Importance and Different Types - Bank instruments

1. Bank instruments – Their Importance and Different Types

3. Bank instruments are the letters ensured by the bank for a successful completion of the commitment made to the clients for future transaction. • Investment in bank instruments can be done in import as well as in export business. Banks work as guarantors of the transaction because bank instruments are utilized by exporters as well as importers. • Bank instruments are one of the major financing options available to Banks, to assist their clients engaged in trade and commerce. • Bank instruments are used by exporters and importers because the banks function as guarantors of the transaction. When an importer purchases a specific amount of goods, the bank would pay the exporter for it if the bank is satisfied with the documentation that the exporter shows.

4. You get world acceptance of the collateral if you obtain an instrument issued by top banks along with lots of greater flexibility because of securing proper funding for any kind of international or cross border business activities. There are a lot of benefits of banking instruments and these are crucially important. The importance of banking instruments: • You can either import or export • It can be considered as the collateral for project finance • You can purchase bank instruments or Bank Debenture • You can use it as the other Credit Enhancement

6. Commodity Market • Commodity market is a place where transaction of business occurs between all kinds of commodities. Commodities market instruments is a way for investors to "diversify" their funds and make their financial portfolio look better. • There is no doubt that Financial instrument monetization is simply the process of liquidating different instruments or assets into legal tender. But: You should know following things before making decisions to monetize any financial instruments

7. The types of instruments: • Standby Letter of Credit or SBLC • Letter of Credit or LOC • Bank Guarantee or BG • Certificate of Deposit or CD • SWIFT MT799 • SWIFT MT760 Bank instruments comes with two types of Guarantees

8. Performance Guarantee: • This type of guarantee, relates to the performance. In this type of guarantee, the Bank ensures the performance of the contract by its customer, on whose behalf it has issued the guarantee. • This type of guarantee is beneficial to the importer because they protect them when the exporter does not fulfill its obligations. These guarantees are generally given to non for profit organizations, or socially oriented businesses or institutions. Financial Guarantee:

9. This type of guarantee relates to money, as against performance. In this type bank agrees to comply with the request of its client, subject to certain conditions, as per Bank policies. • Under this guarantee, the Bank ensures to make good payment, on behalf of its client to a third party. These types of bank guarantees make sure that the importer makes the payments for the merchandise it has received on a timely basis.