iob ppt _ karthiga. d
TRANSCRIPT
1 USD = ?
A STUDY ON FOREIGN EXCHANGE RISK
MANAGEMENT TECHNIQUES OF THE CUSTOMERS
Under the guidance of Dr. B. CHARUMATHI,
Reader & Faculty Advisor Corporate Relations and
Placements
Indian Overseas Bank
• Founded on 10th February 1937
• In 1969 - the bank was nationalized
• Now - 1845 domestic branches and
12 branches overseas.
IOB - Pondicherry
• Commenced in the year 1948• Till 1992, the bank was 100%
manually operated• 1993 partial automation and 1995 full
automation.• 2005, they have implemented
networking• September 2009, this branch was
allowed direct SWIFT connectivity.
• To understand the Risk Management Techniques
• To understand the risk involved in the Forward
contracts
• To analyze the trend of the NRI deposits at the Bank
• To identify the problems associated with Pre-
Shipment and Post-Shipment advances
• To examine the relationship between the inflow and
outflow of foreign currencies at the branch level.
OBJECTIVES OF THE STUDY
ILLUSTRATION
Ordered100 tonnes of Cotton Yarn
Ordered 100 tonnes @ USD 750/tonOn date of order 1 USD = Rs 46.77 Total cost = Rs. 1,28,61,750 On day of payment 1 USD = Rs 47.77Total cost = Rs. 1,31,36,750
Loss = Rs. 2,75,000
Cont…
INSTRUMENTS FOR HEDGING A RISK
• Forward contract
• Futures
• Options
• Swaps
FORWARD CONTRACT
• Forward Purchase contract• Forward Sale Contract
• Fixed Forward contract• Option Forward contract
FORWARD CONTRACT
• Forward contracts ended at Premium
• Forward contracts ended at Discount
NRE Deposits
NRE Savings
EXIM RATIO EXIM Ratio
=
Value of Export/Value of Import
Working of the EXIM ratio
• Consolidation of total value of
exports and imports.
• Calculation of cross rates
• Conversion of all the currencies into
US Dollars
Total value of exportsYEAR/ CURRENCY USD EURO CHF GBP CAD AUD JPY
Apr 06 – Mar 07 1128720 263444 28783 17494 nil nil 486114
Apr 07 - Mar 08 1207908 202590 50197.8 5247.3 1888.17 nil nil
Apr 08 – Mar 09 7276421 213781 97809 17728.5 1121.15 nil 52531306
Apr 09 – Mar 10 3178527 3638718 105391 72437.3 166.5 nil 6573036
YEAR/ CURRENCY
USD EURO CHF GBP CAD AUD JPY
Apr 06 – Mar 07 1986780 72513.5 nil nil nil nil Nil
Apr 07 - Mar 08 2212371 154374 49909.2 2798.5 nil nil Nil
Apr 08 – Mar 09 8908881 375833 124659 27580 nil 110480 1188053
Apr 09 – Mar 10 4013242 99783.6 45904.5 5121.26 nil 51100.5 Nil
Total value of imports
CROSS RATES
EURO / USD = 57.20 / 42.90 1 EURO = 1.33 USD
CURRENCY USD EUR CHF GBP CAD AUD JPY
AMOUNT 2212371 154374 49909.2 2798.5 nil nil nil
CROSS RATE 1 1.33 0.82 1.97 nil nil nil
AMT IN USD 2212371 205317 40925.5 nil nil nil nil
GRAND TOT(IN USD) 2,464,127
Value of imports [April 2007 – March 2008]
CURRENCY USD EUR CHF GBP CAD AUD JPY
AMOUNT 1207908 202590 50197.8 5247.3 1888.17 nil nil
CROSS RATE 1 1.34 0.81 1.98 0.87 nil nil
AMT IN USD 1207908 271470 40660.2 10389.7 1642.71 nil nil
GRAND TOT(IN USD) 1,532,070.644
Value of exports [April 2007 – March 2008]
CALCULATION
EXIM ratio = Value of exports / Value of
Imports
= 2464127 /
1532070.644
= 1.61 times
Results for 4 years
April 2006 – March 2007 – 1.08 times
April 2007 – March 2008 – 1.61 times
April 2008 – March 2009 – 0.18 times
April 2009 – March 2010 – 0.28 times
SUGGESTIONS - Bank
• Bank to enter into inter-bank Forward
contracts
• Banks should check that Forward
contracts are not used for
speculation purposes
SUGGESTIONS - Customers
• Enter into more Forward contracts
• EEFC account holders can also enter
into Forward contracts
• Calculate the amount using Cross
rates and enter into Forward
contracts in that currency
BIBLIOGRAPHY
• Foreign Exchange – By C. Jeevanandam• International Business – By Francis Cherunilam • www.iob.in • www.forex.com• http://www.forex4you.com• http://forex-history.net• http://www.x-rates.com• http://www.indexmundi.com• http://www.economywatch.com
KARTHIGA. DMBA I YR
PONDICHERRY UNIVERSITY