CU-SEM-III-BBA-Fundamentals of Foreign Exchange Management- Second Draft

1. Foreign Currency Term Loan: Financial Institutions provide Foreign Currency Term Loan for meeting the foreign currency expenditures towards — (a) Import of Plant, Machinery and Equipment, and (b) Payment of Foreign Technical Know How Fees. 2. Export Credit Schemes: Export Credit Agencies finance exports of capital goods and related technical services. Types of Export Credit:  Buyer's Credit: Credit is provided directly to the Indian buyer, for purchase of capital goods and / or technical service from the overseas exporter.  Supplier's Credit: Credit is provided to the overseas exporters, so that they can make available medium-term finance to Indian importers. Regulatory: These agencies are formed by the Governments of the respective countries and follow certain consensus guidelines for supporting exports, under a convention known as the Berne Union. 3. External Commercial Borrowings (ECB): These include raising finance from international markets for plant and machinery imports. Funds can be raised subject to the terms and conditions stipulated by the Government of India, which imposes restrictions on the amount raised under automatic route. Funds raised above the stipulated limit would require the prior approval of the Ministry of Finance. Types of ECB: External Commercial Borrowings include Bank Loans, Supplier’s and Buyer’s credit, fixed and floating rate bonds and Borrowing from private sector windows of Multilateral Financial Institutions such as International Finance Corporation. 4. Euro Issues: Subscription can come from any part of the world except India. This takes the following forms — (a) Depository Receipts Mechanism: An indirect equity investment, these are issued through Overseas Depository Banks, on behalf of the issuing Company. (b) Foreign Currency/ Euro Convertible Issues: Euro Convertible Issues is a debt with ‘an option to convert it into equity. (c) Debt Route: Funds can also be raised by way of pure Debt Bonds. 5. Issues in Foreign Domestic Markets: Capital can also be raised by issuing Exchange Traded instruments in Foreign Markets. These include ADRs, GDRs, etc. 201 CU IDOL SELF LEARNING MATERIAL (SLM)

Debt Route The following are some of the instruments used for borrowing of funds from the international market — 1. Syndicated Bank Loans: Borrower should obtain a good credit rating from the rating agencies. Large loans can be obtained in a reasonably short period with few formalities. Duration of the loan is generally 5 to 10 years; interest rate is based on LIBOR Plus spread depending upon the rating. 2. Foreign Bonds: These are debt instruments denominated in a currency which is foreign to the borrower and is sold in the country of that currency. Example: British Firm / Company placing Dollar denominated bonds in USA. 3. External Commercial Borrowings (ECB’s): (a) External Commercial borrowings include the following — • Commercial Bank Loans, • Buyer's Credit, • Supplier's Credit, • Securitized Instruments such as Floating Rate Notes and Fixed Rate Bonds, • Credit from Official Export Credit Agencies, and • Commercial Borrowings from multilateral financial institutions like IFCI, ADB, etc. (b) ECB's are subject to overall ceilings with sub-ceilings fixed by the Government from time to time. 4. Euro Bonds: Euro Bonds are debt instruments denominated in a currency issued outside the country of that currency. These are usually bearer bonds and can take the form of- (i) traditional fixed rate bonds. (ii) floating rate of notes (FRN’s), (iii) Convertible bonds. Example: A Rupee Bond floated in France, a Yen Bond floated in Germany. 5. Euro-bonds with Equity Warrants: These bonds carry a coupon rate determined by the market rates. The warrants are detachable. Pure bonds are traded at a discount. Fixed income funds may like to invest for the purpose of regular income. 6. Euro-Convertible Zero Bonds: These bonds are structured as convertible bonds. No interest is payable on the bonds. But the conversion of bonds takes place on maturity at a pre- determined price. Usually there is a 5 years maturity period and they are treated as a deferred equity issue. 202 CU IDOL SELF LEARNING MATERIAL (SLM)

7. Euro Commercial Papers: ECP’s are short-term money market instruments with a maturity period of less than one year. They are usually designated in US Dollars. Depository Receipts. A depositary receipt (DR) is a type of negotiable (transferable) financial security that is traded on a local stock exchange but represents a security, usually in the form of equity, that is issued by a foreign publicly listed company. The DR, which is a physical certificate, allows investors to hold shares in equity of other countries. One of the most common types of DRs is the American depositary receipt (ADR), which has been offering companies, investors and traders global investment opportunities since the 1920s. Since then, DRs have spread to other parts of the globe in the form of global depositary receipts (GDRs) (the other most common type of DR), European DRs and international DRs. ADRs are typically traded on a U.S. national stock exchange, such as the New York Stock Exchange (NYSE) or the American Stock Exchange, while GDRs are commonly listed on European stock exchanges such as the London Stock Exchange. Both ADRs and GDRs are usually denominated in U.S. dollars, but can also be denominated in euros. How Does the DR Work? The DR is created when a foreign company wishes to list its already publicly traded shares or debt securities on a foreign stock exchange. Before it can be listed to a particular stock exchange, the company in question will first have to meet certain requirements put forth by the exchange. Initial public offerings, however, can also issue a DR. DRs can be traded publicly or over-the-counter. Pricing and Cross-Trading When any DR is traded, the broker will aim to find the best price of the share in question. He or she will therefore compare the U.S. dollar price of the ADR with the U.S. dollar equivalent price of the local share on the domestic market. If the ADR of the Russian gas company is trading at US$12 per share and the share trading on the Russian market is trading at $11 per share (converted from Russian rubles to dollars), a broker would aim to buy more local shares from Russia and issue ADRs on the U.S. market. This action then causes the local Russian price and the price of the ADR to reach parity. The continual buying and selling in both markets, however, usually keeps the prices of the ADR and the security on the home market 203 CU IDOL SELF LEARNING MATERIAL (SLM)

