Bill Rate : Bill rate may also be either bill buying rate or bill selling rate. Let us discuss them in detail. i) Bill Buying Rate: This rate is applied when a foreign bill is purchased. As you must be knowing that exporters draw bills of exchange on their foreign customers. They can sell these bills to an authorised dealer for immediate payment. The authorised dealer buys the bill and collects payment from importer. When the bill is purchased, the proceeds will be realised by the authorised dealer after the bill is presented to the draw at the overseas centre. In case of sight bill the payment is made on presentation of the bill. In the case of
usance bill, the proceeds will be realised on the due date of the bill which includes the transit period and the usance period of the bill. The bank or the authorised dealer, therefore, makes an allowance for the loss of interest for the period of transit, the usance of the bill and the days of grace, if any. The authorised dealer loads the forward margin for an appropriate period. The period for which forward margin is to be loaded depends upon whether the foreign currency is at a forward premium or discount. The authorised dealers extract the rate which is most favourable for them. The rate IS computed as:
Bill Buying Rate = The base rate - Forward discount for transit plus usance period rounded off to the higher month - Exchange Margin
or
Bill Buying Rate = The base rate + forward premium for transit plus usance period rounded off to the lower month - Exchange Margin
FEDAI has prescribed exchange margin rate as between 0.125% to 0.150%
ii) Bill Selling Rate: This rate is applied for all foreign remittances outside India as proceeds of import bills payable in India. In this case the importer requests the bank to make payment to a foreign supplier against a bill drawn on the importer. The bank handles documents related to the transaction. For this purpose, the bank loads margin over the 'TT selling rate. It is computed as:
Bill Selling Rate = TT Selling Rate + Exchange Margin
FEDAI has prescribed exchange margin rate as between 0.175% to 0.200%.