CERTIFICATE

This is to certify that this project report Role of Banks in International Trade is a
bonafide work of _Nikunj V. Gopani_ in part completion of the _Post Graduation
Diploma in Management and has been done under my guidance

The Project is in the nature of original work that has not so far been submitted for any
other course in this institute or any other institute.

Reference of work and sources of information have been given at the end of the project

Signature of the Candidate

Forwarded through the Research Guide

Signature of the Guide

(Prof. Namrata Acharya)

ACKNOWLEDGEMENT
EXECUTIVE SUMMARY

International trade is the exchange of commodities, products, services, capital

between people and companies in di erent countries. It forms a significant part of
many counties' Gross Domestic Product (GDP). International trade has existed for a
long time, but trade has increased hugely in the past few hundred years and has a
major impact on the economies of many countries.

Export finance plays a crucial role in enabling exporters in accepting and e ciently
executing their export orders. Export credit is required for short periods of time both
before and after the dispatch/shipment of an order. While the pre-shipment export
finance is required as working capital for accomplishing timely production, packing
and shipment of the orders, the post-shipment finance facilitates in sustaining
exporters’ business operations while still waiting to receive payments due from foreign
buyers. Commercial banking institutions have been important sources of export credit
in India.

The Reserve Bank of India regulates provision of export & import finance by the
commercial banks in India, both Indian and foreign, through stipulating some
minimum proportion of their total lending to be provided as export finance. From time
to time, the RBI announces various rule and guidelines to ensure smooth and e cient
operation of this system.
The focus has been on short-term working capital credit requirements of the Indian
exporters, which are mainly taken care of by the commercial banks. These banks
provide exporters with financial and other services. While the financial services
include provision of export finance, other services include handling of export
documents, counseling and advisory services, facilitating foreign exchange operations
of exporters, etc. The foreign exchange operations of the banks are guided by the RBI
and FEDAI regulations.

International Trade/business is profitable than domestic business. But it is more risky

also. Such as cancellation of order, non collection of document, non- payment,
transport risk, foreign regulation risk etc. these risk can be reduced by taking various
insurance cover form ECGC and insurance agents. Risk can be spread also by
exporting goods to many countries, so that loss in one market is compensated by the
project other market.

Import-Export is regulated by the Directorate General of Foreign Trade (DGFT) under

Ministry of Commerce and Industry, Department of Commerce, Government of India.
Authorized dealers, while undertaking import transaction, should ensure that the
imports into India are in conformity with the Export Import Policy in force and
Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by
Government of India. Importer & Exporter should follow normal banking procedures
and adhere to the provisions of Uniform Customs and Practices for Documentary
Credits (UCPDC) while opening Letters of Credit for import into India.

The INCOTERMS rules or International Commercial terms are a series of pre-defined

commercial terms published by the International Chamber of Commerce (ICC) that
are widely used in International commercial transactions.

INTRODUCTION

India is a land of great opportunities having a population of almost a billion people and
has a very long way to go in terms of infrastructure (power, roads, telecom, ports etc.)
Similarly, the overall standard of living is very low and has a lot to desire. It is,
therefore essential that we transact with other nations and contribute towards the
overall economic development of our country. In short, it can be stated that
international/foreign trade plays a very significant role towards the growth of our
country.

Objective of Study

………………….
International Trade

International trade is the exchange of capital, goods, and services across international
borders or territories. In most countries, such trade represents a significant share of
gross domestic product (GDP). While international trade has been present throughout
much of history (see Silk Road, Amber Road), its economic, social, and political
importance has been on the rise in recent centuries.

Industrialization, advanced transportation, globalization, multinational corporations,

and outsourcing are all having a major impact on the international trade system.
Increasing international trade is crucial to the continuance of globalization. Without
international trade, nations would be limited to the goods and services produced
within their own borders.

Instead of importing a factor of production, a country can import goods that make
intensive use of the factor of production and are thus embodying the respective factor.
An example is the import of labor-intensive goods by the United States from China.
Instead of importing Chinese labor the United States is importing goods from China
that are produced with Chinese labor.

Gains from International Trade

∑ International trade leads to mutual gain because it allows each country to

specialize in the production of those things that it does best.
∑ Trade permits each country to use more of its resources to produce those goods
that it can produce at a relatively low cost.
∑ With trade, it is made possible for the trading partners to consume a bundle of
goods that it would be impossible for them to produce domestically.
∑ Trade encourages competition & e ciency.

PARTIES IN INTERNATIONAL TRADE

Exporters

Exporters are at the beginning of any international trade transaction and may be
manufacturers, traders, farmers or commodity producers. They sell goods or services
to overseas buyers in a variety of ways and, unless they are part of a large group, will
almost certainly require the services of the other main players. Their aim is to get their
goods to buyers around the world in the quickest and safest manner possible and to be
paid in the correct currency and within their agreed terms of settlement.

Importers
Importers may equally be manufacturers buying raw materials for their factories, oil
companies buying crude oil for refining, or simply merchants and traders fulfilling
contracts with domestic and foreign consumers.

Freight forwarders

Freight forwarders, or forwarding agents as they are otherwise known, are probably
the most versatile operators in the trade chain. They collect goods from exporters,
sometimes actually packing them for shipment, transport them to ports of shipment
by road, rail or barge and arrange with the shipping company (or airline) for them to
be loaded on board. Their knowledge of overseas markets, the documentation required
and the current import regulations applying in foreign countries is of great value to
exporters who will often entrust them with the preparation of certain documents
requiring chamber of commerce certification and consular legalization.

Warehousemen

Warehousemen perform a valuable service prior to the shipment of goods and after
their arrival at the port of destination. As they are always holding goods belonging to a
third party it is essential that they meet stringent security requirements, the most
important of which is that they should be completely independent. Whenever finance
is required for goods which have to be warehoused at some stage in a transaction, the
bank will want to be certain that the warehouse company is completely trustworthy
and properly managed. It will be expected to issue receipts, known as warehouse
warrants, which can be negotiated to a third party when the person named in them
wishes to transfer ownership of the goods.

Carriers

Goods may be transported in a number of di erent ways and by several types of

carriers. We have dealt with freight forwarders who can handle goods through their
journey via di erent modes of carriage and for which they issue multimodal transport
documents. But there exists a need for independent road hauliers, barge operators and
railway companies to carry goods on specific routes and to be responsible for the
whole journey. Each provides an excellent service with the advantage that goods are
only loaded and unloaded once. There is widespread use of sealed containers which
are carried by trucks, barges and seagoing vessels, often containing goods from more
than one exporter and consigned to various importers at destination.

Insurers

Any movement of goods by sea, air or land transport involves certain hazards.
However well a consignment is packed there is always the possibility of damage being
incurred in transit; in some parts of the world, piracy and hijacking is prevalent. Most
shipments are financed by banks or other finance institutions who want to ensure that
their security, for that is what the goods generally are, is properly insured. The major
insurance groups provide a wide range of cover against marine and war risks, and in
many cases write specific policies for individual commodities. For example, the risks
involved in carrying a cargo of liquid gas are entirely di erent from those likely to
arise when carrying wheat, sugar or frozen products.

Banks
The importance of the role played by banks in trade finance cannot be over-stressed.
They provide a multitude of services to every operator in the trade chain and for every
stage of any transaction. Banking instruments and techniques which have been
developed over hundreds of years are made available with world- wide branch
networks, a liates and correspondents. Exporters are able to enjoy the guarantee of
payment which banks provide and importers can be confident that the documentation
they have demanded has been carefully scrutinized. In addition to finance, banks
provide a number of support services essential to exporters and importers wishing to
enter new markets.

Factors

Although factors were once in fierce competition with banks, particularly in the
financing of receivables, the banks quickly realized that there was a niche for factoring
in their own organization and the major banks took over a number of the leading
operators. Now, most international banks have a factoring subsidiary. There is a clearly
defined di erence between the services o ered by banks and factors. The most
important di erence is the question of recourse. Every form of banking finance is
a ected with recourse to its customer, whereas factors provide facilities for buying
debts without recourse.

Government Agencies and International Financial Institutions

In times of recession and following natural disasters those countries most a ected are
often unable to purchase essential commodities, foodstu and fuels. To provide
assistance a number of organizations have been set up with funds subscribed by
member countries. A typical example is the International Monetary Fund (IMF) which
has a membership approaching 200 and provides not only aid, but research into the
underlying problems in countries applying for it.

RISKS IN INTERNATIONAL TRADE

The following is the risks associated with International Trade and some of the risks
could also be common to domestic trade.

• Non payment for the goods sold (Credit Risk)

• Non receipt of goods

• Delay in Payment or delivery of good

•Bankruptcy/Insolvency of the seller /buyer /insurance company /transport company
(credit/ confidential report)
• Quality of goods received di erent from the one ordered (Inspection Certificate)
• Legal Risk (di erent laws)
• High Demurrage Charges
• Language/ Local Customs/ Business Practices
• Cost of Litigation / Dispute Resolution
•Country Risk (Change in rules & regulations, payment moratorium, currency
inconvertibility, war, natural disaster, exchange control)
• Exchange Rate Risk /Devaluation /Revaluation / Convertability

Credit Risk (Default Risk) :

Is the risk of default by the other party in performing their part of the contract -
performance, payment or otherwise to meet contractual obligations etc. Credit risk is
normally associated with the inability of the party to meet its payment obligation
(Buyer, seller, issuing bank, confirming bank etc.)

Currency / Exchange Risk :

The risk associated with the change in the price (exchange rate) of one currency
against another currency.

