Banks play a crucial role in any economy by channeling savings into investments. They accept deposits and make loans. Banks create money through the multiplier effect by lending out deposits while keeping only a fraction in reserves. They earn profits from interest rate spreads on loans and fees. Banks come in many types based on ownership, function, and scope. They are made up of departments like credit, which analyzes loan applications, and external operations, which handles letters of credit. Proper bank operations and risk management are essential.
Banking Structure in India:
This presentation helps us to understand the basics of banking in India, its initiation, role and growth over the period of time.
central bank is the father of all banks, main regulatory body of the nation which control and regulate all the banks of the country. central bank is the financial advisor to the government.
Origin, history and types of banking systemTalha Ali
Banks have been around since the first currency was formed
In the early days of ancient empires, temples were considered to be the safest place to keep valuable commodities.
Fiduciary or paper money is issued by the Central Bank on the basis of
computation of estimated demand for cash. Monetary policy guides the Central
Bank’s supply of money in order to achieve the objectives of price stability (or low
inflation rate), full employment, and growth in aggregate income.
Banks and NBFCs: Types of Banks & NBFCs: Central Bank, Nationalized & Co Operative Banks, Regional Rural
Banks, Scheduled Banks, Private Banks & Foreign Banks, Mudra Bank, Small Finance Banks, Specialized Banks, NBFCs.
Types of Banking: Wholesale and Retail Banking, Investment Banking, Corporate Banking, Private Banking, Development
Banking.
Banking Structure in India:
This presentation helps us to understand the basics of banking in India, its initiation, role and growth over the period of time.
central bank is the father of all banks, main regulatory body of the nation which control and regulate all the banks of the country. central bank is the financial advisor to the government.
Origin, history and types of banking systemTalha Ali
Banks have been around since the first currency was formed
In the early days of ancient empires, temples were considered to be the safest place to keep valuable commodities.
Fiduciary or paper money is issued by the Central Bank on the basis of
computation of estimated demand for cash. Monetary policy guides the Central
Bank’s supply of money in order to achieve the objectives of price stability (or low
inflation rate), full employment, and growth in aggregate income.
Banks and NBFCs: Types of Banks & NBFCs: Central Bank, Nationalized & Co Operative Banks, Regional Rural
Banks, Scheduled Banks, Private Banks & Foreign Banks, Mudra Bank, Small Finance Banks, Specialized Banks, NBFCs.
Types of Banking: Wholesale and Retail Banking, Investment Banking, Corporate Banking, Private Banking, Development
Banking.
savings bank account services by karnataka bankAprameya joshi
the document starts with introduction to financial services then goes with comercial banks and then speaks about the profile of karnataka bank and savings bank account services of karnataka bank
WHAT IS A BANK, CLASSIFY AND DISCUSS BANKS.
Bank: a bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
2. TOPIC NO 1
BANK OPERATIONS
COURSE CONTENT
Importance of banking
How banks operate
Functions of banks
Types of bank according to
Ownership, function , scope
Departments within the banks
Credit department
Loan policy
Lending process
Credit analysis
External operations department
Letter of credit
Letter of guarantee
Risk management department
Types of risks
3. The importance of banking
Banks are essential for each country’s economy, since no growth can be achieved
unless savings are efficiently channeled into investment. They are a primary
source of funds for both individuals and businesses In this respect, the lack of a
full-fledged banking system has often been identified as a major weakness of any
economy.
What is a Bank?
Banks are privately-owned institutions that, generally, accept deposits and make
loans. Deposits are money people leave in an institution with the understanding
that they can get it back at any time or at an agreed-upon future time. A loan is
money let out to a borrower to be generally paid back with interest. This action of
taking deposits and making loans is called financial intermediation. A bank's
business, however, does not end there.
How Banks Create Money
Banks can't lend out all the deposits they collect, or they wouldn't have funds to
pay out to depositors. Therefore, they keep primary and secondary reserves.
Primary reserves are cash, deposits due from other banks, and the reserves
required by the CBE. Secondary reserves are securities banks purchase, which
may be sold to meet short-term cash needs. These securities are usually
government bonds .the central bank of Egypt sets requirements for the
percentage of deposits a bank must keep on reserve, either at the central bank or
in its own vault. Any money a bank has on hand after it meets its reserve
requirement is its excess reserves.
It's the excess reserves that create money. This is how it works (using a
theoretical 10% reserve requirement): You deposit $500 in Your Bank. your Bank
keeps $100 of it to meet its reserve requirement, but lends $400 to Ms. Smith.
