Delhi Based Chemical Importer- Transaction Process Outsourcing

Delhi Based Chemical Importer- Transaction Process Outsourcing

15 Sep 2020 12:27 PM


An importer based out of Delhi had taken up TPO and Advisory services from Myforexeye. He had an import payment of $500,000 ten days later which he wanted to hedge using multiple forward contracts. Myforexeye dealers called his bank to book the contracts. The bank did not give direct treasury access to the client. Also, the bank was offering a net forward rate of 5 paise higher than the actual rate.

Myforexeye Value Addition:

Myforexeye dealer, along with the client, had to call the Relationship Manager who further connected us to the treasury. When asked for the bifurcation of the net forward rate, the dealer quoted the correct spot rate but the premium was 5 paise higher. The following are the few arguments that the bank offered and how Myforexeye dealer countered those arguments:-


Myforexeye Dealer

  • The exact market rate can’t be provided for an amount of less than $10 million
  • The Premium offered was higher by 5 paise, when they are already charging a bank margin.

According to revised RBI Guidelines- All forward contracts with retail clients shall be executed at the ongoing interbank /market rates and shall be time stamped. For all other derivative contracts, the midmarket mark of the derivative shall be disclosed to the client before entering into the contract and the same must be included in the term sheet.

The maximum he improved the rate was by half paisa.

One deal size was $150000. A loss of 4.5 paise per dollar would lead to Rs.7500 which is worth negotiating.

Can’t give actual spot, as he has to take a reverse position himself and thus he’ll be at a loss.

The Spot provided by the bank was correct, it was the premium which was higher- This does not support his argument.


After a long discussion, our Myforexeye dealer asked for annualized premium which the bank denied providing by further unreasonable arguments. The total loss client was incurring on this deal was Rs.25,000.

The only way to provide transparency to the client was to change the bank. Myforexeye associated the client with a partner bank which gives treasury access and is sure to provide transparent rates to the client in the future.

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