Legislative Risk :

The risk that the government of the country could pass legislation that could adversely
a ect the business prospects of one or more companies operating in that country
(Coke / Pepsi / IBM - Janta Government)

Political Risk :

The risk that an investment's returns could su er as a result of political changes or

instability in a-country - military control, civil unrest, unstable government, frequent
changes in legal laws etc.

Country Risk :

Includes Political, Economic, Sovereign and Transfer Risks:

∑ Confiscation or expropriation of machinery, goods or factories .

∑ Violence caused by civil unrest, war.

∑ Inability to convert local currency into foreign currency.
∑ An embargo placed on imports or the arbitrary cancellation of an import license
after the exporter has shipped the goods or incurred costs in the manufacture of
the goods.
∑ An intervention by the government that frustrates the contract. (makes it
impossible to contract)
∑ An unfair calling of a performance or similar bond.
How to Mitigate This Risks ??

Confidential Report on the Buyer (Importer) :

Since the smooth operation in international trade depends to a large extent upon a
trustworthy, solvent and willing buyer, the exporter must make adequate enquiries
about the buyer.

The extent and depth of the confidential check will depend both on the value of the
exports, reputation of the buyer and also on whether a continuing relationship
involving substantial trade with the buyer is envisaged.

Enquiries could be made through banks, chambers of commerce, other business

associates, credit rating agencies (CRISIL, ICRA, Standard & Poor, etc.)

CR should ideally include the following:

• Integrity & Trustworthiness.
• Nature of Business.
• Length of time or duration he has been in the current business.
• Financial position.

Enquiry on Buyer's Country :

The exporter can obtain information regarding the buyer's country from international
banks, government departments / agencies, chambers of commerce and financial
press with particular reference to any regulations prohibiting / restricting / delaying
the free movement of funds and or goods out of such country, the political
environment, stability of the government etc.
Confidential Report on the Seller (Exporter) :

Since the importer receives the goods from the exporter, it is essential that the seller is
capable of delivering the goods in accordance with the quality, quantity and delivery
dates agreed upon.

Enquiries could be made through banks, chambers of commerce, other business

associates, credit rating agencies. (CRISIL, ICRA, Standard & Poor, etc.)

Confidential report should ideally include the following:

• Integrity, reliability & trustworthiness.

• Nature of Business.
• Length of time or duration he has been in the current business.
• Good reputation for quality and honoring delivery dates and other commitments.
• Financial standing.

Enquiry of Seller's Country :

The importer can obtain information regarding the seller's country from international
banks, government departments / agencies, chambers of commerce, and financial
press with particular reference to any regulations prohibiting / restricting / delaying
the free movement of funds and / or the goods out of such country, the political
environment, stability of the government etc.

Inspection / Analysis Certificate :

Buyer could get the goods inspected or analyzed by reputed inspection agencies (SGS,
Intertek International, Cotecna and Bureau Veritas), before shipment to ensure that
the goods being shipped are as per the order placed by him.
MODES OF PAYMENTS IN INTERNATIONAL TRADE

There are 3 major methods of payment are available for settlement of international
trade:

1. Clean payments
a. Advance payment
b. Open Account
2. Bills for Collection
3. Documentary Credit

1. Clean Payments

In the case of Clean Payment transactions, all shipping documents, including title
documents, are handled directly by the trading parties. The role of banks is limited to
clearing funds as required.
 a. Advance Payment

It is an arrangement whereby the exporter is trusted to ship the goods after receiving
payment from the Importer. Advance payment simply means that the buyer pays in
advance and risks losing his money if the supplier he has paid fails to ship the goods.

b. Open account

It is an arrangement whereby the Importer is trusted to pay the Exporter after receipt
of the goods. Open account is a reversal of the above situation; the seller risks losing
his goods by sending them direct to the buyer and allowing him to make payment in
due course. Neither of these methods really involves banking facilities but it is shown
in a later chapter that it is possible to protect buyer and seller from default by using
banking instruments.

2. Bills for collection

This is a relatively inexpensive method of settlement which is very widely used. This is
a method of payment used in international trade where by the Exporter entrusted the
handling of commercial and often financial documents to banks and gives the banks
instructions concerning the release documents to the Importer .

There are 2 types of Documentary Collection transaction:

Documents Against Payment:

If payment is to be made upon presentation, the bill is drawn payable at sight and the
collection is known as Documents against Payment (D/P). Documents are released to
the Importer only against payment.

Documents Against Acceptance:

Documents are released to the Importer only against acceptance of a draft.

DOCUMENTS USED IN INTERNATIONAL TRADE

Commercial Invoice

• Full name & address of the buyer and seller with their respective reference numbers
• Description of goods, quantity of goods, unit price, weight, total price, shipment
terms, Purchase Order No. etc.
• Terms of settlement - advance payment, collection (payment or acceptance), Letter
Of credit etc.
• Shipment details - mode of shipment, name of carrier, port of loading and port of
discharge etc.
• Issued by the seller and addressed to the buyer
Bill of Lading

• Evidence of receipt of goods for shipment & contract of carriage

• Negotiable document which evidences shipment of goods by sea and conveys title to
goods
• Issued in sets
• Full Set - all the originals constitute a full set
• Consignor / Shipper - normally the beneficiary of the LC / seller of goods
• Consignee - normally the LC opening bank/buyer of the goods
• Freight Payable at Destination / Pre Paid
• Notify Party
• Port of Shipment
• Port of Destination
• Date of Shipment
• Shipped on Board
• On Board notation
• Clean Bill of Lading (no evidence of defective condition of goods / packing)
• Gives a strong title to the consignee since the original BL has to be produced for
taking delivery of the goods
• Only one original is required to be produced for taking delivery of the goods. Once
one original is produced, all other originals become null & void

Airway Bill
• Evidence of receipt of goods for shipment and contract of carriage
• Non - negotiable document and is not a document of title to the goods
• Consignor / Shipper - normally the beneficiary of the LC / seller of goods
• Consignee - normally the LC opening bank / buyer of the goods
• Freight Payable at Destination/Pre Paid
• Notify Party
• Port of Shipment
• Port of Destination
• Date of Shipment
• Goods will be delivered to the person named as the consignee in the AWB
• Delivery Order required to take delivery of the goods if goods are consigned to a
bank

Truck Receipt / Consignment / Delivery Note / Railway Receipt

•Document evidencing shipment of goods by truck or rail or other means of land

transport

Certificate of Origin

• Indicates the country of origin of goods

• Normally issued by a Chamber of Commerce

They are generally required for any of the following reasons:

1) Quantum of Import duty to be levied

Some importing countries prohibit import of goods from certain countries and some
countries encourage import of goods from certain specified countries and levy lower
or nil custom duties.

2) Trade under aid agreements / Boycott of goods

Some donor countries often require recipients of aid to import goods from their own
(donor) country or from a group of donor countries. Some countries prohibit the
importation of goods from certain countries for political reasons.

3) Marketing
Often buyers prefer that certain goods originate from specific countries which have a
good reputation for producing quality products; consequently, importers may require
documentation to evidence the country of origin.

Sales / Purchase Contract

It is the agreement between the seller and the buyer for the purchase and sale of goods
and normally will include the following
• Description of goods
• Quantity
• Quality
• Unit Price & Currency
• Total Price
• Shipment Terms (FOB /CFR/GIF etc.)
• Date of Shipment
• Port of Shipment
• Port of Destination
• Credit Period
• Settlement Method (Sight / Usance)
• Documents required

Packing List

• Document which provides the packing of goods into packages/'cartons etc.

• Number of packages/cartons
• Gross & Net weight
• Measurement of packages
• Indicates the shipping marks, if any

Weight List

• Indicates the total gross and net weight of the goods

Inspection Certificate

• Certificate which shows the result of inspection of the goods (quality, condition,
contents etc.)
•Normally issued by reputed independent agencies (SGS, Intertek International,
Cotecna and Bureau Veritas).

Bill of Exchange / Draft

A bill of exchange is an unconditional order in writing, addressed by one person

(drawer) to another (drawee), signed by the person giving it (drawer), requiring the
person to whom it is addressed (drawee) to pay on demand or at a fixed or
determinable future date, a sum. certain in money to or to the order of a specified
person (payee) or to the bearer.

• Unconditional order in writing.

• Addressed by one person (drawer) to another (drawee).
• Signed by the person making it (drawer) .
• Requiring the drawee to pay a specific amount of money.
• Immediately or at a fixed date or determinable future date.
• Or the bearer.

The person who makes or signs the Bill of Exchange is the DRAWER. He is the person
to whom money is owed i.e. the seller.

The person to whom the Bill of Exchange is addressed is the DRAWEE. He is the person
from whom the money is to be received i.e. the buyer.
Bill of Exchanges are usually drawn in sets of two i.e. the first original bill of exchange
and the second original bill of exchange. This is to allow the second bill of exchange to
be used if the first bill of exchange is lost or destroyed or vice versa. Both the bills of
exchanges are identical in nature (date, amount, tenor, drawer, drawee are same). If
one of the bill of exchange is paid, the other bill of exchange becomes null & void and
cannot be legally enforced.

Insurance Policy / Certificate

This document covers the risk of loss of damage to the goods during transit from the
seller to the buyer.

Insurance Policy - incorporates all the terms and conditions of the actual
contract of insurance and shows full details of the risks covered. The right
under the policy can be assigned to a third party by endorsement and delivery of
the policy instrument. The policy instrument is a document which can form the
basis of a legal action.

