review Authority) which had emphasized that the practice of fixing charges by such self regulatory bodies was not much needed in the present context of liberalization and that the fixing of any charges should be totally dispenses with and banks will have complete freedom to decide on their own. 
The act of mandatory of fixing charges for forex transactions, is now eliminated - though it should be kept in mind that FEDAI still playing important role in steering it along other route as mentioned above in most of the pro-active role.
Following are the Rules covered in FEDAI
Rule No. Description of Rule
01 Hours of Business
02 Export Transaction
Import Transaction
Clean Instruments
Foreign Exchange Contracts
Early Delivery, Extension and Cancellation of Foreign exchange contracts.
Business Through Exchange Brokers.
Interbank TT settlement- settlement of Interbank TTs and Despatch.