• export-2

    EXPORTS

    Reasons for exporting:

    • To expand the business and to reduce the dependence in the local market
    • To earn foreign exchange
    • To increase the profit
    • To explore newer customers and vendors in the overseas
    • To spread the risk, such as, to offset lack of demand for seasonal products
    • It improves the economic condition of the country

    Exporting a product is a profitable method that helps to expand the business and reduces the dependence in the local market. Government of India is also supporting exporters through various incentives and schemes to promote Indian export for meeting the much needed requirements for importing modern technology and adopting new technology from MNCs through Joint ventures and collaboration as well as to improve the balance of payments position of the country.

     

    We shall study about this article further, in detail, in our next post.

     

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  • TRADE FINANCE SERVICES

    TRADE FINANCE

    Definition

    Trade finance may be defined as the financing of international trade.

    Trade finance includes activities, such as, lending, issuing letters of credit, factoring, export credit and insurance, etc.

    Persons / entities involved with trade finance include importers and exporters, banks and financiers, insurers and export credit agencies, as well as other service providers.

    Trade finance is of vital importance to the global economy, with the World Trade Organization estimating that 80 to 90% of global trade is reliant on this method of financing.

     

    We shall study about this article further, in detail, in our next post.

     

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  • supplier's credit

    SUPPLIER’S CREDIT

    Benefits to the Importer

    • Helps local importers gain access to cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates.
    • Availability of cheaper funds for import of raw materials and capital goods.
    • Ease short-term fund pressure as able to get credit.
    • Importer can make the payment at sight to the exporter and command a better price in terms of cash discount

     

    Benefits to the Supplier 

    • Realize at-sight payment
    • Avoid the risk of importer’s credit by making settlement with LC

     

    We shall study about this article further, in detail, in our next post.

     

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  • ecb-2

    EXTERNAL COMMERCIAL BORROWINGS (ECB)

    Forms of ECB

    • Loans including bank loans;
    • Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares / debentures);
    • Buyers’ credit;
    • Suppliers’ credit;
    • Foreign Currency Convertible Bonds (FCCBs);
    • Financial Lease; and
    • Foreign Currency Exchangeable Bonds (FCEBs)

     

    We shall study about this article further, in detail, in our next post.

     

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  • Buyers-Credit

    BUYER’S CREDIT

    Benefits for the Importer 

    • The importer gets extended date for making an import payment as per the cash flows.
    • The importer can deal with exporter on sight basis, negotiate a better discount and use the buyer’s credit route to avail financing.
    • The funding currency can be USD, GBP, EURO, JPY, depending on the choice of the customer.
    • The importer can use this financing for any form of trade payments, such as collections or LCs.
    • The currency of imports can be different from the funding currency, which enables importers to take a favourable view of a particular currency.
    • It helps importer in working capital management.

     

    We shall study about this article further, in detail, in our next post.

     

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  • Bank loan - finance

    BANK LOAN / FINANCE

    Bank Loan / Finance / Credit / Advance

    Lending money is one of the two major activities of any Bank. Banks accept deposit from public for safe-keeping and pay interest to them. They then lend this money to earn interest on this money.

    A bank can lend out only a certain proportion of its deposits, since some part of deposits have to be statutorily maintained as Cash Reserve Ratio (CRR) – deposits with Reserve Bank of India and an additional part has to be used for making investment in prescribed securities (Statutory Liquidity Ratio or SLR requirement).

    Banks have the option of having more cash reserves than CRR requirement and invest more in SLR securities than they are required to. Further, banks also have the option to invest in non-SLR securities.

    We shall study about this article further, in detail, in our next post.

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  • standby

    STAND-BY LETTER OF CREDITS

     

    Generally, standby letters of credit are used to support the applicant’s position in a contractual relationship where the applicant of the standby letter of credit is expected to fulfill an obligation. In case of failure of the applicant, the beneficiary of the standby letter of credit can draw the credit amount from the issuing bank by supplying required documents.

    It should be stressed once more that standby letters of credit are separate transactions from the underlying contracts on which they may be based.

    We shall study about this article further, in detail, in our next post.

     

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  • bank guarantee

    BANK GUARANTEES

    Definition

    Bank Guarantee is a contract between a bank as guarantor and a beneficiary in which the bank commits itself to pay a certain sum under certain, specified conditions.

    A Bank Guarantee is an instrument issued by the bank in which the Bank agrees to pay a specific amount of money to the beneficiary of the BG, in the event of non-performance of underlying commitment by the applicant of the BG.

    Thus, a demand guarantee is one in which the bank agrees to pay against the simple written demand of the beneficiary.

     

    We shall study about this article further, in detail, in our next post.

     

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  • letter-of-credits

    LETTER OF CREDITS

    Definition

     A Letter of Credit is a written instrument issued by a bank, at the request of its customer – the Importer (Buyer), whereby the bank promises to pay the Exporter (Beneficiary) for goods or services, provided that the Exporter presents all documents called for, exactly as stipulated in the Letter of Credit, and meet all other terms and conditions set out in the Letter of Credit.

     

    A Letter of Credit is also commonly referred to as a Documentary Credit. 

     

    We shall study about this article further, in detail, in our next post.

     

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  • LC DISCOUNTING

    LC DISCOUNTING

    Discounting

    Since a letter of credit is a written promise by a bank to pay for goods a buyer purchases from a seller, discounting is a way a seller gets paid immediately, even if the buyer wants a longer term for payment. The bank may offer to pay the seller for the goods. The bank then pays the seller the full amount of the invoice minus a discount.

     

    We shall study about this article further, in detail, in our next post.

     

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