in close range of one another. Because of this minimal price differential, most ADRs are traded by means of intermarket trading. A U.S. broker may also sell ADRs back into the local Russian market. This is known as cross-border trading. When this happens, an amount of ADRs is canceled by the depository and the local shares are released from the custodian bank and delivered back to the Russian broker who bought them. The Russian broker pays for them in rubbles, which are converted into dollars by the U.S. broker. The Benefits of Depositary Receipts The DR functions as a means to increase global trade, which in turn can help increase not only volumes on local and foreign markets but also the exchange of information, technology, regulatory procedures as well as market transparency. Thus, instead of being faced with impediments to foreign investment, as is often the case in many emerging markets, the DR investor and company can both benefit from investment abroad. Benefits: For the Company A company may opt to issue a DR to obtain greater exposure and raise capital in the world market. Issuing DRs has the added benefit of increasing the share’s liquidity while boosting the company’s prestige on its local market (“the company is traded internationally”). Depositary receipts encourage an international shareholder base, and provide expatriates living abroad with an easier opportunity to invest in their home countries. Moreover, in many countries, especially those with emerging markets, obstacles often prevent foreign investors from entering the local market. By issuing a DR, a company can still encourage investment from abroad without having to worry about barriers to entry that a foreign investor might face. For the Investor Buying into a DR immediately turns an investors’ portfolio into a global one. Investors gain the benefits of diversification while trading in their own market under familiar settlement and clearance conditions. More importantly, DR investors will be able to reap the benefits of these usually higher risk, higher return equities, without having to endure the added risks of going directly into foreign markets, which may pose lack of transparency or instability resulting from changing regulatory procedures. It is important to remember that an investor will still bear some foreign-exchange risk, stemming from uncertainties in 204 CU IDOL SELF LEARNING MATERIAL (SLM)

emerging economies and societies. On the other hand, the investor can also benefit from competitive rates the U.S. dollar and euro have to most foreign currencies. Giving you the opportunity to add the benefits of foreign investment while bypassing the unnecessary risks of investing outside your own borders, you may want to consider adding these securities to your portfolio. As with any security, however, investing in ADRs requires an understanding of why they are used, and how they are issued and traded. American Depository Receipts An American Depositary Receipt (ADR) is a certificate that represent shares of a foreign stock owned and issued by a U.S. bank. The foreign shares are usually held in custody overseas, but the certificates trade in the U.S. Through this system, a large number of foreign- based companies are actively traded on one of the three major U.S. equity markets (the NYSE, AMEX or Nasdaq). Example: Investors can purchase ADRs from broker/dealers. These broker/dealers in turn can obtain ADRs for their clients in one of two ways: they can purchase already-issued ADRs on a U.S. exchange, or they can create new ADRs. To create an ADR, a U.S.-based broker/dealer purchases shares of the issuer in question in the issuer’s home market. The U.S. broker/dealer then deposits those shares in a bank in that market. The bank then issues ADRs representing those shares to the broker/dealer’s custodian or the broker-dealer itself, which can then apply them to the client’s account. A broker/dealer’s decision to create new ADRs is largely based on its opinion of the availability of the shares, the pricing and market for the ADRs, and market conditions. Broker/dealers don’t always start the ADR creation process, but when they do, it is referred to as an unsponsored ADR program (meaning the foreign company itself has no active role in the creation of the ADRs). By contrast, foreign companies that wish to make their shares available to U.S. investors can initiate what are called sponsored ADR programs. Most ADR programs are sponsored, as foreign firms often choose to actively create ADRs in an effort to gain access to American markets. ADRs are issued and pay dividends in U.S. dollars, making them a good way for domestic investors to own shares of a foreign company without the complications of currency conversion. However, this does not mean ADRs are without currency risk. Rather, the company pays dividends in its native currency and the issuing bank distributes those 205 CU IDOL SELF LEARNING MATERIAL (SLM)

dividends in dollars -- net of conversion costs and foreign taxes -- to ADR shareholders. When the exchange rate changes, the value of the dividend changes For example, let’s assume the ADRs of XYZ Company, a French company, pay an annual cash dividend of 3 Euros per share. Let’s also assume that the exchange rate between the two currencies is even -- meaning one Euro has an equivalent value to one dollar. XYZ Company’s dividend payment would therefore equal $3 from the perspective of a U.S. investor. However, if the euro were to suddenly decline in value to an exchange rate of one euro per $0.75, then the dividend payment for ADR investors would effectively fall to $2.25. The reverse is also true. If the euro were to strengthen to $1.50, then XYZ Company’s annual dividend payment would be worth $4.50. ADRs give U.S. investors the ability to easily purchase shares in foreign firms, and they are typically much more convenient and cost effective for domestic investors (versus purchasing stocks in overseas markets). And because many foreign firms are involved in industries and geographical markets where U.S. multinationals don’t have a presence, investors can use ADRs to help diversify their portfolios on a much more global scale. Global Depository Receipt These are a class of investment which allows international investors to own shares in foreign companies where the foreign market is hard to access for the retail investor, and without having to worry about foreign currencies and tax treatments. Global Depositary Receipts are issued by international investments banks as certificates (the GDR) which represents the foreign shares but which can be traded on the local stock exchange. For example a UK investor may be able to buy shares in a Vietnamese company via a GDR issued by a UK investment. The GDR will be denominated in GB Pounds and will be tradable on the London Stock Exchange. The investment bank takes care of currency exchange, foreign taxes etc. and pays dividends on the GDR in GB Pounds. The concept originally started in the USA with the creation of American Depositary Receipts which were created so that US retail investors could buy shares in a foreign company without having to worry about foreign exchange, or foreign taxes. It should be noted that although the risks of owning the foreign shares directly has been removed, there is now a risk of third party default, because the investment bank owns the underlying assets, and may not be able to pass on the benefits to ADR holders if they get into financial difficulty. 206 CU IDOL SELF LEARNING MATERIAL (SLM)

