Non-fund Based, Modern financial Activities

29/12/2020 1 By indiafreenotes

Bank guarantees

Bank Guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. Commercial Bank sanctions Bank Guarantee limit to facilitate issue of guarantees on behalf of its clients. Various types of guarantees offered are, financial, performance, bid bond, tenders, customs, etc. Our guarantees are accepted by all government agencies including Customs, Excise, Insurance Companies, Shipping Companies, all Capital Market Agencies such as NSE, BSE, ASE, CSE etc. and all major corporates.

Letters of Credit

Letter of credit is a legal document issued by a buyer’s bank that upon presentation of required documents payment would be made. Usually confirmed by the seller’s bank, protection is given to the seller that payment will be made if the goods are shipped correctly, following the conditions laid down when the LC is opened or based on subsequent amendments and protection is given to the buyer that the goods will be shipped before payment is made.

The LC facility can be granted to the importers after assessing their requirement/ credit worthiness/ financial strength and other parameters being to the satisfaction of the Bank.

Commercial Bank can extend Import financing through Letters of Credit, which are well accepted globally and are supported by a strong trade finance set-up. We are direct members of SWIFT and have correspondent banking arrangements with many banks worldwide.

Co‑acceptance of Bills

  • Limits for co‑acceptance of bills will be sanctioned by the banks after detailed appraisal of customer’s requirement is completed and the bank is fully satisfied about the genuineness of the need of the customer. Further customers who enjoy other limits with the bank should be extended such limits.
  • Only genuine trade bills shall be co‑accepted and the banks should ensure that the goods covered by bills co‑accepted are actually received in the stock accounts of the borrowers. The valuation of goods as mentioned in the accompanying invoice should be verified to see that there is no overvaluation of stocks.
  • The banks shall not extend their co‑acceptance to house bills/ accommodation bills drawn by group concerns on one another.
  • Before discounting/purchasing bills co‑accepted by other banks for Rs.2 lakh and above from a single party, the bank should obtain written confirmation of the concerned controlling office of the accepting bank.
  • When the value of total bills discounted/purchased (which have been co‑accpeted by other banks) exceed Rs.20 lakh for a single borrower/ group of borrowers prior approval of the Head Office of the co‑accepting bank shall be obtained by the discounting bank in writing.
  • Banks are precluded from co‑accepting bills drawn under Buyer’s Line of Credit schemes of financial institutions like IDBI, SIDBI, PFC etc. Similarly banks should not co‑accept bills drawn by NBFCs. Further, banks should not extend co‑acceptance on behalf of their buyers/constituents under the SIDBI scheme.
  • However, banks may co‑accept bills drawn, under Seller’s Line of Credit schemes for Bill Discounting operated by the financial institutions like IDBI, SIDBI, PFC etc. without any limit subject to buyer’s capacity to pay and the compliance with exposure norms applicable to the borrower.
  • Where banks open L/C and also co‑accept bills drawn under such L/C, the discounting banks, before discounting such co‑accepted bills, must ascertain the reason for co‑acceptance of bills and satisfy themselves about the genuineness of the transaction.
  • Co‑acceptance facilities will normally not be sanctioned to customers enjoying credit limit with other banks.

Operational aspects of IDBI bills rediscounting scheme have already been discussed and similar procedure shall be adopted while allowing co acceptance facilities which are not covered under the scheme. Important operational aspects in respect of letter of credit facilities and issuance of guarantees will be discussed in this chapter.

Collection of Documents

  • Better turnaround time through timely processing of your documents
  • Facilitating faster payments
  • Lower cost
  • Excellent trade support
  • Arrangement of credit reports of overseas parties

Modern Activities of Financial Services

  • Merger and acquisition planning and helping with their smooth carry out.
  • Providing guidance in capital reconstructing to corporate customers.
  • Assisting in rehabilitation and reconstruction of sick companies.
  • Portfolio management of large public sector corporations.
  • Providing recommendations in management style and structure for attaining better results.
  • Acting as trustees to the debentures-holders.
  • Providing project advisory services ranging from project preparation to capital raising.