ABN-Amro Bank, Amsterdam, wants to purchase Rs. 15 million against US$ for funding their Vostro account with Canara Bank, New Delhi. Assuming the inter-bank, rates of US$ is Rs. 51.3625/3700, what would be the rate Canara Bank would quote to ABN-Amro Bank? Further, if the deal is struck, what would be the equivalent US$ amount.
Solution
Here Canara Bank shall buy US$ and credit Rs. to Vostro account of ABN-Amro Bank. Canara Bank’s buying rate will be based on the Inter-bank Buying Rate (as this is the rate at which Canara Bank can sell US$ in the Interbank market)
Accordingly, the Interbank Buying Rate of US$ will be Rs.51.3625 (lower of two)
Equivalent of US$ for Rs.15 million at this rate will be
= 15,000,000/ 51.3625 = US$ 2,92,041.86
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