Cash flow is the lifeblood of any business, and late cross-border payments can bleed through your operational costs. From missed opportunities to strained relationships, delays in foreign or inward remittances have a significant impact. 

This blog unpacks the payment system intricacies across key markets, to help you navigate the global payment maze and avoid costly delays.

Time Taken For Inward Remittances Worldwide&nbsp;

The central banks of various countries have set frameworks and policies to ensure seamless and secure financial transactions. Like India’s NEFT and RTGS, major countries have their payment networks with distinctive processing times and cost structures. 

Here are the major countrywide payment systems with their processing times.&nbsp;

<a href="https://www.skydo.com/blog/everything-about-ach-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Automated Clearing House, or the ACH network,</a> is an interconnected computer system that communicates with each other to help transfer or receive payments within the US.&nbsp;

The ACH network has evolved from person-to-person payments to allow individuals to utilise the network to make bill payments, pay salaries to employees or make mortgage repayments.&nbsp;

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<a href="https://www.federalreserve.gov/paymentsystems/fedach_about.htm">The National Automated Clearing House</a>, or NACH, governs the payments executed through the ACH network.&nbsp;

Payments made through ACH usually take 1-3 business days to settle. Such payments, called standard ACH payments, differ in cost structure from same-day ACH, which settles the payments on the same day but comes with a higher fee.&nbsp;

<a href="https://tfx.treasury.gov/taxonomy/term/10659#:~:text=The%20Originating%20Depository%20Financial%20Institution,party%20to%20its%20ACH%20operator.">ODFI (Originating Depository Financial Institution)</a> settles regular ACH payments at 8:30 AM on the following business day after initiating debit requests and settles credit requests at 8:30 AM on the following second business day.

<a href="https://www.skydo.com/blog/everything-about-fps-bacs">The Faster Payments Service (FPS)</a> allows the settling of digital financial transactions between two bank accounts registered in the UK. The FPS payment network includes three stakeholders that ensure the successful transaction settlement:

<a href="https://www.wearepay.uk/what-we-do/payment-systems/faster-payment-system/">Using the Faster Payment Systems,</a> individuals can send up to £1 million, if the bank accounts of both parties are registered in the UK.&nbsp;

FPS payments are settled almost immediately after payment initiation. However, some payments may take up to two hours. Although the upper limit is £1 million, banks set their limit for the maximum amount entities can send per transaction or daily using FPS.

Unlike ACH, which carries an average <a href="https://tipalti.com/payments-hub/ach-fees/#ach-payment-processing-cost">cost of $0.29 per transaction</a>, FPS payments are free for retail customers but carry a fee of <a href="https://www.hellozai.com/blog/a-guide-to-faster-payments-service-fps#:~:text=Although%20Faster%20Payments%20are%20free,two%2C%20however%2C%20is%20speed.">around £2.50 per transaction</a> for corporate customers.&nbsp;

<a href="https://www.skydo.com/blog/what-are-sepa-transfers?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">SEPA, or The Single Euro Payments Area</a>, is a payment network to send and receive payments electronically within Europe. The transfer happens in Euros between two banks or financial institutions in the Eurozone (European region).&nbsp;

Thirty-six countries are members of the SEPA network, and the two bank accounts should be registered in any of the member countries for the SEPA transfers to be completed.&nbsp;

<a href="https://www.ecb.europa.eu/paym/integration/retail/sepa/html/index.en.html">SEPA transfers</a> are generally free of cost, and users can transfer a maximum of €100,000 in one single payment using the Instant Credit facility.&nbsp;

The processing time for SEPA transactions differs based on the four types of payment processing schemes, which are;&nbsp;

Similar to the US, ACH payment networks also allow settling funds in CAD within two bank accounts in Canada. Canada <a href="https://www.payments.ca/payment-resources/iso-20022/automatic-funds-transfer#:~:text=Payments%20Canada%20has%20developed%20the,continued%20support%20throughout%20the%20process.">AFT (Automated Fund Transfer)</a> is another cost-effective and convenient solution.&nbsp;

AFT, called Canada’s version of the ACH, works for both CAD and USD and transfers AFT files three times a day. Once the Canadian banks receive the AFT file, they must process <a href="https://www.linkedin.com/pulse/aft-going-forward-dan-dickinson">payments within two hours.&nbsp;</a>

<a href="https://www.pnc.com/insights/corporate-institutional/go-international/ten-things-you-need-to-know-about-payments-in-canada.html">AFT transactions in Canada</a> include electronic payments, such as direct deposits, bill payments, wire transfers, and online banking transactions. Canadian Payments Association (now part of Payments Canada) oversees and facilitates the electronic payment systems in the country.