4. She uses the money to buy Toyota car. The Toyota Company deposits $400 in its
account at Their Bank. their Bank keeps $80 of it on reserve, but can lend out the
other $320 as its own excess reserves. When that money is lent out, it becomes a
deposit in a third institution, and the cycle continues. Thus, in this example, your
original $500 becomes $1,220 on deposit in three different institutions. This
phenomenon is called the multiplier effect. The size of the multiplier depends on
the amount of money banks must keep on reserve.
The central bank can contract or expand the money supply by raising or lowering
banks' reserve requirements. Banks themselves can contract the money supply by
increasing their own reserves to guard against loan losses or to meet sudden cash
demands. A sharp increase in bank reserves, for any reason, can create a "credit
crunch" by reducing the amount of money a bank has to lend.
How Banks Make Money
While public policymakers have long recognized the importance of banking to
economic development, banks are privately-owned, for-profit institutions. Banks
are generally owned by stockholders; the stockholders' stake in the bank forms
most of its equity capital, a bank's ultimate buffer against losses. At the end of the
year, a bank pays some or all of its profits to its shareholders in the form of
dividends. The bank may retain some of its profits to add to its capital.
Stockholders may also choose to reinvest their dividends in the bank.
Banks earn money in three ways:
They make money from what they call the spread, or the difference
between the interest rate they pay for deposits and the interest rate they
receive on the loans they make.
They earn interest on the securities they hold.
5. They earn fees for customer services, such as checking accounts, financial
counseling, loan servicing and the sales of other financial products (e.g.,
insurance and mutual funds).
Why I have to deal with bank ?
Small savers face costs of
Searching;
Contacting;
Negotiating;
Trying to diversify;
Monitoring;
Enforcement etc
Given the large number of savings and deposit by banks, related transaction costs
are either falling or constant , lets clarify the importance of banks by defining its
functions :
1- Reduce transaction costs
Banks reduce costs through several other ways including :provision of convenient
places of business ,standardized products and
less costly expertise through the use of tested procedures and routines. This
besides the regulation and supervision of banks by regulatory and supervisory
bodies to ensure conformity with acceptable codes of behavior frees customers
from the burden of collecting information and monitoring banks.
2-Delegate monitoring
Contracts are necessarily incomplete, so
Borrowers need to be monitored to ensure maximum probability that loaned
funds will be repaid. Lending contracts are incomplete in that the value in large
part is determined by the behavior of the borrower after the issuance of the loan.
Depositors delegate banks to monitor the behavior of borrowers.
3. provide liquidity
Borrowers and lenders have different liquidity preferences so,
6. banks pool funds together ,banks rely on the law of averages to be able to offer
liquidity to their customers.
The existence of banks can be derived from the bank’s balance sheet.
Liabilities side: banks accept deposits and in turn provide transaction
services.
Asset side: banks issue loans, thereby providing liquidity.
As Small-business borrowers find bank lending important because due to small
size and relative opacity, funding through public markets is virtual impossible.
Banks build relationships with customers that give them valuable information
about their operations. Enhanced bank-customer relationships help small
businesses access funding because the bank has got special knowledge about the
firm.
4-Payment system
Banks administer payment systems which are core to an economy.
Through payment system:
o banks execute customers’ payment instructions by transferring funds
between their accounts.
o customers receive payments and pay for the goods and services by
cheques, credit or debit cards or orders
o funds to flow between individuals, retail business and wholesale markets
quickly and safely.
o Currently, we have to pay electricity, phone buying mobile phone bills, send
money via atm, paying employee salaries using bank services.These services
very easy and gives a sense of security and comfort to those who use it.
4- Risk transformation
With risk transformation borrowers’ promises are converted into a single promise
by the bank itself. Depositors who hold the institutions’ liabilities must be able to
regard them as absolutely safe. Banks’ loans inevitably bear some risk.
Banks’ ability to transform these risky assets into riskless liabilities depends on
several factors :
they control risk by incorporating an allowance for probable losses
they spread risk to guard against the probability that loans to some
customers or categories of customers will lead to unusually heavy losses.
7. they ensure that their own capital is adequate to absorb any losses they
may incur through a failure to control risk properly
Different types of banks :
Banks can be divided according to
Types of banks
Function Scope
Ownership
o Commercial banks o National banks
o Investment banks o Private banks
o Public banks o International
o Retail banks
o Specialized banks banks
o Central banks o Multinational
banks
According to function:
Retail banks
Retail banks are banking in which banking institutions execute transactions
directly with consumers, rather than corporations or other banks. Services offered
include: savings and transactional accounts, mortgages, personal loans, debit
cards, credit cards, and so forth.