Insurance Certificate - is merely evidence that cover has been e ected under a
separate open insurance policy already in existence. It does not provide a basis
for legal action.

• Issued by an insurance company or their agents.

• Insurance cover should be e ective at least from the date of shipment.
• Document which provides the amount, terms and conditions of insurance of goods
against any loss.
• Description of goods covered.
• Risks Covered.
• Date of covering the risk.
• Name of the insured party.
• Insurance Company's Agent at destination.

Quality Certificate

• Document which evidences the quality of the goods.

• Required by the importer to ensure that the quality of goods supplied is as per the
requirement.

Fumigation Certificate

The Fumigation Certificate, also referred to as a 'pest control certificate' is the proof
that wooden packing materials used in international sea freight shipping e.g. wooden
pallets and crates, wood, wool etc. have been fumigated or sterilized prior to the
shipment.

• Fumigation certificates usually contain details such as purpose of treatment, the

articles in question, temperature range used, chemicals and concentration used etc.
• It assists in clearance of an international sea freight shipment upon the arrival and
avoids quarantine of the goods.

Phvtosanitarv Certificate

• Phytosanitary certificates are issued to satisfy the import regulations of some

countries. They indicate that a shipment has been inspected and is free from harmful
pests and plant diseases.
• Certificates are mainly required for regulated commodities such as plants, bulbs and
tubers, or seeds for propagation, fruits and vegetables, cut flowers and branches,
grain, and growing medium.
Analysis Certificate

• Certificate which provides the contents of the goods.

• Required by the importer to ensure that the goods supplied is as per the
requirement.
ROLE OF COMMERCIAL BANKS IN INTERNATIONAL TRADE

It is very di cult to be in international trade without involving banks for all the
services they provide such as advice on financial issues and the potential risks
involved. It is true that one critical hurdle is the lack of information on international
trade processes, documentation and banking procedures necessary to carry on with
business abroad. For result oriented and cost e ective international trade, one will
very definitely need access to accurate and timely information and a sound knowledge
of banking.

The role of commercial banks in foreign trade is to provide the financial structure and
instruments necessary for the conduct of business transactions between foreign
buyers and sellers. Commercial banks ensure safety and transparency in the flow of
documents and money.

Below are the Three most popular and widely used bank Products / Instruments In
International Trade.

 Letter Of Credit/Documentary Credit

 Documentary Collection
 Bank Guarantees
  Letter Of Credit/Documentary Credit
The Letter of Credit in its modern shape appeared for the 1st time in 1840s in London
for the settlement of trade transactions.

A Letter Of credit (L/C) is a written undertaking by a bank (Issuing Bank) given to the
exporter (Beneficiary) at the request of the importer (Applicant) to e ect payment
(Reimbursement) up to a stated amount (Credit Amount) within a stated time period
(Expiry date) against presentation of compliant documents (LC terms). In other words
Letter Of Credit is a conditional payment undertaking from a bank.

Before Learning the detailed Mechanism of L/C, let us first know the parties Involved
in Trade Transactions with the use of Letter Of Credit as an Instrument.

Parties to Letter of Credit

Applicant (Importer / Buyer)

• The person who makes the application to the bank for opening the letter of credit
• Normally the importer/buyer of the goods or his agent

Beneficiary (Exporter / Seller)

• Person in whose favor the letter of credit has been established

• Normally the exporter / seller of the goods

Issuing Bank (Opening Bank)

• Bank which establishes (opens/issues) the letter of credit

• Normally the buyer's/importer's bank
• Normally based in the country of residence of the importer

Advising Bank / Second Advising Bank

• Bank which advises the letter of credit to the beneficiary

• Normally the bank located in the country of the beneficiary (exporter)
• Validate the genuineness (authenticity) of the LC before advising the same to the
beneficiary

Nominated Bank (Optional)

• A bank which is nominated in the letter of credit for advising the credit and for
receiving documents for payment, acceptance or negotiation.
• In case a specific bank is indicated, then the credit is restricted to that particular
bank and is known as a RESTRICTED CREDIT.
• In case no specific bank is nominated in the credit, it is available with any bank for
payment, acceptance or negotiation.

Confirming Bank (Optional)

• Is the bank which adds its confirmation to the letter of credit at the request of the
issuing bank.
• Is normally a bank located in the country of the residence of the beneficiary
(exporter).
• Provides additional comfort to the beneficiary regarding payment.
Negotiating Bank (Optional)

• Is the bank which is authorized by the issuing bank to negotiate documents

presented by the beneficiary.
• If no specific bank is nominated in the letter of credit, any bank can negotiate
documents (unrestricted LC).
• In case a specific bank is nominated in the letter of credit as the negotiating bank,
only that bank is authorized to negotiate the documents (Restricted LC).
• Normally is located in the country of residence of the beneficiary.

Reimbursing Bank (Optional)

• A bank which is nominated in the letter of credit from which the negotiating bank
could claim reimbursement for the value of documents negotiated by them,
• It is normally the bank where the issuing bank is maintaining their foreign currency
NOSTRO account.

Letter of Credits - Mechanism

A. Issuance of Documentary Credit / Letter of Credit

After the trading parties agree on a sale of goods where payment is to made by Letter
of Credit, the Importer requests that its bank (the Issuing Bank) issue a Letter of Credit
in favor of the Exporter (Beneficiary).

The Issuing Bank then sends the Letter of Credit to the Advising Bank. A request may
be included for the Advising Bank to add its confirmation. The Advising Bank is usually
located in the country where the Exporter does business and may be the Exporter’s
bank, but does not have to be.

Next, the Advising/ Confirming Bank verify the Letter of Credit for authenticity and
sends it to the Exporter.
B. Flow of Goods

Upon receipt of the Letter of Credit, the Exporter reviews the Letter of Credit to
ensure that it corresponds to the terms and conditions in the purchase and sales
agreement; that the documents stipulated in the Letter of Credit can be produced; and
that the terms and conditions of the Letter of Credit can be fulfilled. Assuming the
Exporter is in agreement with the above, it arranges for shipment of the goods.

C. Flow of Documents & Payments

After the goods are shipped, the Exporter presents the documents specified in the
Letter of Credit to the Advising/ Confirming /Negotiating Bank.

Once the documents are checked and found to comply with the Letter of Credit (i.e.
without discrepancies), the Advising/ Confirming Bank forward these documents to
the Issuing Bank. The drawing is negotiated, paid or accepted as the case may be.

In turn, the Issuing Bank examines the documents to ensure they comply with the
Letter of Credit. If the documents are in order, the Issuing Bank will obtain payment /
Acceptance from the Importer for payment / Acceptance already made by the
Confirming Bank.

Documents are delivered to the Importer to allow him to take possession of the goods
only when the Importer /Applicant agrees to Accept / or make Payment as the case
may be against the documents presented.

Letter of Credits – Cycle

Payment Terms Under Letter of Credit

1. Letter Of credits - Sight (Documents Against Payment)

Settlement of payments through the medium of Letter Of credit involves dispatch of

goods by the seller to the Bank issuing the Letter Of credit (the Issuing Bank) and
forwarding the documents to the Issuing Bank through his bank for obtaining payment
from the buyer.
Sight payment means that payment should be made when the presentation is seen or
sighted. It also means that payment should be made on demand

Flow :

• Buyer and the Seller enter into a sale / purchase contract listing the terms and
conditions of the sale.
• Issuing Bank (Buyer's Bank) establishes a Letter Of credit at the request of the buyer
in favor of the seller / supplier (Beneficiary of the Letter Of credit) and advises the
same through its correspondent in the country of residence of the seller.
• The goods are dispatched to the Issuing Bank by the seller.
• The seller submits stipulated documents as per L/C terms to the Negotiating Bank
and fulfils the terms and conditions of the L/C.
• The negotiating bank makes payment to the seller if stipulated documents
are submitted and terms and conditions of the L/C are complied with.
• The negotiating bank claims reimbursement for the value of negotiation.
• The negotiating bank forwards the documents to the Issuing Bank
• The Issuing Bank debits buyer's account and delivers the documents to the
buyer to enable him to take delivery of the goods if the documents are found to
be compliant.
Buyer's Risk:

• Seller may not supply the quantity and quality of goods as per the agreement but may
submit documents stipulated in the L/C which may also comply with the terms and
conditions of the L/C.
• Seller may not ship the goods.
• Seller may submit fake documents for negotiation.
• Documents may get lost in transit resulting in delay in taking delivery and additional
cost for duplicate documents, demurrage etc.
• Issuing Bank may go into liquidation after payment but before taking delivery of the
goods resulting in delay in getting the goods and incurring of additional costs by way
of demurrage.

Advantages to the Buyer:

• Since the documents are scrutinized by the negotiating bank in the seller's country
as well as by the Issuing Bank, the possibility of fraud is reduced considerably.
• Has the undertaking of the issuing bank that no payment will be made unless the
beneficiary has presented the documents as stipulated under the L/C and complied
with the terms and conditions of the L/C.
• The buyer knows that the payment will not be made unless the seller presents
documentary evidence covering the goods and its shipment.

Disadvantages to the Buyer:

• May not receive goods of the same quantity and quality ordered if the intention of the
seller is doubtful.
• May have to pay fees / charges to his Bank for obtaining Import LC Limits otherwise
have to keep100 % cash margin for opening the LC.

Seller's Risk:
• Issuing Bank may reject the documents (hence the payment) if documents are found
discrepant.

• Issuing Bank may go into liquidation after receipt of payment but before the same
could be remitted to the seller.

