Merchant Rates: TT and Bill Buying and Selling Rates
Four rates, one logic: buying or selling, and whether the bank handles a document.
A merchant rate is the rate a bank applies to a customer, as opposed to the interbank rate banks deal at among themselves. The bank starts from the interbank rate and loads a margin, and the size of the margin depends on how much work and how much waiting the transaction involves.
That is why there are four merchant rates, not two. Buying or selling is one choice; whether the bank handles a document (a bill) or just a funds transfer (a TT, telegraphic transfer) is the other.
You save ₹200 today
- 5 full-length mocks
- 553 questions, chapter by chapter
- Rate & risk calculations
One payment, no subscription · Valid for 2 months
The Four Merchant Rates
- TT buying rate
- The rate at which the bank buys foreign currency when its nostro account is already credited, so no documents are handled and no funds are locked up. Used for inward remittances and for export collection proceeds once realised.
- Bill buying rate
- The rate at which the bank buys foreign currency against an export bill it purchases, discounts or negotiates. The bank pays the exporter before it is paid, and handles documents, so this rate is lower than TT buying.
- TT selling rate
- The rate at which the bank sells foreign currency with no document handling. Used for outward remittances, for crystallising unpaid export bills and for cancelling purchase contracts.
- Bill selling rate
- The rate at which the bank sells foreign currency to retire an import bill, where it handles documents as well. It is the highest of the four rates.
Which Rate Applies to Which Transaction
Per the FEDAI Rules (a forward contract rate replaces the card rate wherever one is booked):
Purchase, discount or negotiation of an export bill
Rate
Bill buying
FEDAI Rule
2.1(a)
Conversion of export collection proceeds after nostro credit
Rate
TT buying
FEDAI Rule
2.5(a)
Realisation of an export bill after crystallisation
Rate
TT buying
FEDAI Rule
2.1(c)
Crystallisation of an unpaid export bill
Rate
TT selling
FEDAI Rule
2.1(b)
Dishonour of an export bill before crystallisation
Rate
TT selling
FEDAI Rule
2.1(d)
Retirement of an import bill with no hedge
Rate
Bill selling
FEDAI Rule
3.1(a)
Outward remittance
Rate
TT selling
FEDAI Rule
4.1
Conversion of an inward remittance
Rate
TT buying
FEDAI Rule
4.4
Cancellation of a purchase contract
Rate
TT selling
FEDAI Rule
6.4(ii)(a)
Cancellation of a sale contract
Rate
TT buying
FEDAI Rule
6.4(ii)(b)
Currency notes, travellers' cheques, forex cards
Rate
The bank's buying or selling rate for those instruments
FEDAI Rule
4.2
| Transaction | Rate | FEDAI Rule |
|---|---|---|
| Purchase, discount or negotiation of an export bill | Bill buying | 2.1(a) |
| Conversion of export collection proceeds after nostro credit | TT buying | 2.5(a) |
| Realisation of an export bill after crystallisation | TT buying | 2.1(c) |
| Crystallisation of an unpaid export bill | TT selling | 2.1(b) |
| Dishonour of an export bill before crystallisation | TT selling | 2.1(d) |
| Retirement of an import bill with no hedge | Bill selling | 3.1(a) |
| Outward remittance | TT selling | 4.1 |
| Conversion of an inward remittance | TT buying | 4.4 |
| Cancellation of a purchase contract | TT selling | 6.4(ii)(a) |
| Cancellation of a sale contract | TT buying | 6.4(ii)(b) |
| Currency notes, travellers' cheques, forex cards | The bank's buying or selling rate for those instruments | 4.2 |
Why the Ordering Works the Way It Does
Under direct quotation the bank buys low and sells high, so both buying rates sit below the interbank rate and both selling rates sit above it. Within each pair the bill rate is the worse one for the customer, because the bank handles documents and, on export bills, finances the customer until the money arrives. From lowest to highest: bill buying, TT buying, TT selling, bill selling.
Cancellations and crystallisations follow a simple rule: the bank reverses the original deal at the opposite TT rate. A purchase contract (bank bought) is unwound by the bank selling, at TT selling. An unpaid export bill (bank bought) becomes a rupee liability by the bank notionally selling the currency back, at TT selling.
Which-rate-applies questions like the exam's. No signup.
Margins Are Each Bank's Call
Some study notes carry a table of margin percentages for each merchant rate. The current FEDAI Rules prescribe none: banks set their own charges, kept in line with the cost of service, and must display card rates along with the threshold up to which card rates apply. Learn the ordering and the mapping, not a margin table.
How CCFE Tests This
- check_circle"Which rate applies to..." questions built from the table above. Crystallisation and contract cancellation are the most missed, because candidates pick a buying rate for a transaction that started as a purchase.
- check_circleOrdering questions: arrange the four rates from lowest to highest under direct quotation.
- check_circleSmall calculations: interbank rate plus or minus a stated margin gives the merchant rate, and the bill rate carries an extra margin over the TT rate. Read the margin from the question; do not bring one from memory.
FAQs
What is the difference between TT buying rate and bill buying rate?expand_more
TT buying applies when the bank's nostro is already credited, such as an inward remittance. Bill buying applies when the bank buys an export bill and pays before it is paid, so it is lower to cover document handling and the wait.
Which rate is used for an outward remittance?expand_more
TT selling rate, or the forward contract rate if the customer has booked one (FEDAI Rule 4.1).
Which rate is used to retire an import bill?expand_more
The bill selling rate if there is no hedge contract; otherwise the contracted rate (FEDAI Rule 3.1).
At what rate is an unpaid export bill crystallised?expand_more
At the bank's TT selling rate. The customer then owes the crystallised rupee amount plus interest and charges (FEDAI Rule 2.1(b)).
Next steps
Take a full CCFE mock test100 questions, timed and scored instantly.