Module: | MODULE A: INTERNATIONAL BANKING
Q20: Analyze the following statements distinguishing between the Telegraphic Transfer Buying Rate and the Bill Buying Rate. Identify the incorrect statements.
Statement 1. The Telegraphic Transfer Buying Rate is applied by a bank when it purchases foreign currency and its Nostro account located abroad has already been credited, ensuring zero transit delay in the realization of funds.
Statement 2. The Bill Buying Rate is applied when a bank purchases a physical export bill from a customer and must wait for a specified transit and usance period before the funds are actually credited to its Nostro account abroad.
Statement 3. From the perspective of an Indian exporter, the Telegraphic Transfer Buying Rate will always yield a lower final Rupee amount than the Bill Buying Rate because electronic transfers carry higher banking fees.
Statement 2. The Bill Buying Rate is applied when a bank purchases a physical export bill from a customer and must wait for a specified transit and usance period before the funds are actually credited to its Nostro account abroad.
Statement 3. From the perspective of an Indian exporter, the Telegraphic Transfer Buying Rate will always yield a lower final Rupee amount than the Bill Buying Rate because electronic transfers carry higher banking fees.
✅ Correct Answer: C
🎯 Quick Answer:
Statement III is the only incorrect statement, making Option C the right choice.Structural Breakdown: Statement I is correct.
The Telegraphic Transfer Buying Rate is the most favorable buying rate for the customer.
It is used for clean inward wire transfers where the money is already sitting in the bank overseas Nostro account.
The bank faces no interest loss.
Statement II is correct.
The Bill Buying Rate is used when the bank buys an export document.
The bank pays the exporter Rupees today, but will not receive the foreign currency until the bill travels abroad and the foreign buyer pays, which creates a transit period.
Statement III is incorrect.
Because the bank has to wait to receive funds in a Bill Buying scenario, it deducts a much larger margin to cover the interest loss for the transit period.
Therefore, the Telegraphic Transfer Buying Rate, which has no transit delay, always yields a higher final Rupee amount for the exporter than the Bill Buying Rate.