A

PROJECT REPORT

ON

“ROLE OF BANKS IN INTERNATIONAL TRADE.”

SUBMITTED

To

CENTRE FOR ONLINE LEARNING

Dr. D. Y. PATIL VIDYAPEETH, PUNE

IN PARTIAL FULFILMENT OF DEGREE OF

MASTER OF BUSINESS ADMISTRATION

BY

MR. SANKET PRAKASH PEDHAMBKAR

PRN: 22116382

BATCH
2021-2023

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 COMPANY LETTER

D
E
C
L
A
R

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 DECLARATION

This is to declare that I have carried out this project work myself in part fulfillment of the M.B.A

Program of Centre for Online Learning of Dr. D.Y. Patil Vidyapeeth’s, Pune – 411018

The work is original, has not been copied from anywhere else, and has not been submitted to

any other University / Institute for an award of any degree / diploma.

Date: - Signature: -

Place: Name: Mr. Sanket Prakash Pedhambkar

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 ACKNOWLEDGEMENT

I wish to express my sincere gratitude to Prof. Prajakta Kulkarni for providing me an

opportunity to do my project work in ““Role of Bank in international trade””. I also wish to

express my gratitude to the officials and other staff members of “Indian Bank” who rendered

their help during the period ofmy project work.

I would also like to extend my gratitude to Dr. Safia Farooqui the Director of Dr. D. Y.

Patil Vidyapeeth Center for Online Learning for providing me the opportunity to embark on this

project. My sincere thanks to Prof. Vishakha Kuwar for guiding all the time for project.

Finally, I would like to thank my parents and friends who helped me a lot in finishing this

project.

Mr. Sanket Prakash Pedhambkar

Sign

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 INDEX

Sr No Topic Page No.

1 Executive Summary 7

2 Introduction 10

3 Research Methodology 38

4 Literature Review 41

5 Data Analysis & Interpretation 53

6 Conclusion 65

7 Suggestions 67

8 Webliography & Bibliography 68

Annexure 69

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 CHAPTER 1

EXECUTIVE SUMMARY

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 EXECUTIVE SUMMARY

This project work has critically highlighted the compact of the

Role of Banks International Trade, the problems affecting the
Role in Banks in international trade have been identified and how
they can be controlled is also includes in thestudy and ways to
solve them are inductive in the study.

The work is organized into chapters to easy comprehension and

deduction. Chapter one deals with the introduction, Background,
statement of problems,purpose / objective of the study,
significance of the study, limitations of the study and the
definition of terms.

Chapter two involves a review of related literature, international

trade, roles,risk factor in international trade, major problems,
trade restriction major andinternational trade problems. This
chapter also treat, the important of international trade, and some
underline issues towards the international tradeproblem in.

This project report explores the pivotal role that banks play in
facilitating international trade, emphasizing their critical
functions and the impact on global commerce. International trade
is the backbone of the global economy, and banks serve as key
intermediaries, providing a range of services and financial
instruments to facilitate cross-border transactions.

The global economy thrives on international trade, with

businesses across the world engaging in cross-border transactions
to exchange goods and services. The role of banks in facilitating
and supporting these transactions is pivotal. This executive
summary provides an overview of the comprehensive project
report on the role of banks in international trade.

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8
 CHAPTER 2

INTRODUCTION

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 INTRODUCTION

2.1 CONCEPTUAL FRAMEWORK

The invention of internet influenced banking sector also. Internet totally

changed the face, figure and the personality of the bank! Internet has
challengedthe physical identity of Banks. Banking has broken the shackles of
time and place, as internet has made banking possible 24hours in every corner
of world! Banks are now not big or small by building and banks are now not
the meter of few and fix hours of services. The world is changing at a
staggering rate and technology is considered to be the key driver for these
changes around us. An analysis of technology and its uses shows that it has
permeated in almost every aspect of our life. Many activities are handled
electronically due to the acceptance of information technology at home as
well as at work place. Slowly but steadily, the Indian customer is moving
towards the internet banking.
Internet Banking transactions are slowly taking over the Physical Banking
Transaction happening at the counters. Customer always looks for simplicity
and ease in any service he wants to avail and the banking sector is matching
its steps to the march of technology to make financial life easy for its
customers. E-banking or Online banking is a generic term for the delivery of
banking servicesand products through the electronic channels such as the
telephone, the internet,the cell phone etc. The concept and scope of ebanking
is still evolving. It facilitates an effective payment and accounting system
thereby enhancing the speed of delivery of banking services considerably.
Several initiatives have been taken by the Government of India as well as the
RBI (Reserve Bank of India); have facilitated the development of e-banking in
India. The government of India enacted the IT Act, 2000, which provides
legal recognition to electronictransactions and other means of electronic
commerce. The RBI has been preparing to upgrade itself as regulator and
supervisor of the technologically dominated financial system. It issued
guidelines on the Chapter 1: Conceptual Framework 4 risks and controls in
computer and telecommunication systems to all banks, advising them to
evaluate the risks inherent in the systems and put in place adequate control
mechanisms to address these risks. The biggest inventionis the invention of
internet. The invention of internet changes the personality of bank and
banking. It gives the modern touch to the banking services and it carries
number of other possibility of modern banking with it.

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International trade ensures export expansion and import contraction coupled
with the fact that it stimulates foreign exchange earnings, international
recognition and the provision of employment opportunities for the teeming
population.

International trade is synonymous with the production of goods and services for
the benefit of trade across the country. Thus we have the banking institution, the
food processing export/import trade and the sugar, tobacco export/import trade
and that of petroleum export trade is not left behind. Therefore, international
trade or external trade is a trade between two or more countries.

International trade does not mean the exchange of goods and services within a
country. The exchange of goods and services among the people of the same
country is called home or internal trade.

External trade is established for the purpose of stabilizing nation’s economy

standard of living. External trade has been proved beyond doubts as very
important for a nation’s survival therefore it is prevented that we explicably
manifest how the role of banks can be employed for the development of these
trade. In doing this, we will limit our study to short- and long-term scale
institutions which are very important to the economy.

Short term scale institutions as defined by the central bank credit guidelines is,
any service enterprise whose annual business turnover does not exceed
500,000.00 (five hundred thousand).

There is no definition for long term scale institutions as these did not attract the
direct emphasis of the CBN.

The role of banks in international trade development of Nigeria, could be seen

through the various services which these banks provide for the sustenance of
international trade in the country.

These services include the provision of capital for these exporter/importers in

the business inform of loans, such as short term loans, medium and long term
loans, which the traders could use to finance their business goals. The banks
also provide overdraft facilities, which are necessary to finance the working
capital of the business.

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An overdraft could be defined as an arrangement whereby the banks allow their
customers to over-draw his account up to a credit position at the end of the
period, while short term loans refer to loans granted for periods between one to
five years. Then medium- and long-term loans are granted for periods between
five to ten years, even ten years respectively.

Apart from granting loans and over drafts facilities, there are still other roles
which banks could play in international trade development in Nigeria. These
roles include professional advice, opening of documentary letters of credit
(L/CS), bills for collection and negotiation/open account and bills of exchange,
foreign exchange example travelers cheques and foreign currencies,
information on trade and exchange restrictions, collection and transfer of funds
status enquires, etc. above all the determination of the actual external funds
required by an export/import borrower. There are accepts of such services
which help international trade growth or expansion.