Global Depositary Receipts (GDRs) are negotiable certificates issued by depositary banks which represent ownership of a given number of a company’s shares which can be listed and traded independently from the underlying shares. These instruments are typically used by companies from emerging markets and marketed to professional investors only. GDRs can be listed on either the Main Market via a Standard Listing or on the Professional Securities Market. A GDR will be used to access two or more markets, usually London and the US. They are often launched for capital raising purposes, so the US element is generally either a Rule 144(a) ADR or a Level III ADR, depending on whether the issuer aims to tap the private placement or public US markets. These securities are generally traded in US dollars on the Exchange’s Electronic Trading Service the International Order Book (IOB). Associated dividends are paid to investors in US dollars. GDRs are settled in either DTC or Euroclear Bank enhancing their cross border liquidity. The more liquid IOB securities have central counterparty clearing ensuring pre and post trade anonymity as well as mitigation of counterparty risk. Features (a) Underlying Shares: Each GDR may represent one or more underlying share, which are physically held by the Custodian appointed by the Depository Bank. (b) Entry in Company’s Books: In the Company’s books, the Depository Bank’s name appears as the holder of the shares. (c) Returns: Depository gets the dividends from the Company (in local currency) and distributes them to the holders of the Depository Receipts after converting into dollars at the going rate of exchange. (d) Negotiable: GDRs are exchangeable with the underlying share either at any time, or after the lapse of a particular period of time, generally 45 Days. (e) Globally Marketed: GDRs are marketed globally without being confined to borders of any market or country as it can be traded in more than one country. (f) Settlement: GDRs are settled through CEDEL & Euro-Clear International Book Entry Systems. Impact of GDR’s on Indian Capital Market (a) Track of Worldwide Events: Arbitrage possibility in GDR Issues has created additional responsibility on the investors. Investors are now required to keep track of worldwide economic events, and how the Company’s GDRs are being traded. 207 CU IDOL SELF LEARNING MATERIAL (SLM)

(b) Free Pricing: GDR can be issued for any price, and therefore retail investors can longer expect discounted rights or public issues. (c) Flow of Foreign Investment into India: Since GDRs are sold primarily to institutional investors abroad, it serves as an easy way for flow of huge volume of foreign funds into Indian Capital Market. Warrants A warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date. Some important characteristics to consider include the following: • A warrant is exercised when the holder informs the issuer of their intention to purchase the shares underlying the warrant. • A warrant's \"premium\" represents how much extra you have to pay for your shares when buying them through the warrant as compared to buying them the regular way. • A warrant's \"gearing\" is the way to ascertain how much more exposure you have to the underlying shares using the warrant as compared to the exposure you would have if you buy the shares through the market. • If you plan on exercising the warrant, you must do so before the expiration date. The more time remaining until expiration, the more time for the underlying security to appreciate, which, in turn, will increase the price of the warrant (unless it depreciates). Therefore, the expiration date is the date on which the right to exercise ceases to exist. • Like options, there are different exercise types associated with warrants such as American style (holder can exercise any time before expiration) or European style (holder can only exercise on expiration date). Sometimes, the issuer will try to establish a market for the warrant and to register it with a listed exchange. In this case, the price can be obtained from a stockbroker. Often, though, warrants are privately held or not registered, which makes their prices less obvious. Warrants Versus Other Convertibles Warrants Warrants are very similar to call options. For instance, many warrants confer the same rights as equity options, and warrants often can be traded in secondary markets like options. However, there are several key differences between warrants and equity options: • Warrants are issued by private parties, typically the corporation on which a warrant is based, rather than a public options exchange. 208 CU IDOL SELF LEARNING MATERIAL (SLM)

• Warrants issued by the company itself are dilutive. When the warrant issued by the company is exercised, the company issues new shares of stock, so the number of outstanding shares increases. When a call option is exercised, the owner of the call option receives an existing share from an assigned call writer. Unlike common stock shares outstanding, warrants do not have voting rights. • Warrants are considered over-the-counter instruments, and thus are usually only traded by financial institutions with the capacity to settle and clear these types of transactions. • A warrant's lifetime is measured in years (as long as 15 years), while options are typically measured in months. Upon expiration, the warrants are worthless unless the price of the common stock is greater than the exercise price. • Warrants are not standardized like exchange-listed options. While each option contract is generally over 1,000 underlying ordinary shares, the number of warrants that must be exercised by the holder to buy the underlying asset depends on the conversion ratio set out in the offer documentation for the warrant issue. Foreign Currency Convertible Bonds (FCCB) A foreign currency convertible Bond (FCCBs) is a quasi-debt instrument that is issued in a currency other than the issuer’s domestic currency. Over the last few years, a majority of Indian Companies issuing FCCBs raised fund in several foreign currency. FCCBs could have a coupon rate of zero but have yield on maturity or FCCBs could also carry lower interest rate and yield on maturity. This is a bullet payment of interest at maturity if the bondholder opts for redemption. This bond is a mix between the debt and equity instrument and provides the bondholders an option to convert the bonds into equity. This bond gives the issuers an ability to access capital available in foreign markets and make their presence felt in the international market. FCCB are attractive to both investors and issuers. The investors receive the safety of guaranteed payments on the bond and are also able to take advantage of price appreciation in the company’s stock. Features of FCCBs • FCCB can be either unsecured or secured. But, in practice most of the FCCB issued in India are unsecured. 209 CU IDOL SELF LEARNING MATERIAL (SLM)

FCCB issues have a ‘Call’ and ‘Put’ option to suit the structure of the Bond. Both the options are subject to RBI guidelines. • Public issue of FCCB shall be through reputed lead managers and Private placement is permitted subject to certain conditions. • It is also possible to issue zero coupon Foreign Currency Convertible Bonds and in this case, the holders of the bond are generally interested to convert the bonds into equity. • The yield to maturity of FCCB normally ranges 2-7%. • FCCB are generally listed to stock exchange to increase its liquidity. Credit rating of bonds is not mandatory. But, rating can help better marketing of the bonds. • FCCB Issue related expenses shall not exceed 4% of issue size and in case of private placement, shall not exceed 2% of the issue size. Interest payable on bonds is also called as coupon rate. The key feature of FCCBs is that the interest is guaranteed and the bondholder also gets the option to convert the bond into equity. The coupon rate is payable at periodic intervals as agreed between the issuer and the bondholder. The holder of FCCBs has the option to convert the bonds into equity within the stipulated timeframe. Thus, FCCBs have the flavor of both debt and equity. If the bondholder opts for conversion, he would receive shares of the issuing company at a redetermined or rather the rate agreed at the time of subscribing to the FCCB issue. This is known as the conversion price. The FCCB conversion price is generally at a substantial premium to the market price prevailing at the time of issue. FCCBs are issued in accordance with the [Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993, and subscribed by a nonresident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments. Euro issues Until about the mid- eighties. India’s external debt was mostly public debt from multilateral institutions like the World Bank, the International Monetary Fund and the Asian Development Bank. Then Indian corporate resorted to commercial borrowings, the bulk of it being in the form of syndicated credit. When the foreign exchange crisis hit the economy in mid – 1990, India’s credit ratings plunged below the investment grade and all external funding avenues were closed. This situation continued until 1992. Following economic 210 CU IDOL SELF LEARNING MATERIAL (SLM)