<a href="https://www.rba.gov.au/payments-and-infrastructure/new-payments-platform/">The New Payments Platform (NPP)</a> was launched in February 2018 as an open-access infrastructure for executing fast payments within Australia.&nbsp;

The NPP enables businesses, households, and government agencies to make simple, near real-time fund transfers 24/7 with no cut-off time. NPP differs from other payment networks as it carries much richer remittance information with each payment message.&nbsp;

In 2022, <a href="https://nppa.com.au/the-company/">NPP merged with BPAY Group</a> and EFTPOS to form the Australian Payment Plus. More than 100 financial institutions offer NPP-enabled financial services to their customers in Australia.&nbsp;

<a href="https://nppa.com.au/faqs/">NPP comes with no transaction limit,</a> but banks can set their own per-transaction or daily limit as per their operating policies. There is no fee involved in making NPP transactions, but banks can set a specific cost for transactions made via products and services on the New Payments Platform.

Before choosing the right payment network, you should compare them based on the urgency of transaction settlement, amount, sender/receiver location, and fee.&nbsp;

Ensure that all recipient information is accurate and complete. Double-check the recipient's name, address, account number, and any other required details.

Initiate remittance transactions well in advance, especially if specific deadlines or time-sensitive requirements exist. Stay informed about the regulatory requirements for inward remittances in both the sending and receiving countries.	

Maintaining open lines of communication with both the sender and recipient and any intermediaries involved in the process can also prove ideal in avoiding processing delays.&nbsp;

Understanding the nuances of remittance worldwide is vital for seamless business transactions, as most countries have payment networks similar to India’s<a href="https://www.skydo.com/blog/differences-between-neft-and-rtgs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link"> RTGS or NEFT.</a> As these payment networks differ in their processing time and cost structure, they can significantly affect the time taken for inward remittances.&nbsp;

Accuracy in recipient information, early initiation of transactions, and a comprehensive understanding of compliance checks form the foundation for minimising delays. Furthermore, it is vital to analyse and compare the payment networks based on factors such as transfer amount, urgency, and the requirement for bank accounts.&nbsp;

Ans: Remitter meaning in bank refers to the individual or entity that is sending or initiating a remittance. The remitter could be an individual sending money to family members, a business making international payments, or anyone involved in the process of transferring funds across borders.

Q2. What fees are associated with cross-border payments?

Ans: There are numerous <a href="https://tipalti.com/mass-payments-hub/cross-border-payments-guide/">costs associated with cross-border transactions,</a> such as bank fees, transfer fees, currency conversion fees, exchange fees, international money transfer platform fees, and international debit or credit card fees.&nbsp;

Q3. What are the most common payment methods for international transactions?

Ans: The most common payment methods include wire transfers, international debit/credit cards, and online payment platforms.

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Businesses and individuals that send or receive payments in foreign currencies must understand the currency trends and the affective factor to predict an ideal currency exchange rate.&nbsp;

Whether you're a seasoned investor, a business leader, or someone keen on understanding the evolving financial ecosystem, this blog highlights the potential trends and influences affecting the currency exchange rate, valuation, and a table with the currency exchange forecast this year.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 

The United States economy saw a drop during the COVID-19 pandemic. However, it has witnessed a strong GDP recovery as it has outperformed expectations in three key dimensions: slowing inflation, labour market resilience, and economic output.&nbsp;

The US GDP has increased to <a href="https://home.treasury.gov/news/featured-stories/the-us-economy-in-global-context#:~:text=Strong%20U.S.%20GDP%20Recovery&amp;text=In%20most%20advanced%20economies%2C%20real,higher%20than%20in%20Q4%202019.">6.1% in Q4 of 2023</a>, which is the highest among all major countries. Inflation fell to <a href="https://www.focus-economics.com/countries/united-states/">3.2% in October</a> from 3.7% in September, below the market estimation of 3.3%.&nbsp;

<a href="https://capex.com/en/overview/usd-to-inr-forecast">The projected USD to INR forecast</a> against INR is mildly bearish for 2024, as experts believe that the 1-month target is 83.00, the 3-month target is 82.50, the 6-month target is 81.50, and the 12-month target is 81.00.&nbsp;

Source: <a href="https://www.bookmyforex.com/currency-converter/usd-to-inr/forecast/">https://www.bookmyforex.com/currency-converter/usd-to-inr/forecast/</a>&nbsp;