It is not for fetched that the exporters/importers of international trade suffer

their own bank problems, which should be analyzed and solved to ensure
international trade development. These problems such as the problem of
corruption in banking parastatals, obtaining capital from and operational
problems which are coursed by the dictates of the Nigeria environment and
society.

The irrational problem of manpower requirement and the poor knowledge of

trade across these external traders help to compound the general problems of
international trade development of which bank services can be gainfully
employed for the purpose of solving them.

Addition to the problems is loss of trust ship among the members or cooperators
of the trade fraudulent acts among members. In all, these problems the worst is
the problems of unstable political contradictions. These problems should be
totally exterminated by the government, and the society entirely to ensure the
steady growth of this important sector of the business of the economy.

In increasing this level of their financing emphasis should be placed on medium

and long term loans to enable these traders concretize their investments for
better results in its outputs; though the commercial banks borrow short from
their deposits, the commercial banks who also declare excess profits at the end
of each year should expand a lending pattern for medium and long terms loans
without adversely affecting their liquidity ratios.

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With the funds available from the banks, international traders should be made to
judiciously invest them and with other important a sound, solid firm and
concrete foundation must be laid for the international development of the
country.

DEFINITION OF TERMS

(a) International Trade: As described by the Author, Norbert M Ile in his

published test “Economics of business studies” (1999, P. 278) defines an
international trade or external trade as “a trade between two or more countries;
it is the exchange of goods and services between two or more countries”.

(b) Banking Institution: We can define a bank as any organization that handles
people’s money. It is a dealer in debts, but indebtedness has a correlation to
wealth and hence, a bank can be described as a liquefier of wealth.

(c) Role: It is defined as “actors in a play; person’s task or duty in undertaking.

(d) Foreign Exchange: This is a process by which a country exchanges its

goods/services to another country’s goods/services.

(e) Overdraft: This is a system whereby a customer drawn more money than he
has to his credit in a bank.

(f) Economy: It is a system of control and management of the money goods and
other resources of a society.

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 2.2 ROLE OF BANKS IN STRENGTHENING INTERNATIONAL

TRADE

International Trade shapes our everyday lives and the world we live in. In
nearly every instance that we make a purchase or sale, we are participating
in the global economy. Whole products and or their component parts come
to our store shelves from all over the world. Most international trade
consists of the purchase and sale of industrial equipment, consumer goods,
oil and agricultural products. Services such as banking, insurance,
transportation, telecommunications, engineering and tourism account for
one-fifth of the world global trade.

The current situation obtaining in Zimbabwe thus calls for increased participation in
international trade by local players, particularly by exporters. With the country
operating without its own currency, the sources of the liquidityin the country comes
largely from trading with the rest of the world. It is therefore important to
understand how the resources flowin international trade and how policies can be
tailor made so that the country is in a position to generate as much revenue as
possible for the benefit of our multicurrency system. With the structure of the
economy fast changing and the informal sector leading in the productive system it is
important that the players in this sector understand and adapt to the use of the
banking system to affect their international payments andreceive payments from
their foreign buyers.

Banks are important facilitators of international trade. Besides providing liquidity

they guarantee payment for around a fifth of world trade. The bankingsector thus
plays an important role in international business. Today, almost all Banks have
formed collaborative alliances and established correspondent banking relationships
withBanks in other countries to better serve their international business community.
Banks play a key role in forming a bond oftrust between buying and selling agents
executing transactions in internationalmarkets. Local Banks have intermediary
Banks outside the country, which assist in effecting international payments hence
the receipt and payment for goods and services by local people.

Banks play a pivotal role in foreign trade through the provision of the financial
structure and instruments necessary for the conduct of business transactions
between foreign buyers and sellers. Banks ensure safety and transparency in theflow
of documents and money. Buyers (importers) of goods from abroad, the sellers
(exporters) will want to be assured of payment, and as a buyer one wouldwant
assurance that all terms and conditions of the purchase agreement are kept.

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This requires then that the Banks come in to broker an agreement and work asan
intermediary between the importer and the exporter.

Banks play a major role by providing assistance in many ways to facilitate

International Trade business which encompasses financing working capital
requirements, financing capital goods, identification of potential markets for
International Trade, identification of buyers and sellers, facilitating payment for
International Trade transactions, issuing Import Letters of Credit, pre an post
shipment financing and guaranteeing payment under Letters of Credit issued by
other Banks.

The most common instrument used for payment and shipment control is a letterof
credit issued by the bank of the buyer in favor of the seller. After the Bank of the
buyer approves the issuance of the letter of credit, the issued letter of credit is sent
to the advising bank that establishes the authenticity of the instrument andinforms
the beneficiary of receipt. The advising bank may confirm the letter ofcredit after
checking the terms and conditions for payment by adding its own guarantee to that
of the issuer. Commercial Banks facilitate trade and the payment of funds through
documents. After all of the terms and conditions for shipment and quality standards
have been checked via the presentation of proper documentation, theissuing bank
pays the seller for the goods.

The Post Shipment facility provides short-term financing to exporting

manufacturers, distributors and service providers. Businesses receive financingin
the form of a loan equivalent to invoice value of export sales, which must berepaid
from the assigned proceeds of payments. The Post Shipment facility aims to bridge
the gap between the settlement of production costs and export sales receipts,
allowing a business to acceleratecash flow and shorten operating cycles. The
advantages of this financing mechanism are that the exporter’s working capital cycle
is shortened thereforeallowing for increased production levels and exporters are able
to convert a credit sale into a cash sale, thereby freeing up their capital for further
exports. Pre-shipment financing is a short-term loan or direct financing that a
commercial bank extends to an approved company to assist in the payment of
inventory, may it beraw materials, semi-finished or finished products. Once goods
are received, the exporter can now prepare products for local sale or export. The
Pre-Shipment Facility is offered at competitive rates and is designed for trade
transactions thatare short-term and self-liquidated. Advantages associated with this
type of financing include; the company is offered credit terms so that it can add
flexibility to its cash flow and thereby manage the business more efficiently;
provides extra time for the goods to clear customs and be resold before you need to
pay for thegoods and also suppliers are assured payment upon request from the
exporter.

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 2.3 ROLE OF COMMERCIAL BANKS IN INTERNATIONAL
BUSINESS
Banking section plays important role in international business. Today almost all
major banks have offices in major cities around the world. Many banks have formed
collaboration with banks in other countries to better serve their international
business community. Banks form a bond of trust between buying and selling
transactions in international market. For individual banks offer services like foreign
exchange, traveler’s check, electronics transfer. For businesses bank plays a role of
trusty agent by offering services like “Documentary Collection” and “Letter of
Credit”. One of the problem international businesses encountering doing business
internationally is
lack of trust. With the help financial devices commercial banks are able for a bond
of trust between international buyers and sellers. In commercial methods like
„Commercial Collection‟ and „Letter of Credit‟ banks act as agents to handle
payments as well as relevant documents. Letter of Credit is
most wide acceptable and used method of doing international transactions. Some
banks and government agencies offer export credit insurance to businesses. In some
cases, exporter has to forgo a letter of credit, in such cases banks offer export credit
insurance.

Foreign exchange market is another area where international commercial banks play
vital role. Foreign exchange market serves two main functions, convert the currency
of one country into the currency of another and provide some insurance against
foreign exchange risk. Multinational corporations constantly need various
currencies for their operations and to hedge against foreign exchange risk.
International banks provide foreign exchange services to their commercial business
clients to complete their business transactions. These banks act as a broker between
commercial customer and foreign exchanges around the world. International
businesses receive payments in
foreign currencies for their export, the income it receives from foreign investments
and income received from licensing agreements with foreign firms.

