• Trade Finance

    Trade Finance refers to all the lending activities by a bank to facilitate trading between two countries. This is completely different from personal and corporate banking and having separate products to help different import and export entities to continue with their trading.

    With globalization, it has become very necessary for banks to spread their business across the globe and open up branches in different continents. The main purpose is to facilitate different trading customers in their inter-country trading activities and earn heavy fees from the services offered to them.

    Services offered by banks in trade finance category

    • Assisting clients in importing accessories and raw materials from other countries
    • Extending credits against receivables of exporting company
    • Provides loan facilities to customers to import assets from other countries
    • Offers all the forex services to cater their foreign currency requirements
    • Risk management services to mitigate credit risk against the default of the buyer
    • Other risk management like country risk, currency risk etc.
    • Helps clients to raise loans in foreign currency at attractive interest rates
    • Offer credit protection to the exporting company until the shipment receives to the desired location

    Moreover banks help their clients to reduce cost of funding by availing trade finance activities at cheaper rate and also by reducing their risk exposure in international trading.

    Services offered related to Import

    • Necessary document preparation and collection
    • Issue Letter of credits
    • Bankers Acceptance facility
    • Standby Credits
    • Guarantees for the exporters

    Services offered related to Export

    • Necessary document check and verification
    • Confirm and validate the Letter of credits
    • Handling transferable credits and receivables from importers
    • Extending credit facilities to the overseas buyer
    • Extending credit to overseas financial institutions for the purpose of on lending to their clients
    • Providing credit protection to the exporters if the importer fails to pay the exporter.

    Banks charge high fee for trade finance related services, that’s why it has become very popular for the banks now.

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