The UK economy has beat expert estimates to perform better than expected in 2023. At the start of the year, it was expected that the UK's GDP was expected to fall by 1%. However, experts now expect the <a href="https://kpmg.com/uk/en/home/insights/2018/09/uk-economic-outlook.html#:~:text=The%20UK%20economy%20has%20performed,by%206.3%25%20in%20Q3%202023.">GDP to grow by 0.5% </a>by the end of 2023.&nbsp;

On a year-on-year basis, business investment in the UK grew by 6.3% in Q3 of 2023, and household consumption was up by 0.3%. Furthermore, the UK’s GDP is thriving based on the headline CPI inflation, which decreased<a href="https://kpmg.com/uk/en/home/insights/2018/09/uk-economic-outlook.html#:~:text=The%20UK%20economy%20has%20performed,by%206.3%25%20in%20Q3%202023."> to 4.6% in October.&nbsp;</a>

<a href="https://longforecast.com/gbp-to-inr-forecast-2017-2018-2019-2020-2021-pound-to-rupee">The pound forecast</a> against INR is moderately bullish for 2024 and can reach 105.69 in the next month, 108.86 in three months, 106.07 in six months, and 110.44 by the end of 2024.

Source: <a href="https://www.bookmyforex.com/currency-converter/gbp-to-inr/forecast/">https://www.bookmyforex.com/currency-converter/gbp-to-inr/forecast/</a>&nbsp;

<a href="https://www150.statcan.gc.ca/n1/pub/36-28-0001/2023010/article/00006-eng.htm">The Canadian economy</a> showed a mild slowdown toward mid-2023 owing to higher borrowing costs. The employment rate is also declining as the labour demand is lower than last year. However, inflation eased to <a href="https://www.focus-economics.com/countries/canada/">3.8% in September,</a> down from 4% in August.

As of the end of 2023, Canada's GDP is estimated to be $1.919 trillion, and the nominal GDP was approximately $2.117 trillion, making it the world's tenth-largest economy.

<a href="https://longforecast.com/cad-to-inr-forecast-2017-2018-2019-2020-2021-canadian-dollar-to-rupee">The CAD forecast</a> for the dollar rate against INR is mostly flat for 2024, as experts believe that the 1-month target is 63.05, the 3-month target is 64.21, the 6-month target is 63.38, and the 12-month target is 64.26.&nbsp;

Source: <a href="https://www.bookmyforex.com/currency-converter/cad-to-inr/forecast/">https://www.bookmyforex.com/currency-converter/cad-to-inr/forecast/</a>&nbsp;

<a href="https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/germany/economic-forecast-germany_en">Germany’s economy</a> is facing multiple challenges as it is witnessing a decline in industrial production along with a decreasing construction sector. Currently, as per the European Commission, Germany’s GDP is expected to shrink by 0.4% by the end of 2023. However, it expects Germany’s inflation to decrease and reach 6.4% by the end of 2023.&nbsp;

<a href="https://longforecast.com/euro-to-inr-forecast-2017-2018-2019-2020-2021-eur-to-indian-rupee">The Euro forecast</a> against INR is bullish for 2024, as experts believe that the 1-month target is 92.97, the 3-month target is 96.07, the 6-month target is 94.22, and the 12-month target is 95.21.&nbsp;

Source: <a href="https://www.bookmyforex.com/currency-converter/eur-to-inr/forecast/">https://www.bookmyforex.com/currency-converter/eur-to-inr/forecast/</a>&nbsp;

<a href="https://economictimes.indiatimes.com/topic/uae-economy">The United Arab Emirates (UAE) GDP</a> is one of the fastest growing and is the second-largest economy in the Middle East. In 2023, the UAE witnessed a substantial rise of 3.7% in its GDP in the first half of the year.&nbsp;

Currently, the International Monetary Fund (IMF) expects the UAE’s economy to grow at a rate <a href="https://www.trade.gov/knowledge-product/united-arab-emirates-market-overview">of 4.2% by the end of 2023</a>, with the labour force participation rate expected<a href="https://thedocs.worldbank.org/en/doc/65cf93926fdb3ea23b72f277fc249a72-0500042021/related/mpo-are.pdf"> to reach 82.7</a>%.&nbsp;

The<a href="https://dollarrupee.in/aed-to-inr-today-forecast"> Dirham (AED) forecast</a> against INR is mostly flat for 2024 and can reach 22.50 in the next month, 22.59 in three months, 22.86 in six months, and 22.68 by the end of 2024.&nbsp;

