Explain the functions of foreign exchange department
Answers
The Foreign Exchange department, which is also being called as the International Banking Division, is one of the important departments of the banks operating in international market. In India also all scheduled commercial banks, both in the nationalized or non-nationalized sectors, do have Foreign Exchange departments, both at their principal offices as well as offices, in metropolitan centers. This department functions independently under the overall change of some senior executive or a senior officer well-versed in foreign exchange operations as well as in the rules and regulations in force from time to time pertaining to foreign exchange transactions advised by various government agencies.
The principal function of a Foreign exchange department is to handle foreign inward remittances as well as outward remittances; buying and selling of foreign currencies, handling and forwarding of import and export documents and giving the consultancy services to the exporters and importers. Besides this, the department also gives the financial assistance in relation to the foreign trade, i.e., it gives assistance to the exporters by way of financing the exports and imports by giving them the financial assistance to clear the consignments or open a letter of credit. The department issues letters of credit for their importer clients and handles letters of credit received from overseas correspondents in favor of exporters from India. Issuance of Performance and the Bid Bond guarantees and tender document is also one of the important functions of the banks that are dealing with foreign exchange business.
Hi dear!
function of foreign exchange department are-
1. Transfer Function:
The basic function of the foreign exchange market is to transfer purchasing power between countries, i.e., to facilitate the conversion of one currency into another. The transfer function is performed through the credit instruments like, foreign bills of exchange, bank draft and telephonic transfers.
2. Credit Function:
Another function of foreign exchange market is to provide credit, both national and international, to promote foreign trade.
3. Hedging Function:
In a situation of exchange risks, the foreign exchange market performs the hedging function. Hedging is the act of equating one's assets and liabilities in foreign currency to avoid the risk resulting from future changes in the value of foreign currency.
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