Module: General Practice
Q60: Consider the following statements:
Assertion (A): FFMCs are generally not permitted to issue Foreign Currency Demand Drafts (DDs) or process TT (Telegraphic Transfers) independently.
Reason (R): FFMCs do not maintain direct "Nostro" accounts with foreign banks and must route remittances through AD Category-I banks.
Reason (R): FFMCs do not maintain direct "Nostro" accounts with foreign banks and must route remittances through AD Category-I banks.
✅ Correct Answer: A
1. Assertion (A): True.
An FFMC's primary business is physical currency (Cash) and Forex Prepaid Cards (as agents). They cannot independently issue a DD or process a Wire Transfer (TT) because they are not part of the SWIFT network directly.
2. Reason (R): True.
To issue a DD or TT, an entity needs a Nostro Account (an account held by an Indian bank with a foreign bank in foreign currency). FFMCs are not authorized to hold Nostro accounts.
3. The Link: Because they lack Nostro accounts (R), they cannot process these transfers independently (A). If a customer needs a DD, the FFMC can only act as a facilitator/agent, taking the rupee equivalent and getting the DD issued by an AD Category-I bank.
An FFMC's primary business is physical currency (Cash) and Forex Prepaid Cards (as agents). They cannot independently issue a DD or process a Wire Transfer (TT) because they are not part of the SWIFT network directly.
2. Reason (R): True.
To issue a DD or TT, an entity needs a Nostro Account (an account held by an Indian bank with a foreign bank in foreign currency). FFMCs are not authorized to hold Nostro accounts.
3. The Link: Because they lack Nostro accounts (R), they cannot process these transfers independently (A). If a customer needs a DD, the FFMC can only act as a facilitator/agent, taking the rupee equivalent and getting the DD issued by an AD Category-I bank.