Source: <a href="https://www.bookmyforex.com/currency-converter/aed-to-inr/forecast/">https://www.bookmyforex.com/currency-converter/aed-to-inr/forecast/</a>&nbsp;

<a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">The Australian economy</a> performed slightly positively as of September 2023, as the GDP grew to 0.2% due to higher capital investment and increased government consumption. However, the growth rate has slowed due to cost of living pressures and higher interest rates.&nbsp;

Currently, Australia is the <a href="https://www.imf.org/en/News/Articles/2023/10/31/cs103123-australia-staff-concluding-statement-of-the-2023-article-iv">14 largest economy worldwide</a> by nominal GDP and has shown improved performance as unemployment has been low and the industrial output is above potential.&nbsp;

The <a href="https://longforecast.com/aud-to-inr-forecast-2017-2018-2019-2020-2021-australian-dollar-to-indian-rupee">AUD forecast</a> against INR is slightly bearish for 2024, as experts believe that the 1-month target is 58.64, the 3-month target is 59.62, the 6-month target is 58.26, and the 12-month target is 56.84.

Source: <a href="https://www.bookmyforex.com/currency-converter/aud-to-inr/forecast/">https://www.bookmyforex.com/currency-converter/aud-to-inr/forecast/</a>&nbsp;

Factors Influencing Currency Trends&nbsp;

Analysing currency trends is vital if you have exposure to international currencies, as the currency exchange rates fluctuate in real-time, resulting in increasing or decreasing the money you send or receive. However, to analyse currency trends effectively, it is vital first to understand the factors that influence currency trends and result in real-time currency exchange rate fluctuations.&nbsp;

Here are the factors influencing currency trends:&nbsp;

A country with stable economic conditions witnesses a lower currency exchange rate fluctuation than a country going through an economic slowdown.&nbsp;

Countries with higher GDP growth rates often experience stronger currencies as they indicate a robust and expanding economy, attracting foreign investment. Factors such as manufacturing and services PMI, industrial production, and consumer confidence can also affect currency trends.&nbsp;

If a country has a higher unemployment rate, the local currency witnesses a weak status against other currencies of countries with a lower unemployment rate, as higher unemployment rates may indicate economic weakness.&nbsp;

Furthermore, currency values are affected by how well a country manages economic factors such as inflation and deflation. Here, a country’s central bank is responsible for managing both factors to ensure a stable currency value.&nbsp;

The political landscape of a country influences the currency as it reciprocates with the mindset of consumers based on how they think the economy will perform. Political stability fosters investor confidence, positively impacting currency values. However, if a country is politically uncertain, the currency trend may turn negative.&nbsp;

Furthermore, Political events, such as elections or government instability, can lead to currency fluctuations owing to economic and geographical uncertainty. For example, foreign institutional investors refrain from investing during elections as the government may change, bringing new rules that may further add to currency fluctuations.&nbsp;

A country’s central bank is the main regulatory authority that manages and regulates the money flow in the economy. For example, in India, the RBI manages the money flow by increasing or decreasing the key interest rates, such as repo or reverse repo rates. Higher interest rates attract foreign capital, increasing demand for the currency and strengthening the currency value.&nbsp;

However, at times of recession, the central banks can lower the key interest rates to inject money into the economy and ensure people have more disposable income. However, this can increase the supply and result in currency depreciation.&nbsp;

4. Technological advancements and market innovations

Currency trends are generally positive for a technologically advanced and innovative country. Technological advancements can affect a country's economic competitiveness, influencing its currency. Innovation and technological progress can attract investment and impact currency values.

For example, a country embracing new technologies such as blockchain and digital currencies can positively influence traditional currency markets, strengthening the currency valuation.&nbsp;

Furthermore, a country with new-age fintech innovation through fintech firms can affect the efficiency and accessibility of financial markets, potentially influencing currency trends.&nbsp;

Currency trends and forecasts, such as USD to INR history, are subject to a variety of factors, and while analysts strive to provide accurate predictions, there are always uncertainties in the global economic landscape. For example, most currency trend-affecting factors are dynamic and can change based on unforeseen economic events.&nbsp;

Unexpected economic developments, such as natural disasters, economic crises, or sudden changes in global demand, can disrupt currency trends. Furthermore, political instability, conflicts, or unexpected geopolitical events can significantly and suddenly impact currency values.&nbsp;

Businesses and investors can mitigate the negative effects of influencing factors by diversifying their portfolios across different asset classes, diligently assessing risks, and staying informed about market trends. Adopting a long-term perspective, seeking professional advice, and maintaining cash reserves provide additional tools for navigating market fluctuations.