Investment Bank
A financial intermediary that performs a variety of services. This includes
underwriting, acting as an intermediary between an issuer of securities and the
investing public, facilitating mergers and other corporate reorganizations, and
also acting as a broker for institutional clients.
8. Investment banking isn't one specific service or function. It is an umbrella term for
a range of activities: underwriting, selling, and trading securities (stocks and
bonds); providing financial advisory services, such as mergers and acquisition
advice; and managing assets. Investment banks offer these services to companies,
governments, non-profit institutions, and individuals.
Specialized banks : are those banks which are specialized in serving a certain sector in
the economy as industry, agriculture & soon , examples of specialized banks :
Industrial Banks / Development Banks
Industrial / Development banks collect cash by issuing shares & debentures and
providing long-term loans to industries. The main objective of these banks is to
provide long-term loans for expansion and modernization of industries.
Land Mortgage / Land Development Banks
Land Mortgage or Land Development banks are also known as Agricultural Banks
because these are formed to finance agricultural sector. They also help in land
development.
Development Banks
Business often requires medium and long-term capital for purchase of machinery
and equipment, for using latest technology, or for expansion and modernization.
Such financial assistance is provided by Development Banks.
Central Bank
A bank which is entrusted with the functions of guiding and regulating the
banking system of a country is known as its Central bank. Such a bank does not
deal with the general public. It acts essentially as Government’s banker; maintain
deposit accounts of all other banks and advances money to other banks, when
needed. The Central Bank provides guidance to other banks whenever they face
any problem. It is therefore known as the banker’s bank. The Central Bank
maintains record of Government revenue and expenditure under various heads.
9. It also advises the Government on monetary and credit policies and decides on
the interest rates for bank deposits and bank loans. In addition, foreign exchange
rates are also determined by the central bank.
Another important function of the Central Bank is the issuance of currency notes,
regulating their circulation in the country by different methods. No other bank
than the Central Bank can issue currency . (this is only a brief note about the
central bank as it will be explained in more detail later)
Commercial Banks
Commercial Banks are banking institutions that primarily handle banking needs
for large and small businesses but it also accept deposits and grant short-term
loans and advances to their customers. In addition to giving short-term loans,
commercial banks also give medium-term and long-term loan to business
enterprises. Now-a-days some of the commercial banks are also providing
housing loan on a long-term basis to individuals. So commercial banks provide a
wide range of service whether to business or individuals , ex : Accepting Deposits ,
checks, loans, paying bills ….etc.
According to ownership
Public Sector Banks: These are banks where majority stock is held by the
Government so the government conducts most of the banking operations.
Private Sectors Banks:
bank owned by individual or small group ,a bank that is owned by a single person
or a limited number of private stockholders, bank for wealthy clients, meaning
that it provides banking facilities to high net worth individuals.
According to scope
International banking
Banking transactions crossing national ,Boundaries so this financial institutions
allow foreign clients---both companies and individuals---to use their services. As
these banks are beneficial for the Companies seeking to conduct business in
different countries set up accounts with international banks to facilitate
international transactions.
10. Multinational banks
Are banks that mange its operations & deliver its services in at least two
countries, for ex : Citibank open its offices in more than 90 countries around the
world.
Bank departments
Credit department
department in a bank that evaluates the financial condition of credit applicants
and maintains a log of loan payments on currently outstanding loans. Credit
information is gathered on a confidential basis and stored for future reference.
The credit department also responds to requests by other lenders for credit
information on a particular borrower.
Note:
In the past, credit departments have been responsible for handling mostly clerical
tasks and identifying obvious trends in companies' financial performance. Today,
credit analysts need to be responsible for more than a basic knowledge of
financial statement analysis. They should understand a prospective borrower's
operation, be knowledgeable about specific industries, and be able to determine
whether projected financial performance is realistic. An analyst should also be
able to identify appropriate loan structures and provide suggestions on
implementing terms and conditions, loan covenants, and loan monitoring.
The credit department should be an independent part of the credit approval
process. Senior managers should stress that loan officers bear the ultimate
responsibility for loan approval. The role of the credit department is to analyze a
credit request thoroughly and suggest how to improve the loan structure so that
it is an acceptable risk. However, it is the responsibility of the loan committee or
others with loan approval …
11. Establishing a written loan policy :
Establishing a written loan policy is an important technique to make sure that the
bank loans meet its regulatory standards as such policy gives the loan officers &
management specific guidelines in making loan decisions & in shaping the overall
loan portfolio, as the bank loan portfolio should reflect what its loan policy says ,
such policy may contain these elements :
1. A goal for the entire loan portfolio ( characteristics of good loan portfolio in
terms of types , maturities, size, & quality of loans) .
