14 CURRENCY EXCHANGE

N. Rekha

epgp books

 

 

 

 

Introduction

 

Many hotels having a high proportion of overseas visitors, will offer foreign exchange facilities. Hotel exchange the foreign currency for local currency. Hotel can not sell foreign currency. Against the settlement of a bill, the change must be given in local currency. Hotel gets the rates of different foreign currency from the bank on daily basis. Exchange rates of major currencies are to be displayed on a board with the authorization number given to the hotel by Reserve Bank of India. It is important for every cahier to understand the types of different foreign currencies the guests carry. Normally foreign currency notes or travelers cheques are accepted by a hotel, but not the coins.

 

Foreign currency exchange and travellers cheque exchange is a type of sundry guest facility offered to their guests by the hotel. Normally, hotels have contract with authorized currency exchange dealers and do the exchange on their behalf after procuring license for the same.

 

These dealers send currency exchange rate to the hotel on a daily basis, which is updated on their software and also displayed on the cashier desk.

 

Some hotels provide this facility only for in-house guest, this also can change depending upon the government regulation on that particular region where the hotel is situated. Hotel may also charge a commission percentage on top of the normal exchange rate as a fee to the service given to the guest.

NOTE:This certificate should be preserved by the holder to facilitate reconversion of th balance, (out of the amount stated at C) if any, into foreign currency at the departure from India and/or for payment of passage/freight cost in rupees, if neces

 

While handling foreign currency the cashier should

1. Check the current rate.

2.Issue a receipt quoting each transaction, guest name, room number, passport number and the rate of exchange

 

Arrange for the foreign currency to be banked on the following day on a separate pay-in-slip. (As the exchange rates can change frequently.

 

Hospitality is the key concept which contribute as a business with courtesy in hotels. As one of the service provided by the hotel foreign currency exchange is one of the important service. In order to provide this facility to the guest the hotel follows some steps to do the work.

 

1.The first step is that the hotel authority should get a license to exchange foreign currency. Hotel should be authorized to deal with foreign exchange transactions, a hotel can not exchange foreign currency. So, a hotel has to be licensed for the front officer/ cashier to deal with the guests in this service.

2. The rate of exchange should be exhibited considerably.

3. Government monitors all foreign currency that extended by hotels.

4. The hotel should abide to the rules and regulation fixed by the central banks. The rules as follows:

5. Firstly a hotel has to obtain a license from the government to exchange foreign currency.

6. License will be given for particular personnel not for the whole member of a hotel. Normally, license goes to the front officer/ cashier.

7. The front office should have the knowledge about the system before going to exchange for the favor of his guest.

8. Central bank governs the exchange rate. On a daily basis updated rate is strictly followed in the exchange desk.

9. To exchange the money, cashier should ask the guest for his/her identification from passport and will verify the date of issue, place of issue of the passport and it’s expire date. He will also confirm of the guest status; whether resident or non-resident guest. Only for resident guest the front officer will advance for exchanging the money.

10.If the guest is nonresident, the cashier will guide the guest to go to the front office manager. The front office manager can give the authorization of exchanging money for the regular guest and VIPs.

11.After all the above mentioned procedures, the cashier will receive the cash in Dollars, Pound starlings, Euro Yen etc or Traveler check.

12.  The details should be filled in the Foreign Exchange Encasement Certificates. The Foreign Exchange Encashment Certificates come in serially numbered book for the better control.

13.  The cashier will ask the guest to sign the same Travel Check that the guest signed before.

14.  Then the cashier should request the guest to sign the Foreign Exchange Encasement Certificate similar to the passport’s signature.

15.  Then the guest will be given his/ her total money in local currency what is exchanged by the cashier.

16.  The cashier needs to affix a copy of the Foreign Currency Encasement Certificate to the travel check. He/she has to keep the record of the exchange.

 

HOW THE FOREIGN EXCHANGE IS HANDLED?