International currencies trade in pairs, which means that their value is compared against another currency to determine how much one has to pay to get the desired foreign currency account. For individuals and businesses with international exposure and dealing in foreign currencies, it is vital to understand the factors that can affect the currency exchange rate.&nbsp;

As currency value fluctuates in real-time, it is crucial to understand the currency trends to predict if the foreign currency you hold can increase or decrease in value. Understanding these currency trends can allow you to determine the ideal time to convert the currency into INR and get the most amount for the foreign currency.&nbsp;

If you receive payments in foreign currencies, you can create an account on Skydo. It creates a virtual currency account, which you can use to hold foreign currencies and convert them at the best currency exchange rate.&nbsp;

Q1. What are the key factors influencing the 2024 forecast for USD, Pound, CAD, Euro, Dirham, and AUD?

Ans: The factors include global economic indicators, geopolitical events, central bank policies, trade agreements, and specific regional factors impacting the USD, Pound, CAD, Euro, Dirham, and AUD.&nbsp;

Q2. How can investors and businesses use the 2024 currency forecast to create their strategies?&nbsp;

Ans: Whether you're a currency trader, investor, or business leader, understanding the forecasted trends can assist in making informed decisions and adapting strategies to the anticipated currency movements in the year ahead. Hence, understand the factors that can influence currency trends in detail and make strategies accordingly.&nbsp;

Q3. What are some factors other than economic factors that could affect currency movements?

Ans: Some factors are market sentiment, currency manipulation, health crisis, geological tensions, and technological advancement.

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Ever wondered how the Reserve Bank of India ensures that the Indian economy remains balanced and has adequate money flow?&nbsp;

Among numerous financial tools <a href="https://www.skydo.com/blog/ensure-rbi-guidelines-for-cross-border-transactions-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">RBI</a> uses, one of the most important is the Cash Reserve Ratio (CRR). CRR is a monetary policy to regulate the amount of money banks must keep as reserves with the RBI to ensure they have enough liquidity.&nbsp;

In this blog, you will learn what the CRR is about—its objectives, how it works, who sets it, and why it changes regularly.&nbsp;

The Reserve Bank of India wants Indian Banks to have enough funds to lend and still have funds to meet the withdrawal requirements of customers. Hence, the RBI created the Cash Reserve Ratio (CRR) for banks to take a percentage of their total deposits and reserve the funds with the RBI.&nbsp;

By adjusting the CRR, RBI can control the amount of money banks have available for lending and control economic factors such as inflation.

In cases of inflation or when there is excess money flow in the market, the RBI regulates the CRR to ensure that the demand and supply are balanced. Currently, the RBI requires <a href="https://www.skydo.com/blog/the-impact-of-open-banking?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Indian banks</a> to maintain a cash balance of no less than 4.5% of the Net Demand and Time Liabilities (NDTL).

NDTL is the total demand and time liabilities (Deposits) held by Indian banks. It includes the cash balance held by the banks with other banks and the general public's deposits (Cash, FDs, etc.) in the bank’s various accounts. For example, an Indian bank with Rs 200 crore NDTL must maintain 9 crores as cash reserves.&nbsp;

Banks calculate their CRR based on a specified percentage of their net demand and time liabilities. Banks must maintain the prescribed CRR on a daily average. They may hold these reserves as cash in their vaults or as deposits with the central bank.

The Reserve Bank of India holds the cash reserve ratio account, and the bank transfers or withdraws the required account from this account to maintain the minimum cash reserves. Banks regularly report their reserve holdings to the central bank, and the latter may conduct audits or inspections to ensure adherence. 

An Indian bank’s core operation is lending money to individuals and corporations at an interest rate. Although the interest rate fluctuates regularly, it can not go lower than a base rate. The base rate sets the benchmark for the minimum rate at which a bank can lend funds. Once the RBI sets the base rate concerning the CRR, it provides transparency to individuals and corporations as to the minimum borrowing and lending rates.&nbsp;

Apart from being an important reference point for setting the base rate, the Cash Reserve Ratio also fulfils these objectives in the financial market.