2. Operating procedures for soliciting , evaluating & making decisions on
customer loan applications.
3. The required documentation that’s required with each loan application &
what must be kept in the lender’s files ( financial statement , security agreements
…. Etc) .
4. Line of authority defining who is responsible for maintaining & reviewing
the institutions’ credit files.
5. Guidelines for taking , evaluating , & perfecting loan collateral.
6. Procedures for setting loan rates & fees & schedules for loan repayment.
7. Identifying limits for the total loan outstanding ( the maximum ratio of total
loans to total assets allowed).
8. Putting procedures for detecting & working out loan problem situations (
ex: loan failure).
Steps of the lending process:
1. Finding loan customers
12. Identifying loan customers can be performed by two ways whether by a direct
request from a customer to fill out a loan application or business loan requests
which arise from contacts the loan officers & sales representatives develop, ex:(
call center, advertisement) as lending game is becoming a sales position ,
sometimes the loan officer call on the same company for months before the
customer agree to fill a loan application & this is due the strong competition
between the banks in the market to attract customers.
2. Evaluating customer’s character & sincerity of purpose
Once a customer decides to request a loan so he will be forwarded to an
interview with the loan officer in order to give the customer an opportunity to
explain his or her credit needs at the same time this interview gives the officer an
opportunity to understand customer’s character & sincerity of purpose ,
As the interviewer should be an experienced person in order to be able to
understand the customer well .
3. Evaluating customer’s credit record
This step involves gathering information about the customers to evaluate his
credit record as this step can be executed by two ways :
a) loan officer may contact other creditors (banks) who had previously loaned
money to this customer to evaluate customer’s commitment to the loan ,
whether the customer was fully adhered to previous loan agreement .
b) The loan officer can understand the customer well through reviewing the
customer’s history from the CBE (note: CBE has records for all the customers who
were engaged in a loan agreement.
4. Evaluating customer’s financial condition
The customer is asked to submit crucial documents in order to evaluate the loan
request as these documents may include previous financial statement or
expected financial statements , the credit analysis division conduct a thorough
financial analysis in order to determine whether the customer has sufficient cash
flow , his business is profitable or not & the a brief summary & recommendation
is submitted to loan committee for approval .
5. Assessing loan collateral & sign loan agreement
Once the loan committee approves the customer request then the credit
committee or loan officer have to check other property or asset to be pledged,
13. then when both of loan officer & credit committee are satisfied so the loan
agreement is prepared & signed by all parties of agreement.
6. Monitoring compliance with loan agreement & other
customer service needs
The new agreement must be monitored continuously to ensure the terms of the
loan are being followed & all required payment of principle & interest are being
made as promised , as for large commercial credit the loan officer will visit the
customer’s business periodically to check on the firm’s progress & see what other
services the customer may need
5 C’s of Credit Analysis
Key to Credit Regardless of where you seek funding - from a bank, a local
development corporation or a relative - a prospective lender will review your
creditworthiness. A complete and thoroughly documented loan request (including
a business plan) will help the lender understand you and your business. The "Five
C's" are the basic components of credit analysis. They are described here to help
you understand what the lender looks for.
The 5C's
Capacity to repay is the most critical of the five factors, it is the primary source of
repayment - cash. The prospective lender will want to know exactly how you
intend to repay the loan. The lender will consider the cash flow from the business,
the timing of the repayment, and the probability of successful repayment of the
loan. Payment history on existing credit relationships - personal or commercial- is
considered an indicator of future payment performance. Potential lenders also
will want to know about other possible sources of repayment.
Capital is the money you personally have invested in the business and is an
indication of how much you have at risk should the business fail. Interested
lenders and investors will expect you to have contributed from your own assets
and to have undertaken personal financial risk to establish the business before
asking them to commit any funding.
14. Collateral, or guarantees, are additional forms of security you can provide the
lender. Giving a lender collateral means that you pledge an asset you own, such
as your home, to the lender with the agreement that it will be the repayment
source in case you can't repay the loan. A guarantee, on the other hand, is just
that - someone else signs a guarantee document promising to repay the loan if
you can't. Some lenders may require such a guarantee in addition to collateral as
security for a loan.
Conditions :describe the intended purpose of the loan. Will the money be used
for working capital, additional equipment or inventory? The lender will also
consider local economic conditions and the overall climate, both within your
industry and in other industries that could affect your business, to assess industry
& economic conditions most lenders maintain file of information, magazine article
& research report on the industry represented by by their major borrowing
customers
Character is the general impression you make on the prospective lender or
investor. The lender will form a subjective opinion as to whether or not you are
sufficiently trustworthy to repay the loan or generate a return on funds invested
in your company. Your educational background and experience in business and in
your industry will be considered. The quality of your references and the
background and experience levels of your employees will also be reviewed.
