Banking - Checklist on Foreign Exchange

I

FCNR ACCOUNTS

1.

Details of deposits tallying with Branches

2.

System of reporting

3.

Applicability of notional rate

4.

Revaluation is done every reporting Friday for CRR purposes

5.

Is it debited to proper head of account

6.

Calculation of Interest test checked

7.

Payment authorization made by valid Authority

8.

Liabilities reversed on payment

9.

Method of reconciliation of Nostro Account with FCNR

10.

Revaluations has not to be taken to P&L A/c

II

RESIDENT FOREIGN
CURRENCY ACCOUNTS

1.

Track record of exporters

2.

Permission of RBI

3.

Opening of Accounts of SEZ in compliance

III

EEFC ACCOUNTS

1.

No credit facilities against the security of balances

2.

100% of Inward remittance for Status Holder Exports.

IV

FOREIGN CURRENCY LOANS AND EXPORT CREDIT IN FOREIGN CURRENCY

1.

Whether the bank has formulated an accounting policy for the same

2.

Whether the branch follows the same.

3.

Whether the assets are booked at “A” category branch of “B” category Branch

4.

Whether the Branch collected the Interest properly by duly applying the BC selling rate for the Interest (or) is recovered from foreign currency sources of borrower.

5.

Rupee to be converted to foreign currency by suitable rate.

6.

Overdue loans- overdue interest at 2% more than the normal rate.

7.

Crystallization into rupee liability

8.

Conversion at TT selling rate to market liability

9.

The export borrower availing pre shipment credit in foreign currency has to avail post shipment credit also in foreign currency.

10.

Foreign currency loans granted to domestic borrowers, accounting entries are similar

11.

Re- statement of foreign assets, risk weightage provisioning norms etc.

12.

Name of such accounts and type of arrangement

13.

Funding of these accounts- bonafide transactions- freely convertible balances

14.

System of monitoring overseas banks

15.

Forward purchase/sale of foreign currencies against rupee for funding is prohibited

16.

Temporary overdrawals to overseas branch/ correspondent not to exceed specified limit

17.

Statement to be sent to forex market division of RBI

V

NON RESIDENT BANK ACCOUNTS

1.

Name of such accounts and type of funding

2.

System of monitoring overseas bank not to take a speculative view on Rupees

3.

Forward purchase/ sale of foreign currencies against rupee for funding is prohibited , compliance

4.

Temporary over drawls

5.

Purpose

6.

Period

7.

Statement to be sent to Forex Market division of RBI

VI

INTERNAL CONTROLS

1.

Counter party confirmation should be properly obtained.

2.

Recording the deals at an appropriate time.

3.

Segregation of duties has been done appropriately

4.

The directives by RBI are followed and complied with effectively

5.

Proper system of hedging against possible exchange losses is done where possible.

6.

There are periodic reconciliations of NOSTRO Accounts.

7.

The transactions between the branch designated as authorized dealer and other branches should be periodically done.

8.

Counter party confirmation should be properly obtained.

9.

Recording the deals at an appropriate time.

VII

GUARANTEES AGAINST EXPORTS

1.

Caution List exporters- RBI’s prior approval obtained

2.

Type of Guarantee

3.

Legal/ credit departments approval

4.

Counter Guarantees on performance, advances payment whether obtained a premium remitted to them properly

5.

Collection of commission

6.

Accounting of commission

7.

Accounting entries at BC selling rates

8.

FEMA compliance

9.

Risk Weight Assessment

10

Capital Adequacy

VIII

RECONCILIATION OF NOSTRO ACCOUNTS

IX

COUNTRY RISK

1.

Funded exposures

2.

Investments

3.

NOSTRO minor debit balances

4.

Overdraft in VOSTRO Accounts

5.

Remittances honoured drawing arrangements

6.

Loans and Advances

7.

Trade Credit and receivables

8.

Other Monetary assets

9.

Non Funded Exposures

X

DEALS VERIFICATION

1.

Confirmation of deals from counter parties

2.

Rate Scan

3.

Settlement on due date

4.

Overdue Interest payments

5.

Consistency in recognizing payables and receivables

6.

Mistakes are corrected immediately

7.

Internal adherence to systems

8.

FEDAI rates compliance

XI

VERIFICATION OF DEALS REGISTER

XII

COMPUTATION OF EXCHANGE RATES

XIII

BOOKING AND CANCELLA-TION FORWARD EXCHANGE CONTRACTS

XIV

EXCHANGE POSITIONS AND COVER OPERATIONS AND TRADING

XV

NOSTRO ACCOUNT MAINTENANCE

XVI

RECONCILIATION OF NOSTRO ACCOUNTS BALANCES WITH MINOR ACCOUNTS MAINTAINED

XVII

VOSTRO ACCOUNTS MAINTENANCE

XVIII

RATE SCANNER MAINTENANCE

XIX

MARKET LEVELS VIS A VIS FORWARD PREMIUMS

XX

INTERNAL CONTROL GUIDELINES OF THE BANK AS PER FOREIGN EXCHANGE POLICY IS FOLLOWED

XXI

OBSERVATIONS OF CONCURRENT AUDIT REPORT NOTED AND ACCOUNTED FOR

XXII

RBI GUIDELINES FOLLOWED

XXIII

FOREIGN EXCHANGE DEPARTMENT INSTRUCTIONS AND RULES FOLLOWED

XXIV

FEMA COMPLIANCE