When the RBI increases the CRR, the banks have fewer funds to lend. Lower funds force the banks to increase the lending interest rate, resulting in borrowers paying more as interest. Since they pay more, the RBI reduces the excess money flow or liquidity in the market.&nbsp;

On the other hand, when the central bank decreases the CRR, banks have more funds available for lending. In turn, they decrease the lending interest rates, allowing various entities to take loans by spending lower amounts on repayment. With higher disposable income left to individuals, they have more to spend, increasing the market's money supply.&nbsp;

Furthermore, higher interest rates resulting from an increased CRR may attract foreign capital, leading to an appreciation of the national currency against currencies such as USD. Conversely, a decrease in CRR and lower interest rates might lead to a depreciation of the national currency as investors seek higher returns elsewhere.&nbsp;

The change in CRR by the RBI is based on the lending operations of the Indian banks, which is the core factor for them to make profits. The higher the lending, the higher the profits for banks. However, rapid lending can result in banks having a low cash reserve, and an unexpected rush by bank account holders to withdraw their cash can lead to banks defaulting to meet the withdrawal requests.&nbsp;

Hence, the RBI ensures that it regularly maintains and adjusts the Cash Reserve Ratio (CRR) to let banks maintain a minimum liquid amount for such a scenario. The main motive behind changing CRR regularly is to ensure that the banks have enough funds to create a healthy balance between lending and meeting the withdrawal requirements of customers.&nbsp;

Furthermore, Central banks use adjustments in the CRR as part of their broader monetary policy framework to create an economic balance. For example, if there is inflationary pressure, the central bank might raise the CRR to reduce the money supply and curb inflation. Conversely, during economic downturns, the central bank might lower the CRR to stimulate economic activity by increasing the availability of funds for lending.

CRR serves as a mechanism for controlling the money supply, influencing interest rates, and contributing to the broader economic stability of a nation. Furthermore, it ensures that the customers can withdraw their funds at any time with the guarantee that the bank will be able to meet the withdrawal requirements.&nbsp;

Apart from using the CRR, the RBI uses metrics such as repo and reverse repo rates to regulate the money supply.&nbsp;

Another factor is the Statutory Liquidity Ratio (SLR), which is similar to the CRR but differs in assets to be held as reserves. In SLR, the banks are required to maintain a certain percentage of their Net Demand and Time Liabilities (NDTL) in the form of liquid assets. Here, liquid assets can include government securities, approved bonds, and other high-quality, low-risk securities.

Understanding CRR is important to understand the monetary policies RBI uses to regulate the economic equilibrium and ensure that the money supply is always balanced.&nbsp;

Q1. What is the formula for the Cash Reserve Ratio?

Ans: The CRR is calculated as the percentage of a specific bank's Net Demand and Time Liabilities (NDTL). The formula for CRR is as follows:&nbsp;

CRR = Reserve Requirement / Bank Deposits x 100%&nbsp;

Ans: The current <a href="https://www.bankbazaar.com/finance-tools/emi-calculator/current-rbi-bank-interest-rates.html#:~:text=The%20Cash%20Reserve%20Ratio%20(CRR,currently%20remains%20unchanged%20at%204.50%25.">CRR </a>in India set by the RBI is 4.5% of the Net Demand and Time Liabilities (NDTL).&nbsp;

Q3. What are repo and reverse repo rates?&nbsp;

Ans: The Repo Rate is the interest rate at which RBI lends money to commercial banks. It is currently 6.50%. The reverse repo rate is the interest rate at which the RBI borrows money from commercial banks. It is currently 3.35%.&nbsp;

Q4. What is liquidity or Cash Reserve Ratio?

Ans: It is a monetary policy tool used by RBI to regulate the liquidity in the financial system and control the money supply. CRR is a specified percentage (currently 4.5%) of a bank's total deposits that must be held in the form of cash reserves or as deposits with the RBI.

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Anyonya Sahayakari Mandali Co-operative Bank, the first one in India, was established in 1889 with 23 members and INR 73 to save Baroda’s residents from exploitation by moneylenders.

True to its name, cooperative banking is a small financial institution that operates on the principles of cooperation, mutual assistance, and shared ownership among the members. Group members commonly start cooperative banking to cater to the capital needs of a specific community. The members own, operate, and are responsible for all the activities executed through the cooperative banks, and the board members are democratically elected to manage operations.&nbsp;

The main motive behind establishing such institutions was to address the problem of rural or local credit and cater to the capital needs of artisans, farmers, daily wage laborers, and anyone with limited means. The Indian government amended the Cooperatives Societies Act in 1912 to include organizations to audit and supervise the supply of cooperative credit. These organizations were:&nbsp;

Currently, 31 cooperative banks in India are under the direct supervision of the RBI and are required to adhere to the regulations as per the Banking Regulation Act 1949 and Banking Laws Act 1955.&nbsp;

Cooperative banks differ from traditional commercial banks’ ownership structure, governance, and primary objectives.&nbsp;

Operation and Services of Cooperative Banks&nbsp;

Cooperative banks strive to provide all the basic banking services a traditional bank provides but at a much more affordable rate.&nbsp;

Cooperative banks generally focus on the low-income segments. Here are some of the major advantages of cooperating banks and their financial services:&nbsp;

Challenges faced by Cooperative banks&nbsp;

Their size, vision, and operations create many challenges for cooperative banks in India:&nbsp;

Cooperative banks in India have the potential to scale and offer improved financial services to a large customer base. The current era of digital services demands integrating their banking services with new-age fintech companies to offer seamless and quick online transactions, which is currently limited The growth of cooperative banks depends on promoting financial literacy about the bank’s products, services, principles, and economic development initiatives to their members.