External operations department
Letter of credit
The letter of credit is a written commitment issued by a bank (called the source)
at the request of the buyer (applicant or order) in favor of the seller (beneficiary),
and is committed to the bank by which to fulfill within the limits specified amount
during a certain period when presented seller documents item identical to the
instructions accreditation requirements, and the Bank's commitment to fulfill in
cash or accept a bill of exchange.
The letter of credit is used to finance foreign trade, which represents in our time
frame, which is accepted by the other parties in entering the field of international
15. trade in order to preserve the interest of these parties are all exporters and
importers.
For the source, have a guarantee - by letter of credit - that will get the value
of the goods which have been contracted for export, and that immediately
after the shipment of the goods and documents to the bank, who have let
him think that the receipt of accreditation.
For the importer, it also ensures that the light of the adoption of the bank
will not pay the contractor the value of the goods imported only with the
documents of goods shipped an update to the conditions contained in the
letter of credit open to him.
And participate in the documentary credit four parties are:
First, the buyer: it is the request to open the credit, and credit is in the form of
contract between him and the light bank credit, and includes all the points
requested by the importer
Second: World Light Accreditation: is the bank which offers the buyer's request to
open the credit, where the study of demand, and in the case of approval and the
approval of the buyer on the terms of the bank, who opens credit and sends it
either to the beneficiary directly in the case of dependence simplex, or one of its
correspondents in the country seller in the case of post second bank in the
process of the documentary credit.
Third , Beneficiary: a source who is on the implementation of accreditation
requirements in the period of validity, and in the event that the notification based
enhanced from the correspondent bank in his country, the book reported to serve
as a new contract between him and the correspondent bank, and under this
contract receives the beneficiary price of the goods if the documents according to
the accreditation requirements.
Fourth, the correspondent bank: the Bank shall inform the beneficiary that the
text of the letter of credit given to him by the issuing bank for approval intervene
in cases where more than one bank in the implementation process of the
documentary credit, as is often, and this adds the correspondent bank.
16. Why use a Letter of Credit?
• The need for a letter of credit is a consideration in the course of
negotiations between the buyer and seller
• When the important matter of method of payment is being discussed.
Payment can be made in several
• different ways: by the buyer remitting cash with his order; by open account
whereby the buyer remits payment
• at an agreed time after receiving the goods; or by documentary collection
through a bank in which case the
• buyer pays the collecting bank for account of the seller in exchange for
shipping documents which would
• Include, in most cases, the document of title to the goods. In the
aforementioned methods of payment, the
• Seller relies entirely on the willingness and ability of the buyer to effect
payment.
• When the seller has doubts about the credit-worthiness of the buyer and
wishes to ensure prompt payment,
• The seller can insist that the sales contract provides for payment by
irrevocable letter of credit. Furthermore, if
• the bank issuing the letter of credit (issuing bank) is unknown to the seller
or if the seller is shipping to a
• foreign country and is uncertain of the issuing bank’s ability to honor its
obligation, the seller can, with the
• approval of the issuing bank, request its own bank — or a bank of
international repute
• to assume the risk of the issuing bank by confirming the letter of credit.
•
Step-by-step process:
• Buyer and seller agree to conduct business. The seller wants a letter of
credit to guarantee payment.
17. • Buyer applies to his bank for a letter of credit in favor of the seller.
• Buyer's bank approves the credit risk of the buyer, issues and forwards the
credit to its correspondent bank (advising or confirming). The correspondent bank
is usually located in the same geographical location as the seller (beneficiary).
• Advising bank will authenticate the credit and forward the original credit to
the seller (beneficiary).
• Seller (beneficiary) ships the goods, then verifies and develops the
documentary requirements to support the letter of credit. Documentary
requirements may vary greatly depending on the perceived risk involved in
dealing with a particular company.
• Seller presents the required documents to the advising or confirming bank
to be processed for payment.
• Advising or confirming bank examines the document for compliance with
the terms and conditions of the letter of credit.
• If the documents are correct, the advising or confirming bank will claim the
funds by:
o Debiting the account of the issuing bank.
o Waiting until the issuing bank remits, after receiving the documents.
o Reimburse on another bank as required in the credit.
Advising or confirming bank will forward the documents to the issuing bank.
Issuing bank will examine the documents for compliance. If they are in order, the
issuing bank will debit the buyer's account.
• Issuing bank then forwards the documents to the buyer.