ABN-Amro Bank, Amsterdam, wants to purchase ₹ 80 million for funding its account with Canara Bank, New Delhi. Out of this amount, ₹ 30 million will…

CA Final · Advanced Financial Management · MTP · November 2026
ABN-Amro Bank, Amsterdam, wants to purchase ₹ 80 million for funding its account with Canara Bank, New Delhi. Out of this amount, ₹ 30 million will be purchased against US dollars (US$) and credited to Canara Bank's US$ account with Citi Bank, New York. The balance amount will be purchased against British pounds (£) and credited to Canara Bank's £ account with Bank of London, London. The prevailing inter-bank exchange rates are per $, ₹ 91.3625/3700 & per £, $ 1.4060/70. Required: (i) State the nature of ABN-Amro Bank's ₹ account with Canara Bank, New Delhi, and the nature of Canara Bank's £ account with Bank of London, London, from ABN-Amro Bank's perspective. (ii) Determine the equivalent amounts in US$ and £ to be credited to the respective accounts of Canara Bank. Note: Round off all calculations upto whole numbers.

Suggested Answer and Working Notes:

(i) From ABN-Amro Bank's perspective, its account maintained with Canara Bank is a Nostro Account and from ABN-Amro Bank's perspective Canara Bank's £ account maintained with Bank of London is a Loro Account . (ii) Equivalent amounts in US$ and £ A. ₹ 30 million against US dollars (US$) The quoted rate is ₹ 91.3625/91.3700 Since ABN-Amro Bank is selling US dollars and purchasing Indian rupees, the applicable rate is the buying rate of US dollars, i.e. ₹ 91.3625 per US$. Therefore, US$ to be credited shall be: ₹ 30,000,000/ ₹ 91.3625 = US$ 328,362 B. ₹ 50 million against British pounds The quoted rates are: £ 1 = 1/ US$ 91.3625 and £ 1 = US$ 1.4060/1.4070 Since ABN-Amro Bank is selling pounds and purchasing Indian rupees, the applicable buying rate for pounds is the bid rate of US$ 1.4060 per £. Therefore, the cross rate of ₹ per £ is: ₹/£ = ₹ 91.3625 × 1.4060 = ₹ 128.4557/£ Hence, the amount of pounds required is: ₹ 50,000,000/ ₹ 128.4557 = £ 389,239 Accordingly, £ 389,239 will be credited to Canara Bank's £ account with Bank of London, London.

Topics: International Financial Management, Foreign Exchange Exposure and Risk Management

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