Assume that the Dutch guilder to euro is pegged at 2.19122. A local exporter with 300 guilders will get 136.92 euros exchanged in three lots of 100, but only 136.91 if done in a single go of 300. Reason: Conversion between a local European currency and the euro has to expressed down to six digits, but the lowest denomination of the new currency will be a cent, leading to a two-digit round-off.

"Decimals means millions," says leading international finance expert and author of `Global Capital Markets' PR Joshi, "...rounding off is just one of the problems that banks and their customers have to face." While the working group on the euro set up by the Foreign Exchange Dealers' Associationof India (Fedai) has suggested that banks upgrade their software to accommodate six significant digits or a minimum of three, quite a few like HSBC Financial Institutions' senior relationship manager Rajeev Bhargava is of the view: "Rounding off must be seen in the context of other operational issues like, say, a customer insisting on having his EEFC deutsche mark account credited even as the payment is made in French francs."

Kanji Pitamber & Co's Gautam Ashra says: "This could lead to an increase in transaction costs for banks, which may not be a fully pass-through one. More so, if cross-currency volumes dip with customers opting to pay or receive in the euro."

A general tariff of Rs 250 per transaction is to be charged by banks for those denominated in legacy currencies and the euro in the transition phase.

A related issue in cross-border deals is one involving a multiplicity of nostro accounts. A euro-centric situation should ideally lead to a single account of its kind. While it is up toindividual banks to decide whether it would be a single nostro with a pan-European bank, there is also the problem of counter-party exposure and limits -- intra-day and overnight -- a bank could get.

But as Dresdner Bank treasury-head Ravi Nursey points out: "There is going to be rationalisation in the number of nostro accounts a bank has. Limits may not be an issue, because transactions may be loaded in favour of a specific legacy currency." Bhargava at HongkongBank says that "choice of a bank with which a nostro account is sought to be maintained will also be determined by the number of European countries in which it is a clearing house member." This is important given the fact that the Trans-European automated real time gross settlement system (TARGET), designed and built by the European Monetary Institute and national central banks, will enable banks to make cross-border payments across Europe, in effect operating as a continental real-time gross settlement system. The Fedai working group, whileacknowledging the nostro aspect, does not offer a solution, but offers a choice: (a) use existing nostro-accounts to receive or pay in the euro or (b) open a centralised euro account in one of the EMU nations and avail of TARGET benefits.