Advantages to the Seller:

• Since the payment for the goods is undertaken by the Issuing Bank upon submission
of Credit compliant documents, he is sure of getting the payment.
• Knows that the payment is final and that there can be no future claim upon the seller
for refund of payment.
• Since documents are drawn under a Letter of Credit, his bank may be willing to
provide finance against the same at favorable terms.

Disadvantages to the Seller:

• Rejection of documents may result in delay in getting payment and at times the seller
may have to find an alternate buyer for selling the goods if they are not accepted by the
Issuing Bank.
• In case of discrepant documents, the buyer may bargain for a reduction in the price
to be paid
• In case of discrepant documents, the issuing Bank may levy fees for the
discrepancies which may result in getting less than the invoice value.
Mitigation of Risks:

• Buyer and seller may obtain credit worthiness and confidential report of each other
from the banks.
• Buyer may conduct independent verification of the goods through a reputed agency
before shipment.
• Seller may obtain credit report on the standing of the Issuing Bank.
• Seller may get the Letter Of Credit confirmed by another bank in his or another
country.

2. Letter of Credits - Usance (Documents Against Acceptance)

Settlement of payments through the medium of Letter of Credit involves dispatch of

goods by the seller to the Bank issuing the Letter of credit (the Issuing Bank) and
forwarding the documents to the Issuing Bank through his bank for obtaining payment
from the buyer.

Flow :

• Buyer and the Seller enter into a sale / purchase contract listing the terms and
conditions.
• Issuing Bank (Buyer's Bank) establishes a Letter of Credit at the request of the buyer
in favor of the seller / supplier (Beneficiary of the Letter of credit) and advises the
same through its correspondent in the country of residence of the seller.
• The goods are dispatched to the Issuing Bank by the seller.
• The seller submits stipulated documents as per L/C terms to the Negotiating Bank
and fulfils the terms and conditions of the L/C.
• The negotiating bank gives acceptance to make payment to the seller on due date, if
stipulated documents are submitted and terms and conditions of the L/C are complied
with.
• The negotiating bank forwards the documents to the Issuing Bank.
• The Issuing Bank accepts the drafts if documents are found to be in order, convey its
acceptance and due date for payments to the negotiating bank.
• The Issuing Bank delivers the documents to the buyer to enable him to take delivery
of the goods.
• The negotiating bank claims reimbursement for the value of negotiation on the due
date.
• The Issuing Bank debits the Buyer's account on the due date for the value of the
goods and makes Payment to negotiating bank, which in turn makes Payment to
Beneficiary/Seller.

Buyer's Risk:

• Seller may not supply the quantity and quality of goods as per the agreement but may
submit documents stipulated in the L/C which may also comply with the terms and
conditions of the L/C
• Seller may submit fake documents for negotiation.
• Documents may get lost in transit resulting in delay in taking delivery and additional
cost for duplicate documents, demurrage etc.
• Issuing Bank may go into liquidation after acceptance but before taking delivery of
the goods resulting in delay in getting the goods and incurring of additional costs by
way of demurrage.
Advantages to the Buyer:

• Since the documents are scrutinized by the negotiating bank in the seller's country as
well as by the Issuing Bank, the possibility of fraud is reduced considerably.
• Has the undertaking of the issuing bank that no payment will be made unless the
beneficiary has presented the documents as stipulated under the L/C and complied
with the terms and conditions of the L/C.
• The buyer knows that the payment will not be made unless the seller presents
documentary evidence covering the goods and its shipment.

Disadvantages to the Buyer:

• May not receive goods of the same quantity and quality ordered if the intention of the
seller is doubtful.
• May have to pay fees / charges to his Bank for obtaining Import LC Limits otherwise
have to keep 100 % cash margin for opening the LC.

Seller’s Risk :

• Issuing Bank may reject the documents (hence the payment) if documents
are found discrepant.
• Issuing Bank may go into liquidation after acceptance of drafts but before the due
date for payment.

Advantages to the Seller :

• Since the payment for the goods is undertaken by the Issuing Bank upon submission
of Credit compliant documents, he is sure of getting the payment.
• Knows that the payment is final and that there can be no future claim upon the seller
for refund of payment.
• Since documents are drawn under a Letter of credit, his bank may be willing to
provide finance against the same at favorable terms.

Disadvantages to the Seller :

• Rejection of documents may result in delay in getting payment and at times the seller
may have to find an alternate buyer for selling the goods if they are not-accepted by
the Issuing Bank.
• In case of discrepant documents, the issuing Bank may levy fees for the
discrepancies which may result in getting less than the invoice value.

Mitigation of Risks :

• Buyer and seller may obtain credit worthiness and confidential report of each other
from the banks.
• Buyer may conduct independent verification of the goods through a reputed agency
before shipment.
• Seller may obtain credit report on the standing of the Issuing Bank.
• Seller may get the Letter of Credit confirmed by another bank in his or another
Country.

Below are the few Governing Rules for Trade Transaction with the use of Letter of
Credit as an Instrument.
∑ UCP-600 (Uniform Customs and Practice for Documentary Credits -ICC
 Publication no. 600)
∑ URR-725(Uniform Rules for Reimbursements, ICC-725)
∑ International Standby Practices ICC-ISP 98
∑ International Standard Banking Practices

Documentary Collection

Documentary Collection is a method of payment used in international trade whereby

the Exporter entrusts the handling of commercial and financial documents to banks
and gives the banks instructions concerning the release of these documents to the
Importer.

Banks involved do not provide any guarantee of payment.

Collections are subject to the Uniform Rules for Collections published by the
International Chamber of Commerce. The last revision of these rules came into e ect
on January 1, 1996 and is referred to as the URC522.

Types of Collection

The following are the two basic types of collections:

• Clean Collections

• Documentary Collections
Clean Collections / Financial Collections :

• In a clean collection the amount owed by the importer to the exporter is evidenced
by a bill of exchange or promissory note or cheque or undertaking, called financial
documents.
• There are no other commercial documents such as invoice or transport documents.
• In most of the cases, the goods for which the amount is owed would have already
been shipped by the exporter and received by the importer.
• The exporter would have also forwarded the commercial documents (invoice, bill of
lading or airway bill) to the importer to enable him to take delivery of the goods.
Documentary Collection:

Collection of commercial documents accompanied or not accompanied by financial

documents.

Bill of Exchange/ Draft:

A Bill of Exchange is an unconditional order from the drawer (the seller) to the drawee
(the buyer) to pay a specific amount to him or his order at sight or at a certain future
date.

Cheques:

Is a type of Bill of Exchange given by the buyer to the seller which is drawn on the
buyer's banker instructing his bank to pay a specified sum to the payee mentioned in
the cheque or his order.

Promissory Note:

Is an unconditional promise from the drawer (the buyer) to the drawee (the seller) to
pay a specific sum to him or his order at sight or at a certain future date.

Below are the parties involved in Trade Transactions with the use of Documentary
Collection as an instrument.

Parties to Collection

Principal (Drawer) :

• This is the party who is the initiator of the collection process.

• In most of the cases he is the seller / supplier / exporter / drawer of the bill of
exchange.

Remitting Bank :

• It is the Bank (normally the Principal's banker) that sends the collection and has
undertaken the responsibility to collect the amount from the drawee on behalf of the
drawer.

Collecting Bank :

• Is generally the Bank in the buyer's country.

• Receives the collection from the remitting bank and informs the drawee of the
receipt of the collection with a request to make payment as per the terms and
conditions of the collection.
• Undertakes the responsibility for remitting the amount collected from the drawee to
the remitting bank.

Presenting Bank :

• It is the Bank that makes documents available to the buyer (the drawee) in terms of
the instructions received from the remitting bank.
• In case the drawee is the customer of the collecting bank, it also assumes the status
of the presenting bank.
• In case the drawee do not maintain an account with the collecting bank, the
collecting bank forwards the documents / collection to the buyer's bank, which
assumes the role of the presenting bank.

The Buyer (Drawee) :

• The person or entity named as the drawee under the collection.

• In most of the cases he is the person / entity who has imported / bought the goods
services and is responsible for making the payment under the collection.

Documentary Collection Transaction Workflow:

Payment Terms Under Documentary Collection

1. Collection – Documents Against Payment (D/P)

Both the buyer and the seller agrees that the seller will dispatch the goods to the
buyer (through the Bank) and forward the documents to the buyer's bank and the
buyer will make payment for the goods (in full or part) and take delivery of the goods.
Flow :

• Buyer and the seller enter into an agreement for supply of goods, the terms and
conditions method of settlement etc.
• Seller dispatches the goods to the buyer's bank (with the concurrence of the
collecting bank).
• Seller or his bank forwards the documents to the buyer's bank.
• Buyer's bank informs the buyer regarding receipt of documents and the terms and
conditions of payment.
• Buyer makes payment and takes delivery of the goods.
• Buyer's bank remits the payment to the seller or his bank.

Buyer's Risks :

• After making payment and taking delivery of the goods, the buyer may find that the
quantity and or quality of goods are not the one which he had ordered.

Advantages to the Buyer :

• Lower bank cost compared to settlement through documentary credit,

• Payment will be made only after the goods reach the destination.

Disadvantages to the Buyer :

• None.
Seller's Risks :

• Buyer may not accept the goods once it reaches its destination.
• Has to rely entirely on the creditworthiness and good faith of the buyer for the
payment.
• Dispatches the goods before getting payment.
• Importing country may prohibit or impose restriction of its import after dispatch of
goods but before payment is received.
• Importing country may prohibit or impose restriction on remittance of payment
after the goods have been dispatched and received by the buyer.