Many commercial banks offer short as well as long term loan financing to
international businesses. Many countries have form banks backed by
government funding’s to provide funding’s for exporters and importers. In United
States, Export-Import bank, an independent agency of the US government, provides
financial aid to facilitate export and import of goods. INDIAN bank also guarantees
repayment of loans US commercial banks make to foreign borrowers for purchasing
US exports.

Banking sector plays vital role of catalysts in international market. Due to

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technology advances in banking sector, communication gap and delays in
international business have really narrow down a lot. Commercial banks do not
create money--they are simply the intermediaries that move money from the capital
markets to businesses and institutions. Banks get their money through business
checking or deposit accounts, service fees and by issuing certificates of deposit
(CD) and banker's acceptances--money market instruments that are collateralized by
letters of credit (LOC) used in trade finance--and commercial paper. Commercial
banks offer services such as trade finance, project finance, payroll, foreign exchange
transactions and trading, lock boxes for collecting payments and general corporate
finance.

Significance

Without commercial banks, the international finance and import-export industry

would not exist. Commercial banks make possible the reliable transfer of funds and
translation of business practices between different countries and different customs
all over the world. The global nature of commercial banking also makes possible the
distribution of valuable economic and business information among customers and
the capital markets of all countries. Commercial banking also serves as a worldwide
barometer of economic health and business trends.

Foreign Branch Banking

Some small commercial banks limit their reach to the local business community; but
as business has gone global, so have commercial banks. Large banks such as
Citigroup, Bank of America and Chase are retail (consumer) banks that also
maintain full commercial banking activities in the United States with branches in
many countries. These larger banks may act as affiliates of smaller banks that do not
have branch presences in other countries. Through foreign branch banking, U.S.
based multinational companies can consolidate their financial business at a single
bank that handles their trade finance, currency transactions, project loans, payroll,
cash management investments and deposit accounts throughout the world.
Commercial banks also arrange deals between their customers globally, including
strategic partnerships and project fulfilment agreements.

Trade Finance

Commercial banks doing international business are also called merchant banks
because they finance trade between companies and customers located in different
countries. This is done by issuing LOCs that indicate the customer has deposited the
full amount due on an order with a company located in a different country. The

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seller company can then feel assured of being paid if it ships goods to its offshore
customer. The LOC may also be used by the company to guarantee a manufacturer's
loan, allowing it to finance the manufacture of the goods to be delivered. Without
LOCs, companies would face considerable expense in investigating their foreign
customers to make sure they are legitimate and creditworthy, and complying with
laws and regulations of the different countries in which they do business.

Foreign Exchange

In order to facilitate international trade and development, commercial banks convert

and trade foreign currencies. When a company is doing business in another country
it may be paid in the currency of that country. While some of these revenues will be
used to pay workers in that country and for administrative expense such as office
rent, utilities and supplies, the company may need to purchase goods from a
neighboring country in that country's currency, or convert cash to its native currency
for return to the home office.

Corporate Finance

Companies always need to borrow money to cover purchases of raw materials,

machinery parts, inventory and/or payroll. Banks with overseas branches or
affiliates can simplify the process of corporate finance throughout a company's
organization by consolidating the transaction procedures, reporting and record
keeping. It is much easier for a company manager to do business in her own
language with a banker located nearby who handles her global business finance
needs than it would be for her to develop banking relationships in every country
where she does business. Her international commercial bank can also provide
referrals to professional service firms in other countries, as well as arrange
introductions to other companies appropriate as customers or for strategic
partnerships.

Miscellaneous Banking Services

Corporate checking accounts, currency specific credit cards and lock boxes are also
offered by commercial banking to help make foreign trade possible for a company.
Lock boxes are particularly helpful for collecting payments from overseas
customers and reporting receipts daily for cash management purposes. Currency-
specific credit cards are also important in eliminating the cost of cross currency
purchasing, which normally is done at expensive valuation levels.

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 2.4 INTERNATIONAL TRADE FINANCE PRODUCTS

A: Banker’s Acceptance:

Since centuries, banker’s acceptance (BA) has been widely used in financing
international trade. BA is the time draft or bill of exchange drawn on and
accepted by a bank. By „accepting‟ the draft, the bank makes an unconditional
promise to pay the holder of the draft the specified amount of money on maturity.
Thus, the bank effectively substitutes its own credit with that of a borrower. BA is a
negotiable instrument that can be freely traded the bank buys (discounts) the BA
and pays the drawer (exporter) a sum less than the face value of the draft followed
by selling (rediscounting) to an investor in the money market. The discount reflects
the time value of money.
The bank makes full payment at maturity to the investor who presents it.
Banker’s drafts by definition are time drafts with varying maturity of 30, 60, 90, or
180 days. The fee charged by the accepting bank varies, depending upon the
maturity period and the creditworthiness of the borrower.

B: Discounting:

Exporters can convert their credit sales into cash by way of „discounting‟ the draft
even if it is not accepted by the bank. The draft is discounted by the bank on its face
value minus interest and commissions. The discounting may be
“with” or “without” recourse.
If the importer fails to pay, the bank can collect from the exporter in case of
“With recourse” discounting, whereas the collection risk is borne by the bank in
case of “without recourse” discounting. Usually, the discounting rates are lower in
many countries including India than other means of financing, such as loans,
overdraft, etc., mainly due to government’s export promotion
schemes and subsidies.
C: Accounts Receivable Financing:

In an open account shipment or time draft, goods are shipped to the importer
without assurance of payment from a bank. Banks often provide loans to the
exporter based on its creditworthiness secured by an assignment of the accounts
receivables.
The exporter is responsible for repaying the loan to the bank even if the importer
fails to pay the exporter for whatever reasons. Usually, the period of such financing
is one to six months. As additional risks such as government control and exchange
restrictions are involved in case of foreign receivables, banks often insist upon
export credit insurance before financing.

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D: Factoring:

Factoring is widely used in short-term transactions as a continuous arrangement. It

involves purchase of export receivables by the factor at a discounted price, i.e.,
generally 2 per cent to 4 percent less than the full value.
However, the discount depends upon a number of other factors such as the type of
product, terms of the contract, etc.

Generally, factors advance up to 85 per cent of the value of outstanding invoices.

The factoring service may be undertaken by the factor with recourse to the seller,
wherein the exporter remains exposed to the risk of non-payment by the importer.
Besides, the factoring may be without recourse, wherein the factor assumes the
credit and non-payment risks.

The operation of export factoring is depicted in Fig. 15.10, which involves the
following steps:

i. The importer and exporter enter into a sales contract and agree on the
terms of sale (i.e., open account)
ii. The exporter ships the goods to the importer
iii. The exporter submits the invoice to the export factor
iv. The export factor pays cash in advance to the exporter against receivables
until the payment is received from the importer
v. However, the exporter pays interest to the factor on the money received or

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 the factor deducts commission charges before making payment to the
exporter.
vi. The export factor transfers the invoice to the import factor that in turn
assumes the credit risks and undertakes administration and collection of
receivables.
vii. The import factor presents the invoice to the importer on the due date for
payment.
viii. The importer makes payment to the import factor.
ix. The import factor in turn pays to the export factor (8).