liberalization, Indian companies started exploring the global market once again. Unlike the earlier period, when syndicated credit was the predominant from of raising external finance, companies began looking at bonds and euro equities, which are collectively referred to as “Euro Issues”. The two principal mechanisms used by Indian companies are the Depository receipts mechanism and Foreign Currency Convertible Bonds (FCCBs). The former represents indirect equity investment in the form of Global Depository (GDRs) and American depository receipts (ADRs), while the latter is debt with an option to convert it into equity. Euro Issues are simply means of raising funds in the international market, and have no special connotation or legal meaning. The term Euro Issue is really a misnomer, as initially these instruments were aimed at the European market, and were listed on either Luxembourg or London Exchanges, but now they have expanded to tap the global market and not just Europe. Euro Commercial Paper Euro Commercial Papers are short term paper issued by non-bank borrowers. The principal distinguishing feature is that Commercial Papers are not underwritten by a bank and the issuer, therefore, is one with very high credentials. The paper is usually issued in higher denominations of the order of $ 1,00,000 and the market is dominated by large professional investors. Although Euro Commercial Papers can be issued in interest bearing form, they are usually issued at a discount to face value and quoted in the secondary market on a yield basis. Euro Convertible Bond (ECB) Euro Convertible Bonds are quasi debt securities (unsecured) which can be converted into Depository Receipts or local shares at a fixed price after the minimum lock-in period. Price of Equity Shares at the time of conversion will have a premium element. Bonds carry a fixed rate of interest, and the payment of interest is made in US Dollars. “Note Issuance Facility” Note-Issuance-Facility (NIF) is a Medium-Term Commitment on the part of underwriting banks which obliges them to purchase any short term notes which the borrower is unable to sell in the market, at an agreed spread over a suitable benchmark (Example: LIBOR). 211 CU IDOL SELF LEARNING MATERIAL (SLM)

Advantages: • Reduced Cost of Borrowing: Borrower can sell notes at a spread lower than that at which the underwriters are committed to buy, thereby reducing the cost of borrowing. • Access to Large Number of Investors: Note Issuance Facility is a short-term facility and therefore, majority of investors, who are not interested in Long Term Investments, would find this as a good short-term investment. Participating Notes Participatory Notes -- or P-Notes or PNs -- are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India. Financial instruments used by hedge funds that are not registered with SEBI to invest in Indian securities. Indian-based brokerages to buy India-based securities / stocks and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investor. Since international access to the Indian capital market is limited to FIIs. The market has found a way to circumvent this by creating the device called participatory notes, which are said to account for half the $80 billion that stands to the credit of FIIs. Investing through P- Notes is very simple and hence very popular. Hedge funds, which invest through participatory notes, borrow money cheaply from Western markets and invest these funds into stocks in emerging markets. This gives them double benefit: a chance to make a killing in a stock market where stocks are on the rise; and a chance to make the most of the rising value of the local currency. P-Notes are issued to the real investors on the basis of stocks purchased by the FII. The registered FII looks after all the transactions, which appear as proprietary trades in its books. It is not obligatory for the FIIs to disclose their client details to the SEBI, unless asked specifically. 11.6 FINANCING FORMALITIES Forex trading is a relatively new investment, discovering the appealing opportunities revolving around these types of transactions. However, due to unreliable brokers promising 212 CU IDOL SELF LEARNING MATERIAL (SLM)

unrealistic results, together with the regular risks of Forex trades, the Indian government has put certain restrictions on trades. Electronic or online overseas trades are subjected to legal charges, but if you avoid indulging in these approaches, and limit your trades to trading processes regulated by authorities, you can go ahead and become a legal Forex trader yourself. The Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI) are the central authorities in charge of regulating these types of investments. Always use the Indian Rupee as your base currency, and you will be legally protected. Currency pairs, such as US Dollar and INR, UK Pounds and INR or Euro and INR are the type of Forex trades allowed. 11.6.1 Forex brokers While in other countries, Forex trading comes with increased flexibility, in India, each aspect should be carefully thought through. As you will find out when researching the legal implications further, to enter the Forex market, you will need to invest through an authorized broker. The forex broker you collaborate with should be registered at Securities Exchange Board of India. Without SEBI authorization, the said trading platform functions illegally. You’ll come across several available options, and the majority of Indian Forex brokers will offer you INR based currency pair options for EUR, USD, GBP, and JPY. 11.6.2 Social trading Social Forex trading is a Forex trend becoming popular recently around the globe. This approach allows you to copy the trades of other network users and thus increase the likelihood of successful investments. This can be an appealing approach for beginners, who aren’t exactly sure what trading direction to pursue. You are basically benefiting from the knowledge and expertise of investors with a richer background in the market, giving you a leaping advantage. Despite the attractive nature of copy trading, considering the existing restrictions in India, this particular option is even more challenging to get into than regular trades. There are only a small number of social trading brokers that allow you to partake in copy trades in India. Verify the available platforms, make sure they are authorized, and only then reach a decision. 213 CU IDOL SELF LEARNING MATERIAL (SLM)

However, even if you won’t exactly become a copy Forex trader yourself, you can still make the most out of the advice received. Talking to traders from different regions around the world, sharing strategies, looking over portfolios are a few examples of actions that you can benefit from, revolving around social Forex trading 11.7 SUMMARY  Consignment purchase terms can be the most beneficial method of payment for the importer. In this method of purchase, importer makes the payment only once the goods or imported items are sold to the end user.  Cash in Advance is a pre-payment method in which, an importer/ exporter the payment for the items to be imported in advance prior to the shipment of goods. The importer must trust that the supplier will ship the product on time and that the goods will be as advertised.  Documentary Collection is an important bank payment method under, which the sale transaction is settled by the bank through an exchange of documents  A letter of credit provides protection for sellers (or buyers).  Banks issue letters of credit when a business applies for one and the business has the assets or credit to get approved.  Letters of credit are complicated, and it’s easy to make an expensive mistake when using one. 11.8 KEYWORDS  Letter of credit- A letter of credit, or \"credit letter\" is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount  A Bill of Exchange - is a written order used primarily in international trade that binds one party to pay a fixed sum of money to another party on demand or at a predetermined date  Forex brokers - Forex trading comes with increased flexibility, in India, each aspect should be carefully thought through. As you will find out when researching the legal implications further, to enter the Forex market, you will need to invest through an authorized broker. 214 CU IDOL SELF LEARNING MATERIAL (SLM)

 Social Forex trading - is a Forex trend becoming popular recently around the globe. This approach allows you to copy the trades of other network users and thus increase the likelihood of successful investments 11.9 LEARNING ACTIVITY 1. Learn about Letter of credit and how does it help an importer of goods ___________________________________________________________________________ ___________________________________________________________________________ 11.10 PRATICAL APPLICATIONS A Tirupur based exporter in textile industry having an annual export turnover of INR 300 Crores had exposures in Dollar and Euro and transacted with a PSU bank. They were not cross checking the rates given by the bank from any source and were referring to online platforms to keep a watch on exchange rates, they are not aware of live inter-bank terminals. Solution A Meeting with the management and finance team to discuss the ongoing risk management process. As they were doing window forwards till now, we advised them to do fixed date forward to gain some extra premium. While doing an audit of their USDINR and EURINR booking we found that bank was overcharging them by 7 paisa for their Dollar transactions and for their Euro transactions they were being overcharged by 5 paisa in USDINR leg and by 8-9 pips in EURUSD leg. In a forward transaction of EUR 5 lakh we assisted them and managed to get the live rate by negotiating EURUSD premium and USDINR premium separately. In total a saving of around 10 paisa that amounts to INR 50,000. 11.11 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain the Meaning of Commercial Invoice Letter 2. What are Credits bills? 3. Explain the usage of Exchange Documents 4. Define the term Social Trading 215 CU IDOL SELF LEARNING MATERIAL (SLM)

5. What is the role of Financing Formalities in Forex Long Questions 1. Briefly explain the Various types of Credit Bills that are utilised in Forex 2. Explain the meaning of Credits Bills and its implication in Forex Market 3. Explain the Financing Formalities in Forex and its various types. 4. Explain the concept and usage of Commercial Invoice Letter 5. Discuss about Letter of Credit. B. Multiple Choice Questions 216 1. An import customer accepts a bill drawn on him. The bank will apply- a. bill selling rate b. bill acceptance rate c. TT selling rate d. no exchange rate, since no foreign exchange transaction is executed 2. For funding the vostro account, the bank in India will apply- a. its TT buying rate b. its TT selling rate c. interbank spot buying rate d. interbank spot selling rate 3. A swap deal is executed by a. entering into another swap deal b. settling the difference in the rates c. actual delivery of currencies d. None of these 4. Which currency is widely used as the 'Vehicle Currency' in foreign exchange transactions? a. Euro b. US dollars CU IDOL SELF LEARNING MATERIAL (SLM)

c. GB Pounds d. INR 5. The number of USDINR option contracts which can be made available for trading at a given time are ______________ a. 3 b. 4 c. 6 d. 9 Answer 1-c 2-a 3-b 4-b 5-b 11.12 REFERENCES  OP Aggarwal, Trade and forex exchange, Himalaya Publications, 8th Edition  Ranjit Singh, Forex Trading: RT Publications  Shah Paresh, Forex Management, Wiley  Ankit Gala and Jitendra Gala; Foreign Exchange and Forex Trading, Buzzing stock Publishing House  Peters Jelle: Forex for Ambitious Beginners: Odyssean Publishing  Sudhir Kochhar: Foreign Exchange Operations under FEMA: Bloomsbury Publishing 217 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT -12: INTERNATIONAL TAXATION AND CARBON CREDITS Structure 12.0 Learning Objectives 12.1 Introduction 12.2 Meaning of International Taxation. 12.3 taxation issues in cross border financing and investment 12.4 Carbon Credits 12.5 Role of carbon credit in the Economy 12.6 Role in the Economy 12.7 Summary 12.8 Keywords 12.9 Learning activity 12.10 Practical Application 12.11 Unit End Questions 12.12 References 12.0 LEARNING OBJECTIVES After studying this unit, students will be able to:  Explain the meaning of International Taxation  Learn about Carbon credits  State the role of carbon credits on Economy 12.1 INTRODUCTION Systems of taxation vary among governments, making generalization difficult. Specifics are intended as examples and relate to particular governments and not broadly recognized multinational rules. Taxes may be levied on varying measures of income, including but not limited to net income under local accounting concepts (in many countries this is referred to as 'profit'), gross receipts, gross margins (sales less costs of sale), or specific categories of receipts less specific categories of reductions.. 218 CU IDOL SELF LEARNING MATERIAL (SLM)

12.2 MEANING OF INTERNATIONAL TAXATION International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries or the international aspects of an individual country’s tax laws. Governments usually limit the scope of their income taxation in some manner territorially or provide for offsets to taxation relating to extraterritorial income. The manner of limitation generally takes the form of a territorial, residency, or exclusionary system. Some governments have attempted to mitigate the differing limitations of each of these three broad systems by enacting a hybrid system with characteristics of two or more. Systems of taxation vary widely, and there are no broad general rules. These variations create the potential for double taxation (where the same income is taxed by different countries) and no taxation (where income is not taxed by any country). Income tax systems may impose tax on local income only or on worldwide income. Generally, where worldwide income is taxed, reductions of tax or foreign credits are provided for taxes paid to other jurisdictions. Limits are almost universally imposed on such credits. With any system of taxation, it is possible to shift or characterize income in a manner that reduces taxation. Jurisdictions often impose rules relating to shifting of income among commonly controlled parties, often referred to as transfer pricing rules. Residency based systems are subject to taxpayer attempts to defer recognition of income through use of related parties. A few jurisdictions impose rules limiting such deferral (“anti-deferral” regimes). Deferral is also specifically authorized by some governments for particular social purposes or other grounds. Agreements among governments (treaties) often attempt to determine who should be entitled to tax what. Most tax treaties provide for at least a skeleton mechanism for resolution of disputes between the parties. Tax laws in India are becoming more and more complex. Globalisation of economies, signing and review of free trade agreements, increase in the number of cross border transactions, mergers, acquisitions, tax treaties, transfer pricing etc. have added to these complexities. 12.3 - TAXATION ISSUES IN CROSS BORDER FINANCING AND INVESTMENT India is a federal republic, with 29 states and seven federally administered union territories; it operates a multi-party parliamentary democracy system. It is a common law country with a written constitution. Parliament has two houses: the Lok Sabha (lower house) and the Rajya Sabha (upper house). The President, the constitutional head of the country and of the armed 219 CU IDOL SELF LEARNING MATERIAL (SLM)

forces, acts and discharges the constitutional duties on the advice of the Council of Ministers, which is headed by the Prime Minister. The Prime Minister and the Council of Ministers are responsible to parliament and subject to the control of the majority members of parliament. The states and union territories are governed by independently elected governments. India is a three-tier economy, comprising a globally competitive services sector, a manufacturing sector and an agricultural sector. The services sector has proved to be the most dynamic in recent years, with trade, hotels, transport, telecommunications and information technology, financial, and business services registering particularly rapid growth. Price controls The central and state governments have passed legislation to control production, supply, distribution and the price of certain commodities. The central government is empowered to list any class of commodity as essential and can regulate or prohibit the production, supply, distribution, price and trade of these commodities for the following purposes: maintain or increase supply; equitable distribution and availability at fair prices; and secure an essential commodity for the defense of India or the efficient conduct of military operations. Intellectual property Indian legislation covers patents, copyrights, trademarks, geographical indicators and industrial designs. The Patent Act 1970 has been amended several times to meet India’s commitments to the WTO, such as increasing the term of a patent to 20 years. Trademarks can be registered under the Trade Marks Act, 1999, which provides for registration of trademark for services in addition to goods, simplifies procedures, increases the registration period to 10 years and provides a six-month grace period for the payment of renewal fees. Copyrights are protected on published and unpublished literary, dramatic, musical, artistic and film works under the Copyright Act 1957. Subsequent amendments have extended protection to other products, such as computer software and improved protection of literary and artistic works and established better enforcement. The protection term for copyrights and rights of performers and producers of phonograms is 50 years. India is a signatory to the Paris Convention for the Protection of Industrial Property and the Patent Co-operation Treaty, and it extends reciprocal property arrangements to all countries 220 CU IDOL SELF LEARNING MATERIAL (SLM)

party to the convention. The convention makes India eligible for the Trademark Law Treaty and the Madrid Agreement on Trademarks. The country also participates in the Bern Convention on Copyrights, the Washington Treaty on Layout of Integrated Circuits, the Budapest Treaty on Deposit of Micro-organisms and the Lisbon Treaty on Geographical Indicators. As a member of the WTO, India enacted the Geographical Indications of Goods (Registration & Protection) Act (1999). Currency The currency is the Indian rupee (INR). Banking and financing India’s central bank is the Reserve Bank of India (RBI), which is the supervisory authority for all banking operations in the country. The RBI is the umbrella network for numerous activities, all related to the nation’s financial sector, encompassing and extending beyond the functions of a typical central bank. The primary activities of the RBI include: • Monetary authority; • Issuer of currency; • Banker and debt manager to the government; • Banker to banks; • Regulator of the banking system; • Manager of foreign exchange; and • Regulator and supervisor of the payment and settlement systems. The RBI formulates implements and monitors the monetary policy. It is responsible for regulating nonbanking financial services companies, which operate like banks but are otherwise not permitted to carry on the business of banking. The banking sector in India is broadly represented by public sector banks (where the government owns a majority shareholding and includes the State Bank of India and its subsidiaries); private sector banks; foreign banks operating in India through their branches/wholly owned subsidiaries; and regional rural bank and co-operative banks, which usually are regional. The RBI has released draft guidelines for the licensing of new banks in the private sector. 221 CU IDOL SELF LEARNING MATERIAL (SLM)

Stringent rules govern the operations of systemically important non-deposit taking non- banking financial services companies, such as those with assets of INR 1 billion or more, to reduce the scope of regulatory arbitrage vis-à-vis a bank. The financial and commercial center in India is Mumbai, and there are proposals to develop this area further as an International Financial Center. Principal Drivers of Investment in India Some of the principal drivers of investment in India include: - English speaking country - Democratic regime - Young and educated workforce - Competitive wages - Increasing urbanization - Expanding middle class with rising household income - Growing consumer markets - Increasingly organized businesses - Investment in infrastructure - Common law jurisdiction – all commercial laws in English Three Routes for Investing in India There are three principal avenues for investing in India: - Through a Foreign Direct Investment (FDI) - As a Foreign Institutional Investor (FII) - As a Foreign Venture Capital Investor (FVCI) Business Taxation (i) Overview Taxes are levied in India at the national and state levels. The principal national taxes on companies are the corporate income tax, minimum alternate tax, capital gains tax, dividend distribution tax (DDT), wealth tax, and indirect taxes, such as value added tax (VAT), central sales tax (CST), securities transaction tax (STT), customs duty, excise duties and service tax. Transaction taxes are set to witness a major change as India works towards implementing a 222 CU IDOL SELF LEARNING MATERIAL (SLM)

goods and services tax (GST) across the country. State taxes include sales tax, profession tax and real estate taxes. Tax incentives focus mainly on establishing new industries, encouraging investments in undeveloped areas, infrastructure and promoting exports. Export and other foreign exchange earnings were previously favored with income tax incentives, but these generally have been phased out except for predominantly export-oriented units set up in SEZs. The Special Economic Zones Act (2005) grants fiscal concessions for both SEZ developers and units in the SEZs and provides for a legislative framework in establishing offshore banking units and international financial service centers. (ii) Residence A company is considered resident in India if it is incorporated in India or if control and management of its affairs take place wholly in India. (iii) Taxable income and rates Corporate entities liable for income tax include Indian companies and corporate entities incorporated abroad. A resident company is liable for income tax on its worldwide income, including capital gains, less allowable deductions (essentially, outlays incurred exclusively for business purposes). A nonresident company is liable for income tax on income arising in or received in India or deemed to arise or accrue in India. Income that is deemed to accrue or arise in India includes: • Income arising from a “business connection,” property, asset or source of income in India; • Capital gains from the transfer of capital assets situated in India; and • Interest, royalties and technical service fees paid by an Indian resident, nonresident or the Indian government. Payments made to a nonresident for the provision of services are taxable in India even if the services are rendered outside the country. Where the fees are payable in respect of services used in a business or profession carried on by such person outside India or for the purpose of making or earning income from a source outside India, they are not taxable in India. Different rates apply to resident and nonresident companies The corporate tax rate for domestic companies is 30%, in addition to a surcharge of 5% where the total income exceeds INR 10 million. A 2% education cess and 1% secondary and higher education cess (collectively referred to as “cess”) also are levied on the amount of income tax including the surcharge. The effective tax rate for domestic companies is, 223 CU IDOL SELF LEARNING MATERIAL (SLM)

therefore, 30.9% (where income is less than or equal to INR 10 million) and 32.445% (where income exceeds INR 10 million). Nonresident companies and branches of foreign companies are taxed at a rate of 40%, plus a surcharge of 2%, where total income exceeds INR 10 million. The amount of tax is further increased by a 3% cess, bringing the effective tax rate to 42.024%, where income exceeds INR 10 million and 41.2%, where income is less than or equal to INR 10 million. The taxable income of nonresident companies engaged in certain businesses (i.e. prospecting for, extraction or production of mineral oils, civil construction, testing and commissioning of plant and machinery in connection with turnkey power projects) is deemed to be 10% of the specified amounts. Similarly, for nonresidents in the business of operating ships and aircraft, profits and gains from the operations are deemed to be 7.5% and 5%, respectively, of the specified amounts. A minimum alternate tax (MAT) is imposed on resident and non- resident corporations. As from 1 April 2011, where the income tax payable on the total income by a company is less than 18.5% of its book profits, the book profits are deemed to be the total income of the company on which tax is payable at a rate of 18.5%, further increased by the applicable surcharge and cess for both domestic and foreign companies. Thus, the effective MAT rate for a domestic company is 19.06% where the total income is less than or equal to INR 10 million, and 20.01% where the total income exceeds INR 10 million (rates comprise the base rate of 18.5%, plus the applicable surcharge of 5% and cess of 3%). For nonresident companies, the effective MAT rate is 19.06% where the total income is less than or equal to INR 10 million, and 19.44% where the total income exceeds INR 10 million (rates comprise the base rate of 18.5%, plus the applicable surcharge of 2% and the 3% cess). Tax paid under the MAT provisions may be carried forward to be set off against income tax payable in the next 10 years, subject to certain conditions. The scope of MAT has been broadened by making developers of SEZs and units in SEZs liable to pay MAT. MAT also applies at a rate of 18.5% on limited liability partnerships. A domestic company is required to pay DDT of 15% (plus a surcharge of 5% and 3% cess) on any amounts declared, distributed or paid as dividends. After adding the cess, the effective DDT rate is 16.2225%. However, the ultimate Indian holding company is allowed to set off the dividends received from its Indian subsidiary against dividends distributed in computing the DDT tax provided certain conditions are satisfied. Dividends paid to the New Pension Scheme Trust are exempt from DDT. 224 CU IDOL SELF LEARNING MATERIAL (SLM)

Specific deductions are allowed as follows: • For Scientific Research Expenditure — Weighted Average Deduction allowed at different rates prescribed for specific investment/expenditure. • Investment-linked incentives for setting up various infrastructure projects, hotel-chains, hospital and other public utility services. • Interest, royalties and fees for technical services paid outside India to overseas affiliates or in India to a nonresident provided tax is withheld. • Payments to employees under voluntary retirement schemes may be deducted over five years. To encourage companies to employ additional workers, an amount equal to 30% of additional wages paid to new workmen is allowed as a deduction for three years subject to certain conditions. • Securities transaction tax paid. • Business losses. Double taxation relief Unilateral relief A resident of India that derives income from a non-tax treaty country is eligible for a credit for the foreign income taxes paid. The credit is granted on a country-by-country basis and is limited to the lesser of the tax on income from the foreign country concerned or the foreign income tax paid on the income. Most of India’s treaties grant relief from double taxation by the credit method or by a combination of the credit and exemption methods. Tax treaties India has a comprehensive tax treaty network in force with many countries. There are also agreements limited to aircraft profits and shipping profits. India’s treaties also generally contain OECD-compliant exchange of information provisions. The Indian government issued a “notification” on 17 September 2012 that specifies the procedure for taxpayers to obtain benefits under India’s tax treaties. A measure in the Finance Act 2012 makes it mandatory for a nonresident to obtain a tax residence certificate from the authorities in its country of residence. The tax residence certificate must contain the following information: • Name of the taxpayer; • Status (individual, company, firm, etc.); • Nationality; 225 CU IDOL SELF LEARNING MATERIAL (SLM)

• Tax identification number in the country of residence; • Residence status for tax purposes; • Period for which the certificate is applicable; and • Address of the taxpayer for the period in which the certificate is applicable Table 12.1 Anti-Avoidance Rules Transfer pricing The transfer pricing regulations are broadly based on the OECD guidelines, with some differences (and more stringent penalties). Definitions are provided for “international transaction,” “associated enterprise” and “arm’s length price.” The definition of associated enterprise extends beyond shareholding or management relationships, as it includes some deeming clauses. The arm’s length principle is enforced by determining an arm’s length price for an international transaction, and allowing a deviation from that to be within 5% of the price of the international transaction. Taxpayers must maintain documentation and obtain a 226 CU IDOL SELF LEARNING MATERIAL (SLM)

certificate (in a prescribed format) from a chartered accountant furnishing the details of international transactions with associated enterprises, along with the methods used for benchmarking. Where the application of the arm’s length price would reduce the income chargeable to tax in India or increase the loss, no adjustment is made to the income or loss. If an adjustment is made to a company enjoying a tax holiday, the benefit of the holiday will be denied in relation to the adjustment made. Transfer pricing audits have been aggressive and the topic of substantial controversy and litigation in recent years. Several measures, such as the introduction of a Dispute Resolution Panel, additional resources to handle transfer pricing audits and an extension of the time to complete the audit have been introduced to reduce the burden of the audit on the tax officers and make the audit process more “reasonable” so that the results are evaluated according to the facts and circumstances of each taxpayer. Thin capitalization India does not have thin capitalization rules. Controlled foreign companies India does not have CFC rules, but these are proposed under the DTC. General anti-avoidance rule India currently does not have a GAAR, but one is included in the DTC. 12.4 CARBON CREDITS A carbon credit is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases. One credit permits the emission of a mass equal to one ton of carbon dioxide. The carbon credit is one half of a so-called \"cap-and-trade\" program. Companies that pollute are awarded credits that allow them to continue to pollute up to a certain limit. That limit is reduced periodically. Meanwhile, the company may sell any unneeded credits to another company that needs them. Private companies are thus doubly incentivized to reduce greenhouse emissions. First, they will be fined if they exceed the cap. Second, they can make money by saving and reselling some of their emissions allowances. 227 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 12.1 Carbon Credit 12.5 ROLE OF CARBON CREDIT IN THE ECONOMY International Emission Trading Under International Emission Trading (IET), developed countries with emission reduction targets can simply trade on the international carbon credit market. This implies that entities of developed countries exceeding their emission limits can buy carbon credits from those whose actual emissions are below their set limits. Carbon credits can be exchanged between businesses or bought and sold on the international market at the prevailing market prices. IET serves the objectives of both developed countries with emission reduction targets who are buyers of carbon credits, as well as developing and least developed countries with no emission targets who are the sellers of carbon credits. 228 CU IDOL SELF LEARNING MATERIAL (SLM)

12.6 ROLE IN THE ECONOMY Taxation has a key role in a modern economy. Listed below are the ways in which governments can use taxation in a modern economy:- Revenue generation: – Taxation is used by the government to raise revenues for its operations, infrastructure, welfare, education defence. Behaviour Discouragement: – Also referred to as social engineering, the purpose of this is to discourage people from antisocial behaviour and is often done heavily taxing the commodity there by increasing its price. Reducing Inequality: – Tax money is used to serve the weaker sections of the society through the welfare programs. Resource Redistribution: – Can be used to transfer resources form one section of society to another section of the society. Protecting local Industry: – Local industries are normally protected by the government through the use of heavy import tariffs. This makes the imported goods more expensive then the local goods and thereby encouraging the production of local goods. 12.7 SUMMARY  International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries or the international aspects of an individual country’s tax laws.  Tax money is used to serve the weaker sections of the society through the welfare programs.  Carbon credits can be exchanged between businesses or bought and sold on the international market at the prevailing market prices  International Emission Trading (IET), developed countries with emission reduction targets can simply trade on the international carbon credit market.  Behaviour Discouragement: – Also referred to as social engineering, the purpose of this is to discourage people from antisocial behaviour and is often done heavily taxing the commodity there by increasing its price. 229 CU IDOL SELF LEARNING MATERIAL (SLM)

12.8 KEYWORDS  Carbon credit- A carbon credit is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases  CER- Certified Emission Reduction.  IET- International Emission Trading  Resource Redistribution: – it is used to transfer resources form one section of society to another section of the society  International taxation - It is the study or determination of tax on a person or business subject to the tax laws of different countries 12.9 LEARNING ACTIVITY 1. Learn whether CER is tradable, and the Taxability of income earned from Carbon credits ___________________________________________________________________________ ___________________________________________________________________________ 12.10 PRATICAL APPLICATIONS A north Based Dry Fruit Importer is having a turnover of around Rs 200 Cr is banking with a Private bank. They are having exposure in USD only, they are not using any medium for reference to cross verify the rates offered by the bank. Having such huge amount of forex exposure with them they do not have skilled designated personnel to manage and are looking for some assistance to manage and improve their forex risk management practices. The management is more concerned about their regular business activities and want to lay more emphasis on forex risk management. They have been using freely available online platforms for their currency conversions. Recently as the currency fell from Rs 65 to above 68 per dollar, they added a huge risk to their business and thus their already low-margins were affected. Solution  To improve their forex risk management process and form a system for the same, we advised the management to report the import orders as and when they arise.  We informed them about the live inter-bank terminal and the know-how of the market. 230 CU IDOL SELF LEARNING MATERIAL (SLM)

 They have also been advised to follow benchmarking process of protecting the first day forward rate. 12.11 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain the Meaning of International Taxation 2. What are Carbon Credits? 3. Explain the usage of Credit 4. Define the term International Taxation 5. Define transfer pricing. Long Questions 1. Briefly explain the Various types of Credit in Forex Management 2. Explain the meaning of Carbon Credits and its implication in Forex Market 3. Explain International Taxation and its predominant role in the economy 4. What is transfer Pricing. 5. Discuss about international emission trading. B. Multiple Choice Questions 1. A ____________is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases a. Carbon credit b. CER c. Both a and b d. None of these 2. Agreements among governments (treaties) often attempt to determine who should be entitled to tax what, are called a. FTP agreements b. DTAA c. Tax Havens d. None of these 231 CU IDOL SELF LEARNING MATERIAL (SLM)

3. In the currency derivative segment of a recognized exchange, pay in and pay-out of the mark-to-market settlement are affected on __________ a. The day following the trade day b. Expiry of contract c. The trade day itself d. Two days after the trade day 4. Every derivative contract should have ________ a. To be traded on a recognised exchange b. An underlying c. Good volumes to be traded regularly d. 3 months or more contract period 5. The total number of outstanding contracts in the future market at any point of time is called the.___________ a. Outstanding status b. Open interest c. Outstanding position d. Open position Answers 2 – b 3-a 4-b 5-b 1 –a 12.12 REFERENCES  OP Aggarwal, Trade and forex exchange, Himalaya Publications, 8th Edition  Ranjit Singh, Forex Trading: RT Publications  Shah Paresh, Forex Management, Wiley  Ankit Gala and Jitendra Gala; Foreign Exchange and Forex Trading, Buzzing stock Publishing House  Peters Jelle: Forex for Ambitious Beginners: Odyssean Publishing  Sudhir Kocchar: Foreign Exchange Operations under FEMA: Bloomsbury Publishing (IN) 232 CU IDOL SELF LEARNING MATERIAL (SLM)