Role of FEDAI and FEDAI Rules;

Introduction

The Foreign Exchange Dealers Association of India (FEDAI) is a self-regulatory organization (SRO) that was established in 1958. FEDAI is responsible for developing and maintaining the foreign exchange market in India. It does this by formulating rules and guidelines for foreign exchange transactions, providing training and education to its members, and resolving disputes between its members.

Role of FEDAI

The role of FEDAI in the Indian foreign exchange market is multi-fold. It includes:

  • Formulating rules and guidelines for foreign exchange transactions: FEDAI formulates rules and guidelines for foreign exchange transactions that are then adopted by the Reserve Bank of India (RBI). These rules and guidelines help to ensure the orderly development and functioning of the Indian foreign exchange market.
  • Providing training and education to its members: FEDAI provides training and education to its members on foreign exchange matters. This helps to ensure that its members are competent to deal in foreign exchange transactions.
  • Resolving disputes between its members: FEDAI has a dispute resolution mechanism that is used to resolve disputes between its members. This helps to ensure that disputes are resolved in a timely and efficient manner.

FEDAI Rules

FEDAI has a number of rules that govern foreign exchange transactions in India. These rules are designed to ensure the orderly development and functioning of the Indian foreign exchange market. Some of the key FEDAI rules include:

  • Rules for trading in foreign exchange: FEDAI has rules that govern the trading of foreign exchange in India. These rules specify the hours of trading, the minimum margins that must be maintained, and the types of transactions that are allowed.
  • Rules for dealing with intermediaries: FEDAI has rules that govern the dealing of foreign exchange with intermediaries. These rules specify the types of intermediaries that are allowed, the fees that can be charged, and the procedures that must be followed.
  • Rules for settlement of transactions: FEDAI has rules that govern the settlement of foreign exchange transactions. These rules specify the methods of settlement, the time limits for settlement, and the penalties for late settlement.

MCQs

Here are some MCQs on the role of FEDAI and FEDAI Rules:

  1. Which of the following is not a function of FEDAI?
    • Formulating rules and guidelines for foreign exchange transactions
    • Providing training and education to its members
    • Resolving disputes between its members
    • Overseeing the foreign exchange market in India
    • The correct answer is (d). FEDAI does not oversee the foreign exchange market in India. This is the responsibility of the Reserve Bank of India (RBI).
  2. Which of the following is not a key FEDAI rule?
    • Rules for trading in foreign exchange
    • Rules for dealing with intermediaries
    • Rules for settlement of transactions
    • Rules for advertising foreign exchange products
    • The correct answer is (d). FEDAI does not have rules for advertising foreign exchange products. This is the responsibility of the advertising industry.
  3. What is the maximum margin that can be maintained on a foreign exchange transaction?
    • 2%
    • 3%
    • 5%
    • 10%
    • The correct answer is (c). The maximum margin that can be maintained on a foreign exchange transaction is 5%.
  4. Which of the following intermediaries is not allowed to deal in foreign exchange?
    • Banks
    • NBFCs
    • Mutual funds
    • Insurance companies
    • The correct answer is (d). Insurance companies are not allowed to deal in foreign exchange. This is because insurance companies are not considered to be financial institutions.

Conclusion

These are just some of the key points on the role of FEDAI and FEDAI Rules. For more information, please refer to the FEDAI website or the RBI website.