Cooperative banks may strengthen their cooperation and collaboration with other cooperative financial institutions at regional, national, and international levels to ensure better services, data security and customer privacy.&nbsp;

Cooperative banks are an integral part of the Indian banking ecosystem as they focus on providing banking and financial services to underserved communities. They provide most of the banking services as traditional banks but ensure the offerings at a much lower cost, promoting much-needed financial inclusion.

These banks will continue evolving and adapting to changing market dynamics and member needs as time passes. By embracing technology, fostering innovation, and staying true to their cooperative principles, they can remain competitive, financially stable, and socially responsible while continuing to serve their communities and members effectively.

Q1. What is meant by the cooperative bank?

Ans: A cooperative bank is a financial institution owned and controlled by its depositors, who are also its members. They prioritize serving their members' needs over maximizing profit, fostering a community-oriented approach to banking.

Ans: Yes, cooperative banks in India are regulated by the Reserve Bank of India (RBI) under the Banking Regulation Act 1949. They adhere to the same regulations and supervision as other commercial banks.

Q3. How many types of cooperative banks are there?

Ans: There are two main types in India:

Additionally, there are specialized cooperative banks catering to specific sectors like industry or professions.

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An exchange rate is the rate or value at which one currency can be exchanged for another. When a layman tries to exchange their currency from dollars to rupees, they might go to a bank or sign up through an online intermediary. If you have tried to exchange your current currency from a bank, you might have noticed that the conversion rate charged by the banks may be higher than the number they previously showed.

However, the same does not apply to some online intermediaries like Skydo, and this is because we provide customers with a live foreign exchange rate. A live FX rate, unlike bank rates, is updated in real-time. So why do bank rates become more expensive than live FX rates, and how does this impact you?

Why bank exchange rates are different from the live FX rates?

Banks trade currencies with customers, as well as each other. However, the rates for both differ– the bank exchange rate is applied when banks are trading with customers, and the interbank rate applies when banks are trading with each other.&nbsp;

The interbank rate is more of a wholesale rate since banks trade with each other currencies in bulk. However, a regular consumer pays a small fee over and above paying the exchange rate. For example, if the interbank rate for buying USD is 1.00, the bank exchange rate for customers to buy USD will be 1.03.&nbsp;

Similarly, if a customer tries to sell USD, the rate offered to them will be 0.97. In each case, the bank earns 0.3 cents for acting as a middleman and helping you facilitate currency exchange. This 6-cent difference is known as the spread, to earn a profit from forex activities.&nbsp;

However, just like the currency, the spread is not constant. Various factors affect the increase or decrease in a forex spread, including the transaction amount itself. Banks charge a lesser spread for larger forex transactions to encourage bulk transactions.&nbsp;

A lower transaction amount might mean you end up paying a larger proportion of the amount in bank charges. Similarly, banks might have a smaller spread for frequently exchanged currencies and charge a larger spread for rarer currencies.

In addition to the spread, banks might charge a flat transaction fee or a certain percentage of the transaction for exchanging currency. This fee, too, is charged to drive profits.

Banks charge fees to secure themselves against currency risks (that might occur due to factors like war, inflation in other countries, or major political changes). Extra charges such as flat fees help banks achieve this while assuming less risk.&nbsp;

Banks have higher operational expenses of handling and processing cash than online brokers and intermediaries. Hence, online intermediaries pass on the cost savings to you in the form of lower fees.

The exchange rate market is highly volatile and is affected by global macroeconomic factors, other than simple demand and supply. Banks need to account for potential losses by adjusting their spread.&nbsp;

Currencies expected to depreciate or lower in demand usually see an increase in their spread for banks to mitigate their losses.&nbsp;

Indian banks must adhere to the rules of the Reserve Bank of India. These rules might be related to bank rates, insuring against risk, and adherence to them increases compliance costs. To some extent, these costs are borne by customers when they pay a transaction fee or a higher spread.&nbsp;

The RBI’s rules are subject to change depending on global factors and its own estimation of the supply and demand in India, which means the transaction fees are dynamic and never fixed.&nbsp;

How Skydo Can Help You to Save Your Money

Compared to this, carrying out your foreign exchange transaction using a service like Skydo can benefit you.