Benefits to exporters:
The benefits of using a factoring service for the exporter are:

1. It facilitates expanding sales in international markets by offering prospective

customers the same terms and conditions as local competitors.
2. It facilitates immediate payment against receivables and increases working
capital.
3. Tasks related to credit investigations, collecting account receivables from the
importer, and providing other book-keeping services are carried out by the
factors.
4. In the event of buyer’s default or refusal to pay, factors assume credit risk
5. Factoring often serves as a good substitute for the bank credit especially when
the bank credit is either uneconomical too restrictive.

Besides, factoring is also beneficial for the importers as it:

1. Increases their purchasing power without drawing on bank credit lines

2. Facilitates procurement of goods with little hassles

E: Forfeiting:

The term „forfeiting‟ is derived from the French word for fate, which means to
relinquish or surrender the rights. Thus, forfeiting refers to the exporter
relinquishing his/her rights to a receivable due at a future date in exchange for
immediate cash payment at an agreed discount, passing all risks and the
responsibility for collecting the debt to the forfeiter.

Forfeiting is particularly used for medium-term credit sales (1 to 3 years) and

involves the issue of a bill of exchange by the exporter or promissory notes by the
buyer on which a bank and the buyer’s country guarantee payment.
Forfeiting is the discounting of receivables, typically by negotiating bills drawn

21
under an L/C or co-accepted bills of exchange. Generally, forfeiting is applicable in
cases where export of goods is on credit terms and the export receivables are
guaranteed by the importer’s bank.

This allows the forfeiting bank to buy the risk “without recourse” to the exporter.
The financing terms mainly depend on the country risk of the buyer, size of the
contract, financial standing of the L/C opening bank or guarantor bank. By
forfeiting, the exporter surrenders without recourse the right to claim for payment of
goods exported in return for immediate cash payment. As a result, an exporter can
convert a credit sale into a cash sale, on a no-recourse basis.

Thus, forfeiting is a mechanism for financing exports:

1. By discounting export receivables evidenced by bills of exchange or

promissory notes
2. On a fixed rate basis (discount)
3. Without recourse to the exporter
4. Carrying medium-to long-term maturities (usually over 120 days)
5. Up to 100 per cent of the contract value

Avalisation (co-acceptances):

Avalisation or co-acceptance is a means of non-fund-based import finance whereby

a bill of exchange drawn by an exporter on the importer is co-accepted by a bank.
By co-accepting the bill of exchange, the bank undertakes to make payment to the
exporter even if the importer fails to make payment on due date.

Operation of a forfeiting transaction:

Receivables under a deferred payment contract for export of goods, evidenced by
bills of exchange or promissory notes (pro notes), can be forfeited. Bills of
exchange or promissory notes backed by avalisation (co-acceptance) of the
importer’s bank are endorsed by the exporter, without recourse, in favor of the
forfeiter in exchange for discounted cash proceeds.
Some transactions are taken without such a guarantee or co-acceptance, provided
the importer is of an acceptable standing to the forfeiter. The operation of a
forfeiting transaction is briefly discussed below.

Step 1: Pre-shipment stage:

1. As the exporter is in the process of negotiating a contract with the overseas

buyer, s/he provides the bank the following details to enable it to give an
“indicative quote”:

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 1. Name and full address of the foreign buyer
2. Details of goods (quantity, base price, etc.)
3. Amount of the contract
4. Number and expected dates/period of shipments
5. Security-banker’s name (under L/C or bills of exchange availed by bank)
6. Repayment schedule
7. Country to which exports are to be made.

2. Based on the details provided, the bank contacts the forfeiting

agencies/INDIAN banks, who are given an indicative quote with details of
discounting cost, commitment fees, etc.
3. After confirming that the terms are acceptable, the exporter informs the bank,
who accordingly calls for the final quote.
4. After confirming acceptance of the forfeiting terms to the bank, the exporter
signs off the commercial contract with her/his buyer. The contract must
provide for the buyer to furnish avalised bills of exchange. Simultaneously, a
forfeiting contract is entered into with the forfeiting agency through the bank.
5. Once the forfeiting contact is duly signed, the bank issues the following
certificates.

a. A certificate giving permission to the exporter to remit commitment

fees
b. A certificate showing the discount payable by the exporter to the
forfeiting agency to enable them to declare the same on the GR form.
Otherwise, the customs clearance of the goods would be held up.

Step II: Post-shipment stage:

i. On shipment of goods, the exporter presents the documents to the bank

who in turn forwards them to the buyer or buyer‟s bank. The set of
documents being forwarded must contain the bills of exchange for the
total amount (inclusive of the forfeiting cost, drawn on the importer or
importer‟s bank).

ii. The importer‟s bank would accept, co-accept, or avalise the bill of
exchange and send it back to the exporter‟s bank.

iii. The exporter‟s bank would ensure that the bill of exchange is
endorsed „without recourse‟ in favour of the forfeiting agency.

23
 iv. After checking the documents, the forfeiter would deposit the forfeited
proceeds in the specified account.

v. The bank after checking the proceeds would issue a foreign inward
remittance certificate (FIRC) and the GR form.

Costs involved in a forfeiting transaction:

A forfeiting transaction generally has three cost elements.

Commitment fee:

The commitment fee is payable by the exporter to the forfeiter for his/her
commitment to execute a specific forfeiting transaction at a discount.
Generally, the commitment fee ranges from 0.5 per cent to 1.5 per cent per
annum of the utilized amount to be forfeited. Besides, the commitment fee is
payable regardless of whether or not the export contract is ultimately
executed.

Discount fee:

It is the interest payable by the exporter for the entire period of credit
involved and is deducted by the forfeiter from the amount paid to the exporter
against the availised promissory notes or bills of exchange.
The discount fee is based on the market interest rates as determined by the
prevailing London Inter-Bank Offered Rate (LIBOR) for the credit period and
the currency involved plus a premium for the risk assumed by the forfeiter.
The discount rate is agreed upon at the time of executing the contract for
forfeiting.
Documentation fee:

Generally, no documentation fee is incurred in a straight forfeit transaction.

However, a documentation fee may be levied in case extensive
documentation and legal work is required.

Benefits to the exporter:

The major advantages of forfeiting to exporters are summarized below:

I. In India, post-shipment finance extended by bankers is limited to 180

days at subsidized rates. The exporter converts a deferred payment

24
 export into a cash transaction, improving liquidity and freeing the
balance sheet of debt, thus also improving leverage.

II. Forfeiting frees the exporter from cross-border political risks and
commercial risks associated with export receivables. There is no
contingent liability in the balance sheet of the exporter.

III. As forfeiting offers "without recourse" finance, it does not impact the
exporter’s borrowing limits. It represents an additional source of
finance, outside working capital limits, providing a convenient option
if funded limits are not sufficient.

IV. Since it is fixed rate finance, it hedges against interest and exchange
risks arising out of deferred export payments.

V. The exporter saves on insurance costs as forfeiting obviates the need

for export credit insurance.

VI. Forfeiting is transaction-specific as the exporter need not have a long-

term relationship with the forfeiting agency abroad.

VII. There is simplicity of documentation as the documents being submitted

are readily available with the exporter.

VIII. Forfeiting is not bound by any retention percentages. It offers 100 per
cent financing and there is no restriction on the type, condition, or age
of the products.

