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09 March, 2022

Discuss the various types of credit facilities offered to importers by the banks

 1. Letter of Credit: This is made in the form of commitment on behalf of the client to pay an agreed sum of money to the beneficiary of the L/C upon fulfillment of terms and conditions of the credit.

2. Loan against Trust Receipt (LTR): LTR may provide when the documents covering an import shipment are given without payment. Importer will hold the goods of their sale proceeds in trust for the bank; until the loan allowed against the Trust Receipt is fully paid.

3. Payment against Documents (PAD): It is a post-import finance to settle the properly drawn import bills received by the bank in case adequate fund is not available in client’s account.

4. Loan  against  Imported  Merchandise  (LIM):  The  lending  bank  mostly pledges the imported goods. The merchandise is released for the use of the importer (borrower) upon repayment of the bank’s finance and charges. LIM may be created in two ways:

a) LIM on importer's request b) Forced LIM

5. Bank Guarantee:  The bank,  on  behalf  of  importer constituents or  other customers, issues guarantees in favor of beneficiaries abroad. The guarantees may be both Performance and Financial.

6. Collection of Import Bills: In this case, the importers may be financed that the bank collect the imports bills by authorized FOREX dealers outside the country and the importer will collect the bills from local bank.