How, you ask? We operate on <a href="https://www.skydo.com/blog/get-the-most-out-of-your-forex-savings-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">live FX rates</a> and charge zero margins or hidden transaction charges. Yes, you read that right. Unlike the volatile transaction fees, spreads, and other charges levied by banks, Skydo has a flat fee and provides a <a href="https://www.skydo.com/blog/get-the-most-out-of-your-forex-savings-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">transparent pricing system</a>.

Similarly, our clear and easy-to-understand thresholds inform you of exact costs compared to the ever-changing bank rates that regularly need a cost-benefit analysis.&nbsp;

Some of our other important features include:

In short, in an age of convenience and quick transactions, going through a bank to exchange your currency might be an outdated solution for your business needs. Recognizing the benefits that a service like <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> can provide is important for your convenience but crucial to financial operations.&nbsp;

Our user-friendly interface helps you instantly set up an account, create invoices, and start doing transactions in no time. Businesses doing bulk forex transactions may save up to Rs 10 lakh annually, among other benefits.

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Book a free demo</a> to experience fast, cost-saving, and transparent cross-border payment experiences.&nbsp;

Ans: An exchange rate is the rate at which one currency can be converted into another. For example, the exchange rate to convert rupees into dollars can be 1 Re= 83 USD.

Q2. What fees do banks charge for currency exchange?

Ans: Multiple factors compel banks to charge different types of rates to exchange currencies. The spread is a charge levied to cover the cost of exchanging the currency as a broker. There are also flat fees or a percentage of the transaction charged for banks to cover operational costs, handling fees, etc. Charges to ensure safety against risk and compliance with RBI guidelines are other reasons banks charge a lot.

Q3. What is the difference between an exchange rate and the real effective exchange rate?

Ans: An exchange rate is the rate used to convert one currency from another. The Real Effective Exchange Rate (REER) gauges the value of a country's currency in relation to a weighted average of the currencies of countries that are its primary or general trading partners. While the exchange rate is a straightforward measure, the REER is much more comprehensive and shows how a nation’s exchange rate holds up compared to other countries while also considering the inflation rates.

Ans: NEER, also known as the Nominal Effective Exchange Rate, measures how a country’s exchange rate holds up against other foreign currencies. Real Effective Exchange Rate, or REER, on the other hand, is a comprehensive measure because it also accounts for the price level, inflation rates, and other factors.&nbsp;

Ans: Several factors, such as demand and supply of the particular currency, global conditions such as war or famine, political stability, central bank interventions and policies, and interest rates, determine a country’s exchange rate.

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This guide is your manual to understand trade credit - the financial GPS that can keep your collaborations running smoothly, making success your constant companion.

Trade credit is an arrangement wherein a supplier allows a buyer to purchase goods or services, deferring payment for a specified period. It serves as a short-term financing option. Typically, trade credit terms outline the credit period, interest rates, and repayment conditions. Credit terms in international trade aren't uniform,&nbsp; varying across businesses and industries.&nbsp;

Trade credit is a common practice, enabling companies to maintain inventory levels, meet operational needs, and navigate economic fluctuations.&nbsp;

Credit limits are not static and can change over time based on the buyer's evolving credit history, based on assessment of the creditworthiness. Borrowers who consistently maintain a positive credit history may find opportunities for credit limit increases.&nbsp;

Consider this case study of Grasim Pvt Ltd. and US Fitness Inc.

In a <a href="https://www.skydo.com/blog/building-a-global-network-for-your-cross-border-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">cross-border collaboration</a>, Grasim Pvt Ltd., known for its custom mobile applications, engages with US Fitness Inc., a leading US fitness firm. The task involves delivering three specialized mobile apps tailored to suit the unique needs of US Fitness Inc.’s operations.

According to the terms, US Fitness Inc. commits to making payments within fifteen days of receiving each mobile application. Grasim Pvt Ltd. delivers the first app as the collaboration unfolds, and US Fitness Inc. has a fifteen-day window to complete the payment. This process repeats for the subsequent two applications, each installment with a fifteen-day payment timeline.&nbsp;

The trade-credit terms allow US Fitness Inc. to evaluate each application before making payments. This arrangement aids their decision-making process and benefits the working capital requirement.&nbsp;

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