Module: | MODULE A: INTERNATIONAL BANKING
Q24: A heavy machinery manufacturer in Gujarat, India, approaches its Authorized Dealer to retire a physical import bill amounting to 1,50,000 Euros. The bank must process the shipping documents and execute an outward remittance to the European supplier. The current interbank spot market quote for the Euro against the Indian Rupee is 90.50 Bid and 90.75 Ask. To cover the operational risks of handling import documents, the bank policy mandates adding an exchange margin of 0.15 Indian Rupees per Euro. Calculate the exact total outflow in Indian Rupees required from the manufacturer to settle this import bill.
✅ Correct Answer: C
🎯 Quick Answer:
The total Rupee outflow for the manufacturer will be exactly 1,36,35,000 Indian Rupees.Structural Breakdown: 1. Identify the transaction.
The customer needs to send Euros abroad.
The bank must therefore sell Euros to the customer.
2. Select the base rate.
In a two-way quote of 90.50 Bid and 90.75 Ask, the bank always sells at the higher Ask rate.
The base rate is 90.75.
3. Determine the correct rate type.
Because the bank is handling physical import shipping documents, it must strictly apply the Bill Selling Rate, not the Telegraphic Transfer Selling Rate.
4. Apply the exchange margin.
The golden rule is Sell High.
To make the selling rate higher, the bank must add its margin to the base rate.
Bill Selling Rate equals 90.75 plus 0.15 equals 90.90 Indian Rupees per Euro.
5. Final Calculation.
1,50,000 Euros multiplied by the final rate of 90.90 equals an exact outflow of 1,36,35,000 Indian Rupees.
This is read as One Crore, Thirty-Six Lakhs, and Thirty-Five Thousand Rupees.