F. Letters of Credit:

One of the oldest forms of international finance is still used in international

transactions. The issuing bank undertakes a written guarantee to make the payment
to the beneficiary, i.e., the exporter, subject to the fulfilment of its specified
conditions. In the process, a debt relationship exists between the issuing bank and
beneficiary. Terms credit is often used as financing instrument for the importer who
gets delivery of the goods without making payment to the exporter.

G. Counter-Trade: Counter-trade is used to combine trade financing and price

setting in one transaction. It involves various forms of reciprocal transactions such
as barter, clearing arrangements, switch trading, counter purchase, buy-back, and

25
off-set. Counter-trade finances imports in form of reciprocal commitments from
countries that have payment problems, especially in hard currencies.

2.6 MODES OF PAYMENT IN INTERNATIONAL TRADE

• Advance Payment:

Under this, the payment is remitted by the buyer in advance, either by a draft mail
or telegraphic transfer (TT). Generally, such payments are made on the basis of a
sample receipt and its approval by the buyer. The clean remittance is made after
accepting the order but before the shipment, through banking channels. It is the
simplest and the least risky form of payment from the exporter’s point of view.
Besides, no post-shipment finance is required if the payment is received in advance.
There is no payment of interest on the funds and no commission is required to be
paid as in other modes of payment, which makes it the cheapest mode of receiving
payment. As it involves the highest level of risk for the buyer, advance payment is
used only in cases where the exporter is in a position to dictate his/her terms. For
instance, advance payment is often used if the product supplied is unique or has
some sort of monopolistic power. However, such forms of payment are common
mainly in case of overseas affiliates of the exporting firm.

• Documentary Credit:

In a typical international transaction, an exporter deals with an overseas buyer who

is situated in a significantly different regulatory and business environment. The
exporter is unwilling to part with his/her goods unless she/he is assured of the
receipt of the payment from the importer. On the other hand, the importer is
unwilling to part with the money unless assured of receiving the goods. In such a
situation, the bank plays the crucial role of an intermediary, providing assurance to
both the importer and the exporter in an international transaction. The payment
collection mechanism that allows exporters to retain ownership of the goods or
reasonably ensures their receiving payments is known as documentary collection.
The bank acts as the exporter’s agent in a documentary collection and regulates the
timing and the sequence of the exchange of goods for value by holding the title of
the documents until the importer fulfils his/her obligation as given in the Uniform
Customs and Practices of Documentary Credits (UCPDC), brought out by the
International Chamber of Commerce (ICC) in its publication no. 600, widely known
as UCPDC 600, implemented on 1 July 2007. The two principal documents used in
documentary collection are the bills of lading (B/L) issued by the shipping company
and the draft (bill of exchange) drawn by the exporter. B/L are issued by the

26
shipping company to the shipper for accepting the merchandise for the carriage. As
the document of title, it has a unique significance in shipping that only its legitimate
holder is entitled to claim ownership of the goods covered therein. The importer
simply cannot take possession of the goods unless the B/L is surrendered in original
to the shipping company at destination. The procedure and the process involved in
documentary credit employing banking channels assures both the exporter and the
importer that the former gets the payment and the later receives the goods. The
draft, commonly known as bill of exchange, is used as an instrument to effect
payment in international commerce. It is an unconditional order in writing, signed
by the seller (exporter), also known as drawer, addressed to the buyer (importer) or
importer’s agent, known as drawee, ordering the importer to pay on demand or at a
fixed or determinable future date, the amount specified on its face. The draft
provides written evidence of a financial obligation in clear and simple terms.
Besides, it is a negotiable and unconditional instrument, which means payment must
be made to any holder in due course despite any disputes over the underlying
commercial transaction. Using a draft enables an exporter to employ its bank as a
collection agent. The exporter’s bank forwards the draft or bill of exchange to the
importer, generally through a correspondent bank, collects the draft, and then remits
the proceeds to the exporter. Thus, in the process, the bank has all the necessary
documents for control of the merchandise, which are handed over to the importer
only when the draft has been paid or accepted in strict accordance with the
exporter’s instructions.

• Documentary credit with letter of credit:

A documentary credit represents a commitment of a bank to pay the seller of goods

or services a certain amount, provided s/he presents stipulated documents
evidencing the shipment of goods or performance of services within a specified
period. The modus operandi of an L/C is depicted in the form of a self-explanatory
diagram in Fig. 15.6.

27
The exporter gets in touch with the importer and based on mutual
communications, either by telephone, fax, or electronic messaging, and
mutually agrees on terms of sale and enters into a sales contract:

 The importer, also known as applicant, applies to the issuing bank located in
his/her country
 For opening an L/C in accordance with the terms already agreed upon
between the buyer and the seller in the sales contract. The issuing bank opens
the L/C and delivers it
 To the corresponding bank located in the exporter‟s country, which in turn
advises
 It to the exporter, also known as beneficially. The exporter carefully
scrutinizes the L/C and ensures that all the terms and conditions agreed upon
in the sales contract are mentioned. In case there is any variation or
discrepancy, it is brought to the notice of the applicant (i.e., importer) and got
rectified. Once the exporter gets satisfied of the terms and conditions
contained in the L/C, s/he makes shipment

28
  Soon after delivering goods to the shipping company, the B/L are obtained,
which serve as the cargo receipt, contract of carriage, and the document for
the tide of the goods. The exporter submits the complete set of documents as
mentioned in the L/C, including the B/L along with the draft drawn by the
exporter
 To the advising bank, which in turn sends it to the issuing bank
 The issuing bank scrutinizes the documents and if found in accordance with
the terms and conditions contained in the L/C, it accepts the documents and in
the case of a sight L/C, releases the payment To the issuing bank.
 The issuing bank in turn makes the payment to the exporter However, in the
case of a usance L/C, payment is made at a later date as contained in the L/C.
The issuing bank presents the draft to the applicant (i.e., importer), who
releases the payment Upon which it handovers the B/L along with other
documents To the importer, who in turn hands over the B/L To the shipping
company at the destination and takes delivery of the cargo.
 The operation of L/C is governed by the UCPDC as prescribed by the ICC.
As per the UCPDC, payment is made only if the documents strictly conform
to the terms and conditions of the documentary credit. Under article 4 of the
UCPDC, banks deal in documents and not in goods and services.

Therefore, an exporter should carefully examine the L/C and ensure that:

i. The names and addresses are complete and spelled correctly

ii. The L/C is irrevocable and preferably confirmed by the advising bank,
conforming to sales contract. However, the confirmation of an L/C,
although preferable by the exporter depends upon the terms of the sales
deal
iii. The amount is sufficient to cover the consignment
iv. The description of goods is correct
v. The quantity is correct
vi. The unit price of goods, if stated in the L/C, conforms to the contract
price
vii. The latest date for shipment or the shipping date is sufficient to
dispatch the consignment
viii. The latest date for negotiation or the expiry date is sufficient to present
the documents and draft(s) to the bank
ix. The port (or point) of shipment and the port (or point) of destination
are correct
x. The partial shipment/drawing is permitted or prohibited
xi. The trans-shipment is permitted or prohibited
xii. The L/C is transferable or non-transferable
xiii. The type of risk and the amount of insurance coverage, if required

29
 xiv. The documents required are obtainable
xv. The following words, or similar, are present in the L/C:

“Unless otherwise expressly stated, this credit is subject to the Uniform

Customs and Practice for Documentary Credits, International Chamber
of Commerce Publication No. 600”
Under a documentary credit, a debt relationship exists between the
issuing bank and the beneficiary. Therefore, it is advisable to assess the
issuing bank’s standing, besides the sovereign
and transfer risk of the importing country.

