What are Ready Rates?


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Ready Rates – when branches receive transactions involving amounts in excess of USD
5000 or equivalent, a transaction specific rate is provided by the Dealing Room in each
case based on the ongoing market rate. Thus, while Card Rates are standardized, Ready
Rates are customized. These rates are finer than Card Rates in terms of profit margins.
Transactions reported throughout the day are segregated currency – wise and separate
dealers consolidate the exposure of the bank in each currency on an on-going basis.
Depending on the view of the dealer the exposures are covered in the inter-bank market.
(Ref: CH 8 and 9) The Dealing Room therefore represents the point of interface between
the Retail and Wholesale components of the foreign exchange market.
Currency exposures are called ‘positions’. A ‘position’ can therefore be described as an
uncovered transaction in which the bank has assumed exchange rate risk by providing a
committed rate to the opposite party. A dealer has to maintain two positions- funds position
and currency position The funds position reflects inflows and outflows of funds i.e.
receivables and payables. A mismatch in funds position will expose the bank to interest
rate risks in the form of overdraft interest in the Nostro a/c, loss of interest income on credit
balances, etc. Currency position deals with overbought and oversold positions, arrived
after taking various merchant and/or inter-bank transactions. The overall net currency
position exposes the dealer to exchange risks from market rate movements. Transactions
undertaken in the inter-bank market to eliminate merchant exposures are called ‘Cover
Transactions’.


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MT UVA BMS

MT UVA- University, Vocational and Affiliated Education for BMS

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