FEDAI Rules Explained
Eight rules govern how banks quote, contract and settle forex. Here are the numbers the paper asks for.
The FEDAI Rules are the rulebook every Authorised Dealer bank follows when it quotes, contracts, delivers and settles foreign exchange. The current text is the 10th edition, effective 1 April 2019 and amended by FEDAI circulars up to 30 May 2025.
There are eight rules plus a set of general guidelines. Older study notes often quote the 9th edition or pre-2020 wording, so check any number you memorise against the current text summarised below.
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The Eight Rules in One Table
1
Subject
Hours of business
What it settles
Market hours, Saturdays, known versus suddenly declared holidays
2
Subject
Export transactions
What it settles
Rate for export bills, crystallisation, interest, normal transit period, collection proceeds
3
Subject
Import transactions
What it settles
Rate for retiring and crystallising import bills, interest
4
Subject
Clean instruments
What it settles
Outward and inward remittances, currency notes and cards, vostro transfers
5
Subject
Forex contracts
What it settles
Definite amounts, option period, cash/tom/spot/forward, merchant quotation
6
Subject
Early delivery, extension, cancellation
What it settles
Swap cost, cancellation rates, overdue contracts
7
Subject
Intermediaries
What it settles
Broker accreditation, the mandatory FEDAI clause
8
Subject
Interbank settlement
What it settles
Interest for late delivery, claim time limits, disputes
| Rule | Subject | What it settles |
|---|---|---|
| 1 | Hours of business | Market hours, Saturdays, known versus suddenly declared holidays |
| 2 | Export transactions | Rate for export bills, crystallisation, interest, normal transit period, collection proceeds |
| 3 | Import transactions | Rate for retiring and crystallising import bills, interest |
| 4 | Clean instruments | Outward and inward remittances, currency notes and cards, vostro transfers |
| 5 | Forex contracts | Definite amounts, option period, cash/tom/spot/forward, merchant quotation |
| 6 | Early delivery, extension, cancellation | Swap cost, cancellation rates, overdue contracts |
| 7 | Intermediaries | Broker accreditation, the mandatory FEDAI clause |
| 8 | Interbank settlement | Interest for late delivery, claim time limits, disputes |
Numbers Worth Knowing, Rule by Rule
- Rule 1: market hours
- Onshore deliverable FCY/INR transactions run 9.00 a.m. to 5.00 p.m. IST on working days. Banks may deal beyond these hours, keeping within their net overnight open position limit. Spot date rolls over at 12.00 midnight IST.
- Rule 1: Saturdays and holidays
- Saturday is not a working business day for forex, except that transactions for individuals (including joint accounts and proprietary firms) may be done on Saturdays, Sundays and holidays under the bank's policy. A known holiday is one known at least 3 working business days in advance.
- Rule 2: normal transit period
- Demand bills not under LC: 25 days for foreign currency bills, 20 days for rupee bills. Banks may vary it on documented evidence, but finance beyond the prescribed period cannot exceed 90 days from shipment. Exports under UN guidelines: up to 120 days.
- Rule 2: collection proceeds
- Funds must reach the exporter's account within two working business days of the nostro credit; delay attracts compensation at the minimum export credit rate.
- Rule 4: inward remittances
- Pay or intimate the beneficiary within two working business days of the credit advice. Delay attracts interest at 2% over the bank's savings rate.
- Rule 4.6: vostro transfers
- Form A3 should reach the beneficiary bank within 5 working business days; the remitting bank then pays ₹1,000 per day of delay, capped at ₹10,000 if the claim is lodged after 15 days.
- Rule 5: option period
- An option period of delivery cannot extend beyond one month.
- Rule 6: overdue contracts
- A matured contract with no customer instruction is cancelled by the bank within three working business days after maturity; any loss is recovered, and any gain is not passed to the customer unless the bank records that the lapse was beyond the customer's control.
- Rule 8: late delivery interest
- The seller bank pays interest at 2% over the currency's overnight benchmark (FBIL MIBOR for INR, SOFR for USD, SONIA for GBP, ESTR for EUR, TONA for JPY, SARON for CHF, CORRA for CAD).
- Rule 8: claim limits
- Claim within 15 working business days of the due date, or interest is capped at 60 days. The seller settles within 15 working business days of the claim. Unsettled after 60 days, the dispute may go to FEDAI, whose decision binds both banks.
The General Guidelines Above the Rules
Before Rule 1, FEDAI sets general guidelines. Banks fix their own charges for forex services, but RBI expects them to stay in line with the cost of providing the service and not to penalise low-volume customers. Banks must display card rates on their website or at their B category branches and declare the threshold up to which card rates apply and how often the card rate is published.
Members must also abide by the FEDAI Code of Conduct and collect a Statement of Commitment from staff involved in forex, confirmed to FEDAI each April.
Transit periods, claim limits and cancellation rates. No signup.
Rules That Changed Recently
Rule 1.1 and Rule 8.2 were amended by FEDAI circular dated 5 April 2024. Late-delivery interest is now benchmarked to overnight alternative reference rates such as SOFR and SONIA, replacing the old bank prime and base rates. Rupee rounding (Rule 5.8) is now a matter of each bank's policy. If your notes quote a fixed rounding convention or a LIBOR-style benchmark, they are out of date.
How CCFE Tests This
- check_circleNumber recall: 25 days NTP, 15 working days to claim, 60-day interest cap, one-month option period, three working days to cancel an overdue contract.
- check_circleWho pays: in a late interbank delivery the seller bank pays interest, whatever caused the delay. Candidates often pick the buyer.
- check_circleWhich rate: a frequent trap pairs a transaction with the wrong merchant rate, for example crystallising an unpaid export bill at TT buying instead of TT selling.
- check_circleWording: every contract and confirmation must say "Subject to the Rules & Regulations of the Foreign Exchange Dealers' Association of India".
FAQs
Which edition of the FEDAI Rules is current?expand_more
The 10th edition, effective 1 April 2019, with amendments up to 30 May 2025 incorporated in FEDAI's published text.
What is the normal transit period for export bills under FEDAI Rules?expand_more
For demand bills not under a letter of credit, 25 days for foreign currency bills and 20 days for rupee bills. Bills with a fixed due date have no NTP because the due date is already known.
Who pays interest for late delivery of funds between banks?expand_more
The seller bank, for every day of delay regardless of the cause, at 2% over the overnight benchmark rate of the currency concerned.
Are FEDAI Rules binding on customers?expand_more
They bind member banks, and because every contract carries the FEDAI clause, they also become terms of the bank's forex contracts with its customers.
Next steps
- What Is FEDAIarrow_forward
- Merchant Ratesarrow_forward
- Forward Contractsarrow_forward
- Crystallisationarrow_forward
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