 

The Central Reserve Bank of India under the provisions of FERA 1973, has given the authority of handling Foreign Exchange to State Bank of India (and its subsidiaries), Public Sector Banks, Private Sector Banks and Foreign Banks. These sectors have been delegated the authority of handling Foreign Exchange and they are explained through various Chapters of Exchange Control Manual, a book released by Reserve bank of India. Again Banks that are authorized to handle Foreign Exchange, designate certain branches to handle the Foreign Exchange transactions, depending on the necessity and potentiality of branch’s location and they are called Authorised dealing branches.

 

Other than the above mentioned sectors, Reserve Bank of India also authorizes reputed Hotels and other private establishments to handle Foreign Exchange in a limited way (like they can issue / encash Foreign Currency Travellers’ Cheques / Foreign Currency Notes) to cater to the foreign tourists’ requirements. They are called Authorised Money Changers (AMC). They are classified as FULL-FLEDGED / RESTRICTED MONEYCHANGERS.

 

TYPES OF FOREIGN EXCHANGE TRANSACTIONS:

 

Authorised Dealers can handle two types of transactions viz. Purchase and Sale of Foreign Exchange. Specifically, when the customers tender export bills are denominated in Foreign Currency, Authorized dealers shall purchase the Foreign Currency Bill. Likewise, when customers request for a remittance in Foreign Currency towards payment of Import bills, then Authorized Dealers have to sell Foreign Currency to them. From this, it is clearly understood that both selling and purchasing transactions are from the bankers point of view.

 

FOREIGN EXCHANGE TRANSACTIONS SETTLEMENT:

 

Settlements of Foreign Exchange Transactions are made through the following accounts: –

 

1) NOSTRO Account: Our Account with you;

 

Nostro account is one in which the account which is maintained by an Authorised Dealer with a foreign bank is called “NOSTRO” Account or “Our Account with You”. When an material like a cheque or an export bill is purchased the same is sent to the overseas bank (correspondent) for realization, the amount is collected and credited to Authorized Dealer’s account with them.

 

Likewise, when a draft is issued on a bank for foreign correspondent it will be paid at the overseas centre by debiting the NOSTRO Account of the issuing bank.

 

2) VOSTRO Account: Your Account with us

 

Ex.: Foreign banks (Correspondents) also maintain accounts with any bank in India in Indian Rupees for the purpose of settling their rupee transactions and these accounts are called “VOSTRO” Accounts meaning “Your Account with us”.

 

3) LORO Account: Their account with them

 

Ex.: As the State bank Of India maintaining an account with foreign correspondent say BTC New York, Canara Bank may also maintain a Nostro Account with them. When State Bank of India advises BTC New York for transfer of funds to Canara Bank Account with them, Canara Bank Account is titled as Loro Account “i.e. their account with you”.

 

A bank in India deals with an export credit bill on realization of export bills negotiated /purchased/discounted, the foreign currency funds is to be credited to our account. For this purpose, we maintain Foreign Currency accounts with our various correspondents abroad. The account is called NOSTRO account. Once the proceeds are credited in our NOSTRO account, we receive the statement, based on which, the concerned branch, which have handled the transaction, will be informed.

 

Likewise, when we want to make remittances, in favor of our customers towards import payments, miscellaneous remittances etc., we give instructions to our correspondents, to debit our NOSTRO account and effect payment.

 

At times our correspondents maintain VOSTRO accounts (Rupee accounts of Non-resident banks) with our bank and payment or receipts are made through this account. For exports, they will authorize us to debit their VOSTRO account and for imports, they will give instructions to credit their account.

 

Similarly, whenever the account of one bank in the books of the same correspondent, where we are maintaining our NOSTRO account, the other bank’s account with the correspondent is referred as LORO account.

 

EXCHANGE RATES:

 

The calculated rate, at which a currency is converted into another currency, is called the rate of exchange. Such rates are arrived from the base rate, which is decided by market forces and is quoted on a routine basis. Banks quote various rates for different types of operations like Bill buying, Bill selling, TT (DD/MT/TT) buying , TT (DD/MT/TT) Selling etc. The rates are arrived after loading suitable margins, as per F.E.D.A.I. (Foreign Exchange Dealers Association of India) guidelines.