Advantages to the Seller :

• Lower bank charges.

• Has control over the goods till payment.

Disadvantages to the Seller :

• Blocking of working capital from the dispatch of goods till the payment is received.

When is mode of DOCUMENTARY COLLECTION AGAINST PAYMENT advised to the

Buyer & Seller.
• Mutual trust and confidence between the buyer and seller.
• No restriction on movement of goods from the export country to the importing
country.
• Stable economic and business conditions prevail in the exporting and importing
countries.
• When the relationship between the importing and exporting countries are cordial.
• When other more secure modes of settlements are not acceptable to the buyer.

Mitigation of Risks :

• Buyer and Seller may obtain credit worthiness confidential report of each other from
the banks.
• Buyer may conduct independent verification of the goods through a reputed agency
before shipment.
• These may add to the cost of import but the additional cost may worth the risk.

2. Collections - Documents Against Acceptance (D/A)

Both the buyer and the seller agrees that the seller will dispatch the goods to the buyer
(through the Bank) and forward the documents to the buyer's bank and the buyer will
accept the bill of exchange and take delivery of the goods. The buyer will make
payment for the goods (in full or part) at an agreed future date.

Flow :

• Buyer and the seller enter into an agreement for supply of goods, the terms and
conditions, method of settlement etc.
• Seller dispatches the goods to the buyer's bank.
• Seller or his bank forwards the documents to the buyer's bank.
• Buyer's bank informs the buyer regarding receipt of documents and the terms and
conditions of payment.
• Buyer accepts the draft and takes delivery of the goods.
• The payment for the goods will be made at a future fixed date as per agreement
between the buyer and the seller.
• On the due date the buyer makes the payment against the documents.
• The buyer's bank remits the payment to the seller or his bank.

Buyer's Risks :

• None.

Advantages to the Buyer :

• Lower bank cost compared to settlement through documentary credit.

• Payment will be made only after the goods reach the destination.
• Gets an opportunity to examine the goods before payment is made.
• Obtains credit from the seller to make payment at a future date so that the funds
could be easily raised from the sale proceeds of the goods.

Disadvantages to the Buyer :

• None.

Seller's Risks :

• Buyer may not accept the goods once it reaches its destination.
• May not get payment for the goods supplied.
• Dispatches the goods before getting payment.
• Has to rely entirely on the creditworthiness and good faith of the buyer for the
payment.
• Importing country may prohibit or impose restriction of its import after dispatch of
goods but before payment is received.
• Importing country may prohibit or impose restriction on remittance of payment after
the goods have been dispatched and received by the buyer.

Advantages to the Seller :

• Low bank charges.

Disadvantages to the Seller :

• Blocking of working capital from the time of dispatch of goods till the receipt of
payment.

When is mode of DOCUMENTARY COLLECTION AGAINST ACCEPTANCE advised

to the BUYER & SELLER?

• Mutual trust and confidence between the buyer and seller.

• No restriction on movement of goods from the export country to the importing
country.
• Stable economic and business conditions prevail in the exporting and importing
countries.
• When the relationship between the importing and exporting countries are cordial.
• When other more secure modes of settlements are not acceptable to the buyer.

Mitigation of Risks :

• Buyer and seller may obtain credit worthiness and confidential report of each
other from the banks.
• Buyer may conduct independent verification of the goods through a reputed agency
before shipment.
 Bank Guarantees

Guarantees are given by banks on behalf of its customer regarding specific

performance/ obligation by the customer to the other party. The guarantees ensure
payment to the party the bank’s customer is doing business.

Under a bank guarantee/surety bond arrangement, the bank acts as guarantor of a

claim or obligation in lieu of the debtor. The bank cannot be held liable in the event
that the debtor fails to “perform”. The banks obligation is limited to its pledge to pay a
maximum specified amount on fulfillment of the terms of the commitment.

Types of bank Guarantees.

Direct/Indirect Guarantee

In principle, there are two types of guarantee:

1. Direct guarantees:

A direct guarantee occurs when the client instructs the bank to issue a guarantee
directly in favor of the beneficiary
3. Indirect guarantees:

With an indirect guarantee, a second bank is involved. The second bank usually a
foreign bank by with head o ce in the beneficiary’s country of domicile, is requested
by the initiating bank to issue a guarantee in return for latter’s counter-liability and
counter-guarantee.

Depending on the purpose of the guarantee, the Bank Guarantees may be classified as
under:

1. Tender Bond:

This type of bank guarantee is also known as a bid bond. The purpose of a tender bond
is to prevent a company from submitting a tender, winning the contract ant then
declining to accept it on the grounds that deal is no longer lucrative. Tender bonds
o er buyers security against dubious or unqualified bids. They are often mandatory for
public invitation to tender.

2. Performance Bond

This is known as a performance guarantee. A performance bond/guarantee provides

security for any costs that may be incurred by the beneficiary on non-performance of
a contractually agreed services and/or non-compliance with the contractual deadline.

3. Credit Guarantee
Borrower are often required to provide collateral for a credit line or a loan. A third
party may also provide collateral. A bank guarantee is one of the options creditors have
to ensure that a loan will be repaid. (On the condition that the lending and
guaranteeing banks are not identical.)

4. Payment Guarantee

A payment guarantee, or payment default guarantee, provides security against default

for the goods to be delivered, for example. If the debtors fails to make payment when
due, and the beneficiary has fulfilled his or her contractual obligations, e.g. goods have
been delivered and/or services have been provided in accordance with the contact, a
written declaration to this e ect is generally su cient to redeem from the
guaranteeing bank.

5. Confirmed Payment Order

This is irrevocable obligation on the part of the bank to pay a specified sum at a
specified time to the beneficiary (creditor) on behalf of the customer.

6. Advance Payment Guarantee

The advance payment guarantee is intended to bind the supplier to use the advance
payment for the purpose stated in the contract between the buyer and the supplier. An
advance payment provides the supplier with funds to purchase equipment or
components, for example, or make other preparations.

7. Rental Guarantee
This is a guarantee of payment under a rental contract. The guarantee is either limited
to rental payments only, or includes all payments due the rental contract. (e.g.
including cost of repairs on termination of the rental contract)

BANKS AS A SOURCE OF FINANCE FOR TRADE

In International Trade, Importers and Exporters require finance for purchasing goods
from abroad and for producing goods for export. An importer or an exporter does not
have all the money required for purchasing imports or for financing production for
export. Therefore, they have to depend on outside sources for funds particularly when
the funds required are in large amounts.

Besides, funds may be required at di erent stages of purchase of imports or at

di erent stage of producing for export.

It is essential to note that international trade financing is more concentrated on

finance required for export production. The need for increasing export is universal
and the availability of competitive trade financing has become an e ective tool of
promoting exports, particularly exports of manufactures. In the case of imports, there
is no special case of encouraging inflows of import more so if countries do not have a
comfortable foreign exchange position. In the result importers do not have any special
schemes or facilities for financing imports.

Banks and Financial Institutions play an important role in facilitating trade and
production by providing funds (loans and credits) to both exporters and importers.

Types of Finance

Basically, there are only two classification of finance available to the traders viz.

i. Export Finance
ii. Import Finance

 Export Finance :
Exports play a very crucial role in a developing economy and they are given utmost
priority in the foreign trade policy of such an economy. Finance is the backbone of any
trade, whether Domestic or International. Export, being part of International Trade is
no exception. Hence, any measure to promote exports must also consider the vital
ingredient of finance.

Banks, being the main source of finance, are encouraged in several ways to extend
export finance, to achieve the objectives of the foreign trade policy. Further is of great
significance to banks since the credit is being extended to one of the vital sectors of
the economy and serves the process of economic development, which is a national
objective.

There are a number of sources for financing export trade. Depending upon the terms
of credit and the cost of financing, exporters may rely on a given source.

The sources of export finance may be through:

i. Direct Trade financing

ii. Indirect Trade financing
i. Direct Trade financing

The process of direct trade financing usually begins before the goods are sold or
shipped. It may be from domestic sources or external sources.

Among domestic sources, commercial banks are the most important source of export
finance for short to medium term i.e. 180 days to 5 years. Investment bank also
provide export finance usually in the form of medium to long-term credit i.e. 5 to 7
years. Among other domestic sources of export finance, government agencies and
institution play a major role. The most notable of these are export-import bank [EXIM
Bank].

External sources of export finance have also become important with the increasing
globalization of the financial markets of the world. The classic example is the Euro-
currency market. International financial leasing markets also finance exports of
capital goods.

ii. Indirect Trade Financing

An exporter can also avail finance through indirect methods of trade financing. One
method of indirect trade financing is the discounting of export bill. The exporter can
obtain finance by discounting the draft or banker’s acceptance, for a sum below the
face value of the bill or draft.

Another method of indirect trade financing is forfaiting. Forfaiting is the non-

recourse discounting of export receivables. It is a mechanism of financing that
virtually converts exporters credit sale into cash transaction.

Factoring is another method of indirect trade financing. In this type of financing , a

third party (Factor) pays the exporter a percentage (typically 90% of the face value of
the accounts receivable) for its exports receivables then assumes all risk for collecting
on the accounts receivable (without recourse to the firms discounting the receivable in
the event of loss). Importers are notified to remit directly to the factor. In short, it is a
type of financial service whereby a firm sells or transfers title to its accounts receivable
to a factoring company, which then acts as principal, not as agent.

In India, export finance is broadly classified in the following two categories, depending
upon at what stage of export activity the finance is extended namely :

 Pre-shipment Finance
 Post-shipment Finance

The other classification of export finance, which is also gaining importance are:

 Forfaiting
 Factoring

 Pre-shipment Finance

Financial assistance extended to the exporters, prior to shipment of export goods, falls
within the scope of pre-shipment finance.
Pre-shipment finance, also known as packing credit refers to ‘any loan to an exporter
for financing the purchases, processing, manufacturing or packing of goods’ as defined
by Reserve Bank of India [RBI] . As its name suggest it covers credits extended by
banks prior to the shipment of goods or supplies considered as deemed exports. In
e ect, packing credit is a loan against exportable stocks. It is a short terms credit
because it is granted for a short period of say about 180 days or a maximum 270 days as
against medium and long-term credit extended for period beyond 6 months, except
where the period is extended otherwise.

Why Packing Credit ?

The exporter may not be able to meet the financing needs of an export transaction as
the amount involved may be beyond his resources, he hardly gets advance payment
and the credit allowed by his supplier of production inputs is not adequate. Hence, a
substantial part of sale (export) contract or orders needs to be made available by
commercial banks and other financial institutions. Packing credit which in fact and
essential is working capital is necessary and provided not only in developing countries
like India but also the developed economies where there are also specialized
institutions, such as development banks and export/ import banks which provide
export finance.

Short term i.e. packing credit is more vital to developing countries because of the type
of products that most of them sell abroad. The traditional products comprising
primary products and non- traditional manufactures and consumer goods are
generally exported on a short-term repayment basis. The other non-traditional items,
such as engineering goods and industrial project, need medium and long term
financing and often called “term export” as well.

Packing credit is given to eligible exporters for specified purposes against.

 Irrevocable letter of credit [L/ C] established/ transferred in their favour by the

foreign buyer through the medium of a reputed bank.
 A confirmed or firm export order/contract placed by the buyer for export of goods
from India.

The RBI has permitted banks to grant packing credit advances even without lodgment
of L/C or firm order/contract at initial stage under the scheme known as “Running
Account Facility”.

Pre- shipment finance may be given under “Rupee packing credit scheme” and/ or
“Packing Credit in Foreign Currency [PCFC]”.

PCFC is available to cover both the domestic and imported inputs of the goods
exported from India. The facility will be available in any of the convertible currencies
and will be extended only on the basis of confirmed/firm export orders or confirmed
L/Cs.

Banks are eligible for 100% re-finance from RBI for all their rupee packing credit
disbursals. However, under PCFC scheme, banks will not be eligible for re-finance
from RBI.
 Post-shipment Finance

Financial assistance extended after the shipment of export goods falls within the scope
of post-shipment finance.

Post-shipment credit/finance means any loan or any other credit provided by any
institution to an exporter of goods from India from the date of extending the credit
after shipment of goods of the date of realization of export proceeds.

Post-shipment finance is granted under various methods. Hence, the exporter may
choose the type of facility which is most suitable to his needs.

Post-shipment finance can be classified into following categories:-

i. Negotiations/payments/acceptance of export documents under Letter of credit.

ii. Purchase/discount of export documents under confirmed orders/export contracts,
iii. Advance against bills sent on collection basis,
iv. Advance against export on consignment basis,
v. Advance against duty drawback entitlement,
vi. Advance against retention money,
vii. Financing exports under Deferred Payment Arrangements, turnkey project,
construction contracts, etc.

 Forfaiting
Forfaiting is a word derived from a French word. Forfaiting is the non- recourse
discounting of export receivables. It is a mechanism of financing that virtually converts
exporters credit sale into cash transaction:

 By discounting export receivables.

 Evidence by bills of exchange, promissory note, of credit or letter of guarantee
 Without recourse to the exporter.
 Carry medium to long term maturities (over 90 days and up to 7 years).
 On fixed or floating rate basis.
 Up to 100% of contract value (less the forfaiting cost).

How does Forfaiting work?

Bills of exchange or promissory notes, backed by co-acceptance from a bank (buyer's

bank), are endorsed by the exporter, without recourse, in favour of the forfaiting
agency in exchange for discounted cash proceeds. The banker's co- acceptance is
known as Avalisation. The co- accepting bank must be acceptable to the forfaiting
agency.

Forfaiting covers supplier's credit due to mature at any time from six months to ten
years and repayment can be annual, semi annual, quarterly or monthly it is flexible
and can be tailor made to suit individual transaction requirements.

Steps involved in Forfaiting

i. Commercial contract .
ii. Forfaiting agreement.
 iii. Delivery of goods.
iv. Delivery of documents.
v. Endorsement of drafts in favor of forfeiter .
vi. Payment of total amount less forfaiting charges.
vii. Presentation of instruments .
viii.Final Payment.

Benefits to an exporter from Forfaiting

An exporter will benefit from a forfaiting transaction as follows :

∑ Converts a deferred payment export into cash transaction, improving liquidity

and cash flow.
∑ Frees exporter from cross-border political or commercial risks associated with
export receivables.
∑ Finance up to 100% of the export value is possible as compared to 80-85%
financing available from conventional export credit programmes.
∑ As forfaiting o ers without recourse finance to an exporter, it does not impact
the exporter’s borrowing limits. Thus, forfaiting represents an additional
source of funding, contributing to improved liquidity and cash flow.
∑ Provides fixed rate finance; hedges against interest and exchange risks arising
from deferred export credit.
∑ Exporter is freed from credit administration and collection problems.
∑ Forfaiting is transaction specific. Consequently, a long term banking
relationship with the forefaiter is not necessary to arrange a forfaiting
transaction.
 ∑ Exporter saves on insurance costs as forfaiting obviates the need for export
credit insurance.
∑ Simplicity of documentation enables rapid conclusion of the forfaiting
arrangement.

 Factoring

The dictionary meaning of ‘factoring’ is ‘the work of the factor’, the business of buying
up of trade debts, or lending money on the security of these.

Factoring started in North America in the textile industry which still account for the
maximum turnover. In most other countries, factoring started much later in 1960s. In
the USA, the main requirement of factoring is the principal influences.

Factoring may be defined as a contract by which the factor is to provides at least two of
the services (finance, the maintenance of accounts, the collection of receivables and
protection against credit risks), and the supplier is to assign to the factor on a
continuing basis, by way of sale of security, receivables arising from the sale of goods
or supply of services.

In this type of financing , a third party (Factor) pays the exporter a percentage
(typically 90% of the face value of the accounts receivables) for its exports receivables
then assumes all risk for collecting on the accounts receivable (without recourse to the
firms discounting the receivable in the event of loss). Importers are notified to remit
directly to the factor. In short, it is a type of financial service whereby a firm sells or
transfers title to its accounts receivable to a factoring company, which then acts as
principal, not as agent.
Full factoring involves cent per cent protection against bad debt in case of non-
recourse facility, guaranteed cash flow, credit management, sales ledger
administration and optional pre-payments.

The common elements in a supplier sought by a factor are:

∑ Quality product or service,

∑ Experienced in the business management,
∑ Good system or internal control,
∑ Short term contract, no sale return or consignment selling,
∑ No stage payments, assignable debtors,
∑ Good spread of receivables, and
∑ Growth.

 Import Finance :

Credit & finance are not only available for export, but for import also. Importers
obtain bank finance on secured or unsecured basis for use as working capital. The
extent to which they are able to borrow on a loan or overdraft basis depends on their
creditworthiness, their relationship with banks as borrowers and the security they
may o er if required.

Importers obtain bank finance, though indirectly, for paying the foreign exporter when
the importer’s bank opens a letter of credit. When a bank sanctions an importer’s
application for an L/C, it implicitly agrees to provide finance to the importer. Since,
invariably it is an irrevocable L/C, the bank pays the exporter on behalf of the importer
either on DP [delivery against payment] basis or DA [delivery against acceptance] basis.
This amounts to a loan to the importer against the goods. Importers can also obtain
finance from the exporter in the form of trade credit or supplier’s credit.

Sometimes importers may require finance even at the post-import stage for honouring
commitments under the L/C and also for payment of customs duty, octroi etc., for
clearance of the goods. The commercial banks might be able to finance the importer
up to a percentage of the landed cost of the goods.

Banks also extend finance to importers on deferred payment basis, by opening L/Cs
providing for payment on deferred terms. However, this facility is extended to
importers only in the case of imports of capital goods and where necessary, after
getting the approval of the authorities.
In addition to these, Indian importers can obtain finance from abroad in foreign
currency, subject to the approval of Reserve Bank of India and Government of India.
They may obtain suppliers credit in foreign currency both short and long term, the
latter being in the form of deferred payment credit.

In the case of imports financed out of external aid and loans received by the
Government of India (on commitment basis or reimbursement basis), banks finance
importers by providing bank guarantees to the Government.

Indian importers can also obtain finance in the following forms:

i. Buyers credit i.e. loans provided directly to the importers by foreign financial
institutions;
ii. Foreign currency loans out of lines of credit obtained by IDBI, IFCI, ICICI,etc.

Buyer’s Credit

Buyer’s Credit is a loan extended by a financial institution or a consortium of financial

institutions to the overseas buyer for financing a particular contract.

The EXIM bank operates a buyer’s credit scheme which envisages grant of credit by it
in participation with commercial banks in India to foreign buyers for export of Capital
Goods and turnkey projects from the country. This scheme provides for payments
being made to exporters out of buyer’s credit on a non-recourse basis on their
fulfilling the commercial terms of the export contracts to be financed under it.

All o ers for deferred payment exports or turnkey projects against buyer’s credit
require specific prior approval of the Exim Bank/Working Group.

EXIM bank has been authorized to extend buyer’s credit up to Rs. 50 crores and
proposals exceeding this limit will be considered by the Working Group.

The EXIM bank considers the proposals under buyer’s credit on the basis of the
following factors:

∑ Exporter’s competence and capability in executing the proposed contract.

∑ Commercial justification of the contract.
∑ Economic viability of the overseas project.
∑ Credit-worthiness , standing and financial position of foreign borrower.
∑ General economic conditions of buyer’s country.
EXPORT CREDIT AND GUARANTEE CORPORATION OF INDIA LTD. (ECGC)

Export Credit and Guarantee Corporation of India Ltd. (ECGC) was established by the
Government of India in December 1983. ECGC is a fully owned Government Company.
It operates under the overall supervision of the Ministry of Commerce. It is managed
by a Board of Directors. These directors are representatives of the Government, RBI,
banking, insurance and export community. ECGC insures the exporters and finds
finance for them.

Objectives of ECGC

The main objectives of ECGC are:

(a) To facilitate the growth of India’s export trade by providing credit insurance cover
to India exporters and giving them guarantee for enlarging exports of the country.
(b) To provide the supplementary facilities which are necessary for diversifying
exports.
(c) To conduct any other function which the Government asks them to do from time to
time. This includes giving credit and guarantees in foreign currencies for importing
raw materials which are required for manufacturing of processing export goods. ECGC
does not give direct export assistance to the exporters.
It only helps them to get export finance from the lending institution. They do this by
agreeing to share the risk with the lending institution, through their policies and
guarantees. The ECGC issues di erent types of insurance policies in order to protect
the interest of exporters and the lending institution. It also collects and distributes
information regarding credit worthiness of overseas buyers.

Banks and financial institution need guarantee for lending financial support to the
exporters. A number of financial guarantees have been introduced by ECGC on the
strength of which credit can be extended to exporters and banks and financial
institution are protected.

Guarantees of ECGC

Important guarantees o ered by ECGC are:

1. Packing credit guarantee.
2. Post-shipment export credit guarantee.
3. Export finance guarantee.
4. Export production finance guarantee
5. Export performance guarantee
6. Transfer guarantee.

1. Packing credit guarantee: An exporter requires pre- shipment finance or packing

credit, for procuring raw material manufacture goods, and packs them. This all
requires finance. Commercial banks provide this finance ECGC issues guarantee to
protect these banks against:
(a) Non-delivery of shipping documents by the exporter to the bank. The guarantee
given by ECGC for this purpose cover 66.67% losses.
(b) Non-payment of debt of shipment is not made. The guarantee issued by ECGC
indemnifies bank to the extent of 75% of the losses due to non-payment of debts.
(c) In case of credit granted to small scale merchant exporter whose turnover does not
exceed Rs. 2 lakhs and if such exporter fails to repay. ECGC indemnifies the back up to
90% of the losses.

2. Post- shipment export credit guarantees: The commercial banks extend post-

shipment finance or post shipment credit to the exporter. This type of finance is
granted through purchase negotiations and discounting of export bills. The financial
banks are protected under this guarantee by the ECGC. The banks are protected
against:

(a) Default or insolvency of exporter

(b) Non - Performance of export contract
(c) Dispute between exporter and importer
The banks are normally protected under this guarantee by the ECGC upto 75% of the
losses.

3. Export finance guarantee: It takes time normally to claim incentive money from the

government. This claim is to be made by exporter only after shipment of goods. But
exporters funds are blocked in this course. He needs finance for keeping his activities
continue. Commercial banks help him in this regard. Against these incentives the
exporter can get from the banks maximum 50% of finance of the FOB value of goods or
actual amount receivable on account of incentive whichever is less.
The financial institutions banks are protected by the ECGC against:
(a) Default or insolvency of the exporter.
(b) Any enforceable loss
75% of the losses incurred by the bank are compensated by the ECGC.

4. Export production finance guarantee: The goods of exporter sold in the foreign

market are much lower in value. It is only when the exporter receives the amount of
incentives from government and export proceed from importers, he makes up the full
value of goods commensurate with the cost of production. But realization of incentives
takes time invariably. As a result exporter's finances are blocked. This guarantee of
ECGC enables manufacturer/exporter to get finance from commercial banks upto 50%
over and above FOB value of the goods at the pre-shipment and post-shipment stage.
The guarantee is issued to financing bank to indemnify to the extent of 66.67% of any
loss owing insolvency or protracted default on the part of manufacturer/exporter.

5. Export performance guarantee: Sometimes exporter has to furnish bank guarantee to

the foreign buyer. This guarantee is required when exports are made on deferred
terms basic.

6. Transfer Guarantee: Exporter prefers a letter of credit to be confirmed by a reputed

bank in India. Exporter’s own bank may confirm the L/C required from foreign buyers.
The exporter receives the money of export transaction from the confirming bank. The
confirming bank, however, may fall in trouble if the payment is not received from
foreign buyers or from his foreign bank. ECGC has devised transfer guarantee scheme.
Under this guarantee scheme, confirming bank has to see that transfer of money is
guaranteed from the foreign country which is due to be payable to the confirming bank
of L/C.
Risk Covered By ECGC

ECGC covers commercial risk as well as political risk.

1. Commercial Risks :

(a) Insolvency of the buyer.

(b) Failure of the buyer to make the payment due within 2 months from the due date.
(c) Buyer’s failure to accept the goods, due to no fault of the exporter, provided that legal
action against the buyer is considered to be inadvisable.

2. Political Risks :

(a) Imposition of restrictions by the Government of the buyer’s country or any Government
action which may block or delay the transfer of payment made by the buyer.
(b) War, civil war, revolution or civil disturbances in the buyer’s country.
(c) New import restrictions or cancellation of a valid import licence.
(d) Interruption or diversion of voyage outside India resulting in payment of additional
freight or insurance charges which cannot be recovered from the buyer.
Any other cause of loss occurring outside India, not normally insured by general insurers
and beyond the control of both the exporter and the buyer.

Risk Not Covered by ECGC

The Policy does not cover losses due to following risks:

(a) Commercial disputes including quality disputes raised by the buyer, unlike the exporter
obtains a decree from a competent court of law in the buyer;s country in his favour.
(b) Causes inherent in the nature of the goods.
(c) Buyer’s failure to obtain necessary import or exchange authorisation from authorities
in his country.
(d) Insolvency or default of any agent of the exporter or of the collecting bank.
(e) Loss or damage to goods which can be covered by general insurance.
(f) Exchange rate fluctuation.
(g) Failure of the exporter to fulfill the terms of the export contract or negligence on his
part.

EXPORT IMPORT BANK OF INDIA (EXIM)

The EXIM bank of India is a public sector financial institution established on 1st January,
1982. It started operating from 1st march, 1982. It was established by an Act of Parliament,

for the purpose of financing, facilitating and promoting foreign trade. It is also the

principal financial institution for coordinating the working of institutions engaged in

financing India’s foreign trade. This bank was mainly created for the purpose of
financing medium and long term loans to exporters there by promoting the country’s
foreign trade.
Objectives of EXIM Bank

The main objectives and purposes of EXIM bank are as follows:

1. Financing of export and imports of goods and services not only of India but also of
third world countries.
2. Financing of joint ventures in foreign countries.
3. Financing of Indian manufactured goods, consultancy and technological services of
deferred payment terms.
4. Financing R&D and techno-economic study.
5. Co-financing global and regional development agencies.

Functions of EXIM Bank

The assistances o ered by EXIM bank to the exporters can be grouped under the
following three categories.

1. Fund Based Assistance.

a. Financial assistance to Indian companies.
b. Financial assistance to foreign govt. and business firms.
c. Financial assistance to Indian commercial banks.
2. Non-Fund Based Assistance.
a. Guarantees and bonds.
b. Advisory and other services.
We would discuss each of these briefly.

1. Fund Based Assistance

It provides direct loans to exporters, refinance, overseas buyers credit, foreign lines of
credit, overseas investment finance and preshipment credit. It also re- discounts
export bills, and extends re-lending facility to banks abroad. It also renders technology
and consultancy services. It also provides term finance for export-oriented units. It
assists SSI who is exporting by its bill rediscounting programme. It also has an 'agency
credit line' with IFC. It refinances exports of computer software. Fund based assistance
is divided into three broad groups:
(i) Financial Assistance to Indian Exporters.
(ii) Financial Assistance to Overseas Buyers and Agencies, and
(iii) Financial Assistance to Indian Commercial Banks.

a. Financial Assistance to Indian Companies: EXIM bank provides loans to Indian

Companies in the following manner:

I. Direct Financial assistance to exporters: Funds are provided on deferred payment

terms to Indian exporters to enables them to extend deferred credit to the overseas
buyer. Commercial banks participate in this programme directly or under the Risk
Syndication facility.

II. Consultancy & Technology Services: Indian companies can obtain finance from
EXIM Bank to extend deferred credit to overseas buyers of Indian consultancy,
technology and other services.

III. Pre-shipment Credit: Packing credit is available for construction/turnkey project

exporters involving cycle time exceeding six months.
IV. Facilities for Export Oriented Units: EXIM Bank provides term loans/ deferred
payment guarantee for projects in export oriented units and units in free trade zones.

V. Facilities for Deemed Exports: Deemed export transactions are eligible for funded
and non funded facilities from EXIM Bank.

VI. Overseas Investment Financing: EXIM Bank provides finance to Indian Company
establishing a joint venture abroad and requires funds towards equity participation in
the joint venture.

b. Financial Assistance to Foreign Governments and Business Firms : EXIM bank also
provides loans to foreign Governments, Companies and Financial Institutions in the
following ways:

I. Overseas Buyer’s Credit: This is o ered directly to foreign buyers to import eligible
Indian goods and related services with repayment terms spread over a period of years.

II. Lines of Credit to Foreign Governments: EXIM Bank also provide credit to foreign
governments and foreign financial institutions. Such lines provide term finance import
eligible Indian goods and related services.

III. Relending facility to banks overseas: Relending facility to enable overseas banks to
provide term finance to importers for import of eligible Indian goods. Banks overseas
would
intermediate between foreign buyers and EXIM Bank and the latter would
intermediate with the suppliers.
c. Financial Assistance to Indian Commercial Banks: EXIM Bank provides loans to
Indian Commercial Banks as explain below:

I. Export Bills Rediscounting : Exchange banks in India can rediscount their short term
export bills for a period of 90 days with EXIM Bank.

II. Refinance of export credit: EXIM Bank provides to authorized dealers in foreign
exchange hundred per cent refinance of deferred payment loans. For export contracts
up to Rs. 2 crores, automatic refinance facility is available. For proposals beyond Rs. 2
crores, EXIM Bank’s approval is required.

2. Non-Funded Assistances

Non-funded assistances provide cover assistance, retent on money, guarantees etc.

(a) Issue of Guarantees: EXIM bank participates with commercial banks in India in the
issue of guarantees such as advance payment guarantee, performance guarantee, and
guarantee for retention money and guarantee for borrowings abroad required for
execution of export contracts. The bank charges at present interest ranging between
7.5% p.a. and 12.5% p.a. in connection with its export financing programmes.

(b) Advisory and Other Services: It advises Indian companies, in executing contract
abroad, and on sources of overseas financing. It advises Indian exporters on global
exchange control practices. The EXIM bank o ers financial and advisory services to
Indian construction projects abroad. It advises small-scale manufacturers on export
markets and product areas. EXIM bank provides access to Euro Financing sources and
global credit sources to Indian exporters. It assists the exporters under forfeiting
scheme. EXIM bank also provides advisory services relating to Marketing research,
merchant banking, Foreign exchange, risk syndication, dissemination of information
through publications.

REGULATORY FRAMEWORK

In the Indian context, the major policy/regulatory frameworks in International Trade

are laid down by:

1. Directorate General of Foreign Trade (DGFT).

2. Reserve Bank of India (RBI).
3. International Chambers of Commerce (ICC).
4. Foreign Exchange Dealers’ Association of India (FEDAI).

Directorate General of Foreign Trade(DGFT)

DGFT operates under the Ministry of Commerce and lays down policies and
regulations relating to physical movement of goods into India.

Any company undertaking imports or exports of goods/services requires to get itself

registered with the DGFT, DGFT issues an Import Export Code(IEC) to the company .
IEC is a unique code that the company needs to provide to the bank and to the
customs/other regulatory agencies while making International Transactions.

IEC Code helps DGFT and other regulatory agencies in keeping a track of various
International Transactions done by the company.

Reserve Bank of India(RBI)

Reserve Bank of India’s role trade in concerned with:

 Exchange Control: RBI overseas the payments and receipts by residents to non-
residents and vice versa.
 Credit Norms of RBI: Any credit being extended to another party is controlled by
RBI credit norms.
As a result, both domestic and international trade and currency transactions come
within the scope of various RBI regulations.

RBI also closely monitors international transactions in order to ensure compliance

with various forex regulations. Foreign Exchange Management Act(FEMA) is an
important act that lays down the underlying regulations governing all foreign currency
transactions in India.

International Chambers of Commerce(ICC)

International Chambers of Commerce is an apex international body, which forms the

guidelines for smooth functioning of trade and forex transaction across countries. ICC
has laid out Uniform Customs and Practice for Documentary Credits(UCPDC).

Foreign Exchange Dealers’ Association of India(FEDAI)

Foreign Exchange Dealers’ Association of India is the apex forum of banks authorized
to deal in forex issues and guidelines. Its major activities includes framing of rules
governing the conduct of inter-bank foreign exchange business, business among banks
vis-à-vis public and liaison with RBI for reforms and development of forex market.

Some of its functions are as follows:

∑ Guidelines and Rules for Forex Business.

∑ Training of Bank Personnel in the area of foreign Exchange Business.
∑ Accreditation of Forex Brokers.
 ∑ Advising/Assisting member banks on Government/RBI/other Bodies.
∑ Announcement of daily and periodical rates to member banks.

INCOTERMS 2012

The INCOTERMS rules or International Commercial terms are a series of pre-defined

commercial terms published by the International Chamber of Commerce (ICC) that
are widely used in International commercial transactions. They are intended to reduce
or remove altogether uncertainties arising from di erent interpretation of the rules in
di erent countries. As such they are regularly incorporated into sales contracts
worldwide. The Incoterms rules are accepted by governments, legal authorities, and
practitioners worldwide for the interpretation of most commonly used terms in
international trade.

EXW (EX-Works)

The seller makes the goods available to the buyer at their facilities: factory, warehouse,
etc. All expenses are thereafter by the purchaser. The EXW Incoterms can be used with
any kind of transport or a combination of them (known as multimodal transport).

FAS (Free Alongside Ship)

The seller delivers the goods on the quay of the agreed port of shipment, ie next to the
boat. The FAS is proper INCOTERM of bulk goods or large load being deposited in
specialized port terminals, which are located on the dock. The seller is responsible for
the e orts and costs of the o ce of export (in versions prior to INCOTERMS 2000, the
buyer organized export customs clearance). The FAS INCOTERM only used for
transport by boat, either sea or river.

FOB (Free On Board)

The seller delivers the goods on the ship. The seller contracts for transport through a
transient or a receiver, but the cost of transport is assumed by the buyer. The
Incoterms FOB is one of the most used in international trade. It should be used for
general cargo (drums, coils, containers, etc.) Of goods, bulk unusable. The Incoterms
FOB is used exclusively to transport by boat, either sea or river.

FCA (Free Carrier)

The seller agrees to deliver the goods at an agreed point in the country, which may be
the premises of a transient, a railway station ... (This place agreed to deliver the goods
usually associated with the carrier spaces). It bears the costs until the goods are
located at that point agreed, among others, the customs in the country of origin. The
FCA Incoterms can be used with any type of transportation: air, rail, road, and
containerized / multimodal transport. However, it is a little used INCOTERM.

CFR (Cost and Freight)

The seller is responsible for all costs, including the main transport, until the goods
arrive at the destination port. However, the risk is transferred to the buyer when the
goods are loaded on the ship, in the country of origin. It should be used for general
cargo not containerized, nor is it appropriate for the bulk. The CFR INCOTERM only
used for transport by boat, either sea or river.
CIF (Cost, Insurance and Freight)

The seller is responsible for all costs, including transport and insurance leading until
the goods arrive at the destination port. Although insurance has hired the vendor, the
beneficiary of the insurance is the buyer.

As in the previous INCOTERM, CFR, the risk is transferred to the buyer when the
goods are loaded on the ship, in the country of origin. The INCOTERMS CIF is one of
the most used in international trade because the conditions of a CIF price are what
make the customs value of a product that should be used importa.2 general cargo or
conventional, but should not be used when transported in containers. The CIF
Incoterms used for any transport, but most boat, either sea or river.

CPT (Carriage Paid To)

The seller is responsible for all costs, including the main transport, until the goods to
the agreed point in the destination country. However, the risk is transferred to the
buyer at the time of delivery of the goods to the carrier in the country. The INCOTERM
CPT can be used with any mode of transport including multimodal transport
(combination of di erent types of transport to reach destination).

CIP (Carriage and Insurance Paid To)

CIP The seller is responsible for all costs, including transport and insurance leading
until the goods to the agreed point in the destination country. The risk is transferred
to the buyer at the time of delivery of the goods to the carrier in the country. Although
insurance has hired the vendor, the beneficiary of the insurance is the buyer. The
Incoterms CIP can be used with any mode of transport or a combination of them
(multimodal transport).

DAT (Delivered At Terminal)

DAT The INCOTERM DAT is used for all types of transport. It is one of two new
Incoterms 2010 with DAP. Replaces INCOTERM DEQ. The seller is responsible for all
costs, including transport and insurance leading (not required), until the goods are
placed in the terminal set. It also assumes the risks so far. The DEQ was used
INCOTERM particularly alongside international trade in bulk because the delivery
point coincides with the bulk terminals of the ports. (In earlier versions of Incoterms
2000, with the DEQ Incoterms, payment of import customs was payable by the seller,
in the current version, is paid by the buyer).

DAP (Delivered At Place)

DAP The INCOTERM DAP is used for all types of transport. It is one of two new
Incoterms 2010 with DAT. INCOTERMS replaces DAF, DES and DDU. The seller is
responsible for all costs, including transport and insurance leading (not required) but
not costs associated with importing, until the goods are made available to the buyer in
a vehicle ready for download . It also assumes the risks so far.

DDP (Delivered Duty Paid)

DDP The seller pays all costs until the goods leave the agreed point in the destination
country. The buyer does not perform any type of procedure. The import customs
charges are borne by the seller.
CONCLUSION & SUMMARY
BIBLIOGRAPHY OF REFERENCES

Books: 438305

1. Fundamentals of International Banking, Rupnarayan Bose , McMillan India Ltd.,

2007,
2. International Banking, ICFAI March , 2006