What is a Forex card rate and how it differs from an IBR rate?

by Deepak Madan | Feb 21, 2024 | Blog

What is a Forex card rate?

A forex card exchange rate is like a display board where a bank publishes exchange rates for buying and selling foreign currencies, travel cards, and currency notes. The spread between buying and selling currencies in a card rate is generally kept very wide. For example, SBI forex card rates for USD/INR can be in the form of the below-mentioned table:

When a bank displays a card rate for foreign exchange, it may show both the TT buy rate and the TT sell rate. The TT buy rate is the rate at which the bank will buy foreign currency from the customer in exchange for local currency. The TT sell rate is the rate at which the bank will sell foreign currency to the customer in exchange for local currency. The difference between the TT buy and TT sell rates is known as the bid-ask spread, and it represents the bank’s profit margin for facilitating the transaction. The bid-ask spread can vary depending on various factors, such as market conditions, currency volatility, and the size of the transaction. Customers need to understand the card rate and the bid-ask spread to make informed decisions about foreign exchange transactions and to minimize the costs associated with such transactions.

Do the forex card rates of each bank differ? 

The card rate can differ across banks. Each bank sets its own card rate based on a variety of factors, such as its cost of acquiring foreign currency, operating expenses, and profit margin.

The differences in card rates across banks can impact the cost of foreign exchange transactions for customers. Therefore, comparing the card rates offered by different banks before making a foreign exchange transaction is essential to get the best possible rate.

What is the difference between the card rate & interbank exchange rate?

The card and interbank exchange rates are two different rates used in foreign exchange transactions. The main differences between the two are:

Definition: The interbank exchange rate is the rate at which banks buy and sell currencies with each other in the wholesale market. It is used by banks to settle their transactions and by other financial institutions as a benchmark for pricing their foreign exchange products.

On the other hand, the foreign exchange card rate, refers to the rate derived on a daily basis by bank based on the interbank exchange rates by keeping a substantial margin on buy and sell foreign exchange transactions. Generally the margin loaded in forex card rate is more than 1 rupee on USD/INR transactions, 2 rupee on EUR/INR transactions and 3 Rupee on GBP/INR transactions. This margin can vary across banks based on their different strategies and other market factors.

Calculation: Numerous economic considerations and market dynamics of supply and demand as well as market dynamics of supply and demand, influence the interbank exchange rate. While the bank’s profit margin, the interbank rate, and any other fees or charges are all included in the card rate, which is established by the bank.

Spread: The difference between a currency pair’s purchasing and selling rates for a currency pair is known as the bid-ask spread. Due to banks’ high volume of transactions, the spread for interbank exchange rates is normally quite small, with only a few pips. For example the spread between USD to INR IBR rate is generally 1 to 3 paisa only. As a result of the bank’s profit margins and other expenses related to supplying retail consumers with foreign exchange services, the gap in card rates is often greater and can range between 1 to 3 Rupees.

Exploring the Key Highlights of Foreign Trade Policy 2023

by Deepak Madan | Feb 21, 2024 | Blog

The government had received requests from Export Promotion Councils and leading exporters that they should continue with the current Foreign Trade Policy (2015-20), which had been extended from time to time.

The government has always involved all stakeholders in formulating policy. Hence, it was decided to extend the Foreign Trade Policy 2015-20, valid till Sept 30, 2022, for a further period of six months, till 31.03.2023.

On March 31, 2023, Shri Piyush Goyal, the Hon. Minister of Trade and Industry, revealed his proposed foreign policy for the years 2023 to 2028.

The policy is in place as of April 1, 2023, and it remains in place through March 31, 2028.

The new global trade policy’s goal, unveiled in March 2023, is to grow India’s exports to $2 trillion by 2030. Its flexible and open-ended nature allows it to adapt to changing needs.

The policy is built around four pillars: Developing Areas, Export Growth through Collaboration, Incentive to Remission, and Ease of Doing Business.

A one-time amnesty program is introduced in the FTP 2023 to allow exporters to finish up any old outstanding authorizations and start over.

The “Towns of Export Excellence Scheme” and the “Status Holder Scheme,” promotes the recognition of new towns and exporters, respectively.

The policy emphasizes process re-engineering and automation to make doing business easier for exporters and growing sectors, including dual-use high-end technological products under e-commerce export, SCOMET, and merchanting trade from India.

The strategy strongly emphasizes export development and promotion, shifting from an incentive system to one that is facilitating and built on the technological interface and collaborative principles.

Building on prior “convenience initiatives,” the guideline also codifies implementation procedures in a paperless, online world.

Here are the key points of the new foreign trade policy:

1. The Foreign Trade Policy (FTP) 2023 is a dynamic, open-ended policy that will accommodate emerging needs.
2. The policy aims to increase India’s exports to $2 trillion by 2030.
3. The four pillars of FTP 2023 are Incentive to Remission, Export promotion through collaboration, Ease of doing business, and Emerging Areas.
4. The policy is based on the continuity of time-tested schemes facilitating exports and a nimble document responsive to the trade requirements.
5. The FTP 2023 encourages recognition of new towns through the “Towns of Export Excellence Scheme” and exporters through the “Status Holder Scheme.”
6. The new FTP is offering a one-time Amnesty Program for exporters to finish the previous round of pending authorizations and begin anew.
7. The strategy strongly emphasizes export development and promotion, shifting from an incentive system to one that facilitates trade and is based on concepts of cooperation and technological interface.
8. Exporters are being given more credit by using automatic IT technologies with a risk-management framework for various permissions under the new FTP.
9. Regional Offices will now administer duty exemption programs for export manufacturing in a regulated IT system environment, doing away with the necessity for a manual interface.
10. The FTP 2023 expands on prior “ease-of-doing-business initiatives” by codifying implementation procedures in an online, paperless environment.
11. Due to reduced pay structures and IT-based programs, MSMEs and other groups will find it simpler to enjoy export benefits.
12. In addition to the 39 existing towns, four additional towns—Faridabad, Mirzapur, Moradabad, and Varanasi—have been named Towns of Export Excellence (TEE).

Overall, the new FTP aims to promote exports, enhance competitiveness, and promote sustainable development in the Indian economy.