 

F.E.D.A.I.

 

This is an association of all the AD banks in India to liaise with each other, with RBI and other agencies. They prescribe the rules and charges for various foreign exchange transactions, with the consent of all the members.

 

FOREIGN EXCHANGE MARKET:

 

Foreign Exchange Market is an Over the Counter Market. It means that there is no fixed market place. Market players are located in different places. It has no barriers. All the transactions are done through telecommunications followed up by written confirmations. Hence there is the need of high level professionalism for the market players, which is in place.

 

Market Players are Authorised Dealers, Recognised Foreign Exchange brokers, Exporters, Importers, Reserve Bank of India.

 

Foreign banks in abroad also comes under the categorization of market dealers.

 

Foreign Exchange Market is a three tier market:

 

 

a)Merchant       Market:   This   is   between  Authorised  Dealers    and  the  public.

b)Inter Bank Market : This is carried out between Authorised Dealers in India including Reserve Bank.

c)International Market : This market includes all Banks who deal in Foreign Exchange at selected international Foreign Exchange Centres like Singapore, Hong Kong, Tokyo, London, New York etc. When an Authorised Dealer is unable to cover a deal in the local market, he will approach the other Bankers in the International Market for covering his deal.

 

Foreign Exchange is a limited commodity, Hence, it is subjected to control.

It gives request for a price according to the forces of supply and demand.

It has both domestic and international active market .

 

The job of the Authorised Dealers is to maintain stocks of Foreign Exchange abroad to meet contingencies in the form of balances in Nostro Accounts with their Correspondent Banks.

 

Guest needs for the opportunity to exchange currency and travelers cheques will be carried out to the complete satisfaction of the guest and without loss to the hotel.

 

Procedure

  1. Exchange of foreign currency is a courtesy extended to registered hotel guests only. Local currency will not be accepted in exchange for foreign currency.
  2. To complete a foreign currency exchange, verify the currency is one of the hotel exchanges and confirm the effective exchange rate. If a guest request to exchange a currency is not available advise them of a location which can meet their needs,
  3. Verify the guest’s name and room number in the computer before completing the foreign exchange voucher/receipt.
  4. Record relevant details of the foreign exchange voucher for the guest to sign. Include the dollar amount and type of currency received, the current exchange rate, and the amount of local currency provided. Check the calculations for accuracy.
  5. Carefully count the currency received from and given to the guest to ensure accuracy of the transaction.
  6. Double check that all amounts given to and received from the guest equal the amounts referenced on the form. Do not finalize the transaction if there is any question of theses amounts.
  7. While the transactions is in process, the monies on the counter, in sight but out of reach of the guest, until the GSA and the guest are in agreement on the transaction.
  8.  Foreign currency received will be stored in the foreign currency drawer once the transaction is complete.
  9. Provide the currency to the guest, counting out the amount so the guest can clearly see the denomination of each bill.
  10. Advise the guest to retain the foreign exchange receipt for the purpose of exchanging the unused portion at the end of their trip.
  11. Complete the transaction with the guest by thanking the guest and asking them if there is anything else you can do for them.
  12. Place the appropriate copy of the form in the cash drawer, and lock the drawer as needed.

Summary

 

If a guest desire is to pay their hotel bill with foreign currency, first follow the above steps, then apply the guest’s newly obtained local currency to settle their bill as a cash check-out. The hard copies of all vouchers/receipts should be batched, with their corresponding foreign currency attached, and should be submitted with the control form in accordance with end of shift procedure.

 

 

you can view video on CURRENCY EXCHANGE

 

Web links

 

  • https://www.investopedia.com/terms/e/exchangerate.asp www.businessmanagementideas.com/foreign-exchange…/characteristics…foreign-exch
  • www.letslearnfinance.com/foreign-exchange-market-features.html https://businessjargons.com/functions-of-foreign-exchange-market.html gccexchange.com/blog/different-types-of-foreign-currencies