The issuing bank authorizes a corresponding bank in the beneficiary’s

country to honour the documents in its place.

Under the UCPDC, unless the credit stipulates that it is available only
with the issuing bank, all credits should nominate the bank (the
„nominated bank‟), which is authorized to pay (to incur a deferred
payment undertaking to accept drafts) or negotiate. However, in a
freely negotiable credit any bank is treated as a nominated bank.

Types of letters of credit:

According to methods of payments, the letters of credit may be of following
types:

a. Irrevocable:

The issuing bank irrevocably commits itself to make payment if the credit
terms as given in the L/C are satisfied under article 9A of UCPDC. A
unilateral amendment or cancellation of an irrevocable L/C is not possible.

b. Revocable:

A revocable L/C is highly risky for the exporters as it can be revoked any
time without consent of or notice to the beneficiary. For an L‟C to be
revocable, it should explicitly indicate as „revocable‟, otherwise under article
5C of UCPDC, in absence of any explicit indication that the credit is
revocable, it is deemed as irrevocable. Nowadays, revocable letters of credit
are rare, although these were not uncommon in the 1970s and earlier,
especially when dealing with less developed countries.

30
c. Confirmed:

The confirming bank (generally a local bank in the exporter’s country)

commits itself to irrevocably make payment on presentation of documents
under a confirmed L/C. The issuing bank asks the corresponding bank to
confirm the L/C. Consequently, the corresponding bank confirms the L/C by
adding a clause, The above credit is confirmed by us and we hereby
undertake to honour the drafts drawn under this credit on presentation
provided that all terms and conditions of the credit are duly satisfied. A
confirmed L/C provides additional protection to the exporter by localizing the
risk of payment. Thus, the exporter enjoys two independent recognitions: one
by the issuing bank and the other by the confirming bank
.
However, the confirming banks require the following criteria to be
fulfilled:

i. The L/C should be irrevocable.

ii. The credit should clearly instructor authorize the corresponding bank to
add its confirmation.
iii. The credit should be available at the confirming bank.
iv. The contents of credits should be unambiguous and free of stop clauses
(that allows buyer to prevent the terms of credit being fulfilled).

d. Unconfirmed:

Under such credit, the issuing bank asks the corresponding bank to advise
about the L/C without any confirmation on its part. It mentions, The credit is
irrevocable on the part of the issuing bank but is not being confirmed by us.

e. Sight:

The beneficiary receives payment upon presentation and examination of

documents in a sight L/C. However, the bank is given a reasonable time
(generally not more than seven banking days) to examine the documents after
its receipt.

f. Term credits:

Term credits are used as financing instruments for the importer. During the
deferred time period, the importer can often sell the goods and pay the due
amount with the sales proceeds.

31
g. Acceptance credit:

The exporter draws a time draft, either on the issuing or confirming bank or
the buyer or on another bank depending upon the terms of credit. When the
documents are presented, the draft is accepted instead of payment being
made. For instance, the payment date may be 60 or 90 days after the invoice
date or the date of transport documents.

h. Deferred payment credit:

Such credits differ from the time draft in terms of lack of acceptance of a
draft. The bank issues a written promise to make the payment on due date
upon presentation of the documents. The due date is calculated on the basis of
the terms of the credit. The deferred payment credit is generally more
economical from the point of view of commission than the credit with time
draft. However, an advance payment of credit amount may normally be
obtained only from the issuing or confirming bank whereas there are various
possibilities for discounting a draft.

i. Revolving:

Under „revolving letters of credit‟ the amount involved is reinstated when

utilized, i.e., the amount becomes available again without issuing another L/C
and usually under the same terms and conditions.

j. Back-to-back:

Such back-to-back letters of credit are used when exporter uses them as a
cover for opening a credit in favour of the local suppliers. As the credits are
intended to cover same goods, it should be ensured that the terms are identical
except that the price is lower and validity earlier.

k. Documentary credit without letter of credit:

Documents are routed through banking channels that also act as the seller’s
agent along with the bill of exchange. The major documents should include a
full set of B/L, commercial invoice, marine insurance policy, and other
stipulated documents.

Sight draft (documents against payment) Similar to L/C, exporter and

the importer enter into a sales contract:

32
  On mutually agreed terms. Upon finalization of contract, the exporter
(drawer) ships
 The goods and submits the documents along with the bill of exchange
through his/her bank, also known as the remitting bank
 To the corresponding bank, also known as collecting bank In the
importer’s country.
 The corresponding bank presents the draft to the importer (drawee)
who makes payment at sight And thereafter the documents Are handed
over.
 The collecting bank transfers the payment To the remitting bank in
exporter’s country, which in turn makes payment To the exporter (Fig.
15.7).

Thus, under documents against payment, the importer can take physical
possession of the goods only when s/he has made the payment before getting
the documents from the bank. Sight drafts are generally considered safer as
theexporter has possession and title of the goods till the time payment is
made.

Time draft (documents against acceptance): Once a sales contract:

Is signed between the exporter and the importer, the exporter (drawer) ships the
goods And submits the draft along with documents and the collection order To the
bank located in his/her country, known as the remitting bank, which in turn sends
The draft along with documents to a corresponding bank, also known as the

33
collecting bank, in the importer’s country. The collecting bank presents the draft to
the importer (drawee), who indicates his/her acceptance of the payment obligations
By signing the draft, upon which the B/L along with other documents is handed
over to the importer o For taking delivery of the goods. The payment under time
draft is usually to be made at a later date, after 30, 60, 90 or more days. However,
the bill of exchange already accepted by the drawee (i.e., importer) is again
presented to the buyer on the due date, who in turn releases the payment The
collecting bank transfers the funds to the remitting bank for onward payment to the
exporter (Fig. 15.8).

This mode of payment poses a much greater risk as the documents are delivered to the
importer, who subsequently takes tide of the goods before the payment isreleased. In case the
importer fails to make payment, the recovery of the sales proceeds is difficult and involves a
cumbersome process.

l. Consignment Sales:

Under the consignment sales, the shipment of goods is made to the overseas
consignee and the title of goods is retained with the exporter until it is finally
sold. As the title of goods lies with the exporter, the funds are blocked and the
payment period is uncertain. Consignment sales involve certain additional
costs, such as warehousing charges, insurance, interest, and commission of
the agents. Besides, the liability and risks lie with the exporter unless the
consignment is sold. The risk of violating the terms of consignment is much
higher in consignment sales. Besides, the price realization is also uncertain,
over which the exporter has little control. Selling goods on consignment basis
in international markets also provide opportunity to the exporter to realize

34
 higher prices based on the buyers‟ satisfaction. Generally, such a mode of
payment is restricted to dealing with trusted counterparts in the overseas
markets. Export of precious or semiprecious stones and cut flowers is
generally made on consignment basis. However, the exporters are required to
declare the expected value of consignment on the guaranteed remittance (GR)
form.

2. Open Account:
The exporter and importer agree upon the sales terms without documents
calling for payments. However, the invoice is prepared by the exporter, and
the importer can take delivery of goods without making the payment first.
Subsequently, the exporting and importing firms settle their accounts through
periodic remittances As the payment is to be released later, it serves as an
instrument to finance the importer for the transaction and the importer saves
the cost of getting bank finances. It requires sufficient financial strength on
the part of the exporter. The operation of open account is hassle free and
simple. The major drawback of an open account is the lack of safeguard
measures against non-payment by the importer.
Therefore, the open account is generally restricted to firms with longstanding
dealing and business relationship and intra-company transactions among
subsidiaries and affiliates. The statutory provisions related to foreign
exchange often restrict using open account for receiving payments in
international transactions. Generally, the central banks in most counties
permit open accounts to foreign firms operating in their country and restrict it
for domestic firms.

TRADE OF INDIA IN 2022-2023

India’s overall exports in August 2023 estimated at USD 60.87 Billion;
Merchandise exports estimated at USD 34.48 Billion in August 2023, despite global
sluggish growth.
Overall Trade Deficit is projected to improve by 37.85% during April-August 2023;
Merchandise trade deficit also improves from USD 112.85 Billion during April-
August 2022 to USD 98.88 Billion in April-August 2023
Engineering Goods exports record a growth of 7.73% from USD 8.41 Billion in
August 2022 to USD 9.05 Billion in August 2023
Electronic Goods exports register growth of 26.29% and 35.22% in August 2023
and April-August 2023
Ceramic products & glassware exports grow by29.28% in August 2023 and 15.74%
in April-August 2023
Drugs and pharma exports continue to grow at 4.53% in August 2023
Agricultural exports registered robust growth in August 2023: Oil Meals (57.26%),
Tobacco (20.03%), Oil Seeds (17.02%), Meat, Dairy & Poultry Products (16.46%),

35
Cashew (14.25%), Fruits & Vegetables (14.19%), Cereal Preparations &
Miscellaneous Processed Items (12.88%)

36
 CHAPTER 3

RESEARCH METHODOLOGY

37
3.1 OBJECTIVES OF THE STUDY

 To find out if commercial banks play any role in international trade in

 To find out if merchant banks play any role in international trade
 To find out if development banks play any role in international trade
 To find out if commercial banks play any role in international trade.
 And equally to find out if peoples bank plays any role in international trade

3.2 SIGNIFICANCE OF THE STUDY

The research study will be of high benefit to banking sectors, importers/exporters

and to the society in general to embark of the effectiveness of their business,
which in turn will change of the society. Also, the study will determine the
census and problems of banks role in international trade in Nigeria and thereby
should be taken as a corrective measure.

Through this investigation, therefore, the banks and the society will then know
their weak points and willingly adopt measure aimed at enhancing its business
effectiveness.

The government will be in the position to adopt the right strategies to enable the
society achieve its business expectations or goals.

3.3 Limitation

1. The time span for the project is limited.

2. Survey report analysis is based on only 50 responses.
3. Research was conducted online which leads to unbiased conclusion.

3.4 Data Collection

There are two methods of data collection that can be considered when collecting
data for research purpose. These data collection types include the following:

1. Primary Data
Primary data are original and are like raw materials. It is the crudest form of
information. The investigator himself collects primary data or supervises its
collection. It may be collected on a sample or census basis or from case studies.

38
2. Secondary Data
In this study data required was collected from both primary and secondary data. The
data collected for the survey was collected with the help of questionnaire. The data
collected for the research was collected from books, newspaper and internet
websites.

39
 CHAPTER 4

LITERATURE REVIEW

40
3.1 IMPORT EXPORT DOCUMENTATION

Introduction

MK Industries, is a trading firm, imports large quantity of polymers in India.

To facilitate these transactions, MK Industries takes help of various banking
channels and instruments in accordance with international guidelines and
laws. A typical transaction involves –

1. Negotiating price with counter part

2. Obtaining Pro-forma invoice
3. Preparing Letter of Credit Application based on pro-forma invoice
4. Submitting the application to bank, which in-turn gives promissory
notes to corresponding bank
5. Prepare Application to release the document from Bank along with
mandatory government forms such as Form A1 or 15c or 15d.
6. In addition, it may also involve filling up another application for
Buyers Credit.

In all the process involves at least 6 set of different forms and documents
which are interlinked with each other.

The Problem

For small number of transactions, one can easily make these document either
by hand or in some word processor. Once the number of transaction
increases, it becomes really difficult to handle and keep track of various
documents generated. Also as the number of documents increase, so will the
human error rate. Especially when document are inter- linked. Also almost
80% of the information is carried forward the next document in workflow
chain, hence typing these documents manually involved lot of repetitive work
which costs lots of time.

The Solution

Each document in the workflow chain, was designed to export its content to
the next document All the document were validated for common errors and
all ambiguity across entire set of document was removed, as the information
captured was very minimal. So the document flow chain looked something
like this –

41
 a. Letter of Credit Application Form
b. Letter of Credit Request letter (imported from 1)
c. Government declarations (imported from 1)
d. RBI Form A1 (imported from 1)
e. Letter for release of document (imported from 4)
f. Buyers Credit Application (imported from 4)

As you can see, at stage we only capture incremental information, importing the
rest from previous document in the chain. The whole process reduced the time to
generate these documents from an hour to 10 minutes. That too without any
errors.

International Trade
International trade is the exchange of capital, goods, and services across
international borders or territories because there is a need or want of goods or
services.
In most countries, such trade represents a significant share of gross domestic
product (GDP). While international trade has existed throughout history (for
example Uttarapatha, Silk Road, Amber Road, scramble for Africa, Atlantic
slave trade, salt roads), its economic, social, and political importance has been on
the rise in recent centuries.
Carrying out trade at an international level is a complex process when compared
to domestic trade. When trade takes place between two or more states, factors
like currency, government policies, economy, judicial system, laws, and markets
influence trade.
To ease and justify the process of trade between countries of different economic
standing in the modern era, some international economic organizations were
formed, such as the World Trade Organization. These organizations work
towards the facilitation and growth of international trade. Statistical services of
intergovernmental and supranational organizations and governmental statistical
agencies publish official statistics on international trade.

Characteristics of global trade

A product that is transferred or sold from a party in one country to a party in

another country is an export from the originating country, and an import to the
country receiving that product. Imports and exports are accounted for in a
country's current account in the balance of payments.[3]

Trading globally may give consumers and countries the opportunity to be

exposed to new markets and products. Almost every kind of product can be
found in the international market, for example: food, clothes, spare parts, oil,

42
jewellery, wine, stocks, currencies, and water. Services are also traded, such as in
tourism, banking, consulting, and transportation.

The ancient Silk Road trade routes across Eurasia

Advanced technology (including transportation), globalization, industrialization,
outsourcing and multinational corporations have major impacts on the
international trade systems.

Differences from domestic trade

International trade is, in principle, not different from domestic trade as the
motivation and the behaviour of parties involved in a trade do not change
fundamentally regardless of whether trade is across a border or not.
However, in practical terms, carrying out trade at an international level is
typically a more complex process than domestic trade. The main difference is
that international trade is typically more costly than domestic trade. This is due
to the fact that cross-border trade typically incurs additional costs such as explicit
tariffs as well as explicit or implicit non-tariff barriers such as time costs (due to
border delays), language and cultural differences, product safety, the legal
system, and so on.
Another difference between domestic and international trade is that factors of
production such as capital and labour are often more mobile within a country
than across countries. Thus, international trade is mostly restricted to trade in
goods and services, and only to a lesser extent to trade in capital, labour, or other
factors of production. Trade in goods and services can serve as a substitute for
trade in factors of production. Instead of importing a factor of production, a
country can import goods that make intensive use of that factor of production
and thus embody it. An example of this is the import of labour-intensive goods
by the United States from China. Instead of importing Chinese labour, the United
States imports goods that were produced with Chinese labor. One report in 2010,
suggested that international trade was increased when a country hosted a network
of immigrants, but the trade effect was weakened when the immigrants became
assimilated into their new country.

TRADE BARRIERS:
Trade barriers are government-induced restrictions on international trade. The
barriers can take many forms, including the following:
 Tariffs
 Non-tariff barriers to trade
 Import licenses
 Export licenses
 Import quotas

43
  Subsidies
 Voluntary Export Restraints
 Local content requirements
 Embargo
 Currency devaluation
 Trade restriction

Trade barriers are generally classified as

1. Import policies reflected in tariffs and other import charges, quotas, import
licensing, customs practices,
2. standards, testing, labelling, and various types of certifications
3. direct procurement by government,
4. subsidies for local exporters,
5. lack of copyright protection,
6. restrictions on franchising, licensing, technology transfer
7. restrictions on foreign direct investment, etc.
Most trade barriers work on the same principle: the imposition of some sort of cost
on trade that raises the price of the traded products. If two or more nations
repeatedly use trade barriers against each other, then a trade war results Economists
generally agree that trade barriers are detrimental and decrease overall economic
efficiency, this can be explained by the theory of comparative advantage. In theory,
free trade involves the removal of all such barriers, except perhaps those considered
necessary for health or national security. In practice, however, even those countries
promoting free trade heavily subsidize certain industries, such as agriculture and
steel.

IMPACT OF TRADE BARRIERS ON BUSINESS:

Trade barriers are often criticized for the effect they have on the developing world.
Because rich-country players call most of the shots and set trade policies, goods
such as crops that developing countries are best at producing still face high barriers.
Trade barriers such as taxes on food imports or subsidies for farmers in developed
economies lead to overproduction and dumping on world markets, thus lowering
prices and hurting poor-country farmers. Tariffs also tend to be anti-poor, with low
rates for raw commodities and high rates for labour-intensive processed goods. The
Commitment to Development Index measures the effect that rich country trade
policies actually have on the developing world. Another negative aspect of trade
barriers is that it would cause a limited choice of products and would therefore force
customers to pay higher prices and accept inferior quality. Trade barrier obstructs
free trade. Before exporting or importing to other countries, firstly, they must be
aware of restrictions that the government imposes on the trade. Subsequently they
need to make sure that they are not violating the restrictions by checking those
related regulation on tax or duty, and finally they probably need a license in order to

44
ensure a smooth export or import business and reduce the risk of penalty of
violation. Sometimes the situation becomes even more complicated with the
changing of policy and restrictions of a country. In the past, many companies relied
on spreadsheets and manual process to keep track of compliance issues related to
incoming and outgoing shipments, which takes risks of potential errors.

TARIFF AND NON-TARIFF BARRIERS:

Tariffs barriers represent taxes on imports of commodities into a country/region and
are among the oldest form of government intervention in the economic activity.
Non-tariff barriers represent the great variety of mechanisms that countries use in
order to restrict the imports. For example:
 technical barriers to entry;
 import licensing;
 domestic content regulations;
 voluntary export restrains etc

The non-tariff barriers are mentioned in GATT 1947, art.37 (1/b):

1. The developed contracting parties shall to the fullest extent possible _ that is,
except when compelling reasons, which may include legal reasons, make it
impossible _ give effect to the following provisions:
(b) refrain from introducing, or increasing the incidence of, customs duties or
non-tariff import barriers on products currently or potentially of particular
export interest to less-developed contracting parties.

WORLD TRADE ORGANIZATION:

The World Trade Organization (WTO) is an organisation that intends to supervise
and liberalise international trade. The organization officially commenced on January
1, 1995 under the Marrakech Agreement, replacing the General Agreement on
Tariffs and Trade (GATT), which commenced in 1948.The organization deals with
regulation of trade between participating countries; it provides a framework for
negotiating and formalizing trade agreements, and a dispute resolution process
aimed at enforcing participants' adherence to WTO agreements, which are signed by
representatives of member governments and ratified by their parliaments. Most of
the issues that the WTO focuses on derive from previous trade negotiations,
especially from the Uruguay Round (1986–1994).The organization is attempting to
complete negotiations on the Doha Development Round, which was launched in
2001 with an explicit focus on addressing the needs of developing countries. As of
June 2012, the future of the Doha Round remains uncertain: the work programme
lists 21 subjects in which the original deadline of 1 January 2005 was missed, and
the round is still incomplete. The conflict between free trade on industrial goods and
services but retention of protectionism on farm subsidies to domestic agricultural
sector (requested by developed countries) and the substantiation of the international

45
liberalization of fair trade on agricultural products (requested by developing
countries) remain the major obstacles. These points of contention have hindered any
progress to launch new WTO negotiations beyond the Doha Development Round.
As a result of this impasse, there has been an increasing number of bilateral free
trade agreements signed. As of July 2012, there are various negotiation groups in
the WTO system for the current agricultural trade negotiation which is in the
condition of stalemate.
WTO's current Director-General is Pascal Lamy, who leads a staff of over 600
people in Geneva, Switzerland.

PRINCIPLE OF TRADING SYSTEM:

The WTO establishes a framework for trade policies; it does not define or specify
outcomes. That is, it is concerned with setting the rules of the trade policy games.
Five principles are of particular importance in understanding both the pre-1994
GATT and the WTO: 1. Non-discrimination. It has two major components: the most
favoured nation (MFN) rule, and the national treatment policy. Both are embedded
in the main WTO rules on goods, services, and intellectual property, but their
precise scope and nature differ across these areas. The MFN rule requires that a
WTO member must apply the same conditions on all trade with other WTO
members, i.e. a WTO member has to grant the most favourable conditions under
which it allows trade in a certain product type to all other WTO members. "Grant
someone a special favour and you have to do the same for all other WTO members.
“National treatment means that imported goods should be treated no less favourably
than domestically produced goods (at least after the foreign goods have entered the
market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods). 2.
Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise
because of the MFN rule, and a desire to obtain better access to foreign markets. A
related point is that for a nation to negotiate, it is necessary that the gain from doing
so be greater than the gain available from unilateral liberalization; reciprocal
concessions intend to ensure that such gains will materialise.
3. Binding and enforceable commitments. The tariff commitments made by WTO
members in a multilateral trade negotiation and on accession are enumerated in a
schedule (list) of concessions. These schedules establish "ceiling bindings": a
country can change its bindings, but only after negotiating with its trading partners,
which could mean compensating them for loss of trade. If satisfaction is not
obtained, the complaining country may invoke the WTO dispute settlement
procedures. 4. Transparency. The WTO members are required to publish their trade
regulations, to maintain institutions allowing for the review of administrative
decisions affecting trade, to respond to requests for information by other members,
and to notify changes in trade policies to the WTO. These internal transparency
requirements are supplemented and facilitated by periodic country-specific reports

46
(trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The
WTO system tries also to improve predictability and stability, discouraging the use
of quotas and other measures used to set limits on quantities of imports. 5. Safety
valves. In specific circumstances, governments are able to restrict trade. The WTO’s
agreements permit members to take measures to protect not only the environment
but also public health, animal health and plant health.

ROLE OF WTO IN INTERNATIONAL TRADