The terms ‘bills purchase’,’ bills discount’, and ‘bills negotiation’ are respectively used by the bank for financing against ‘Demand Bills’,’Usance Bills’, and LC bills. The seller of goods (exporter) gets immediate money from the bank for the goods sold by him irrespective of whether it is a purchase, discount, or negotiation by the bank according…
Reserve Bank of India on Monday said it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR. All Category-I Authorised Dealer (AD) banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai, before putting in place…
The Reserve Bank of India (RBI) on Friday permitted banks to open additional current account for exports proceeds in addition to special rupee vostro accounts with a view to provide greater operational flexibility to exporters.In terms of this provision and in order to provide greater operational flexibility to the exporters, AD Category-I banks maintaining Special…
An exporter needs ECGC cover for the risk of non-payment by the buyer. The risk of non-payment may be due to political and economic changes all over the world. Political changes like an outbreak of war, civil war, a coup or an insurrection may block or delay payment for goods exported. Likewise economic difficulties or…
The term forfaiting refers to a form of trade finance involving discounting of export bills receivables such as drafts drawn under LC, bills of exchange, promissory notes, or other instruments on without recourse basis. The export of capital goods involves account receivables of medium and long term maturities. It is a general practice that the…
Objective:To provide bank staff with a comprehensive understanding of the various risks involved in Letter of Credit (LC) transactions and equip them with strategies to identify, assess, and mitigate these risks effectively. 1. Introduction Letters of Credit (LCs) are widely used instruments in international trade, providing a secure payment mechanism for both buyers (applicants) and…
Objective:To equip trade finance staff with practical knowledge of International Standard Banking Practice (ISBP 745) and Incoterms, highlighting their interaction within documentary credit transactions and illustrating real-world implications through case studies. 1. Overview of ISBP 745 What is ISBP 745?The International Standard Banking Practice (ISBP 745) is a publication by the International Chamber of Commerce…
Objective:To familiarize bank staff with the purpose, scope, and operational framework of the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (URR 725) issued by the International Chamber of Commerce (ICC). These rules provide clarity, consistency, and efficiency in processing reimbursements between banks under documentary credit arrangements. 1. Introduction to URR 725 URR 725 is…
Objective:To provide bank staff with a clear understanding of the roles, responsibilities, and rights of each party involved in a Letter of Credit (LC) transaction, in accordance with international banking practices and regulatory frameworks. 1. Introduction to Letter of Credit (LC) A Letter of Credit (LC) is a financial instrument issued by a bank on…
Objective:To equip bank staff with the necessary knowledge and procedural understanding for effectively handling bills under Letters of Credit (LC), ensuring timely payments, accurate documentation, and full regulatory compliance. 1. Tracking and Monitoring of Bills a. Bill Status MonitoringStaff must monitor each bill’s lifecycle—from acceptance to negotiation and eventual settlement—ensuring that timelines stipulated under the…
