Module: | MODULE A: INTERNATIONAL BANKING
Q193: Consider the following statements regarding the establishment and constitution of the Foreign Exchange Dealers Association of India:
1. The Association was established in 1958 as an association of banks dealing in foreign exchange in India.
2. It operates as a self-regulatory organization and is registered as a non-profit corporate entity under the Companies Act.
3. The Association is a statutory body established directly by an Act of the Parliament of India, similar to the Reserve Bank of India.
Which of the statements given above is or are correct?
2. It operates as a self-regulatory organization and is registered as a non-profit corporate entity under the Companies Act.
3. The Association is a statutory body established directly by an Act of the Parliament of India, similar to the Reserve Bank of India.
Which of the statements given above is or are correct?
✅ Correct Answer: A
🎯 Quick Answer:
Option A is correct because only statements 1 and 2 are accurate.Structural Breakdown: It functions as a self-regulatory organization.
It standardizes rules for quoting exchange rates, handling trade bills, and resolving interbank disputes.
It is registered under the Companies Act as a non-profit company.
Statement 3 is entirely incorrect because the Association is not a statutory body; it was not created by an Act of Parliament, but rather formed voluntarily by the banking industry with the central bank's encouragement.
Historical Context: In the late 1950s, the Indian foreign exchange market was highly disorganized with vastly different practices among banks.
The central bank encouraged the formation of this Association in 1958 to bring uniformity and fairness to the pricing and handling of customer transactions.
Causal Reasoning: The causal logic for forming a self-regulatory organization instead of a statutory regulator is market agility.
An industry-led body can update operational banking rules and technical transaction standards much faster than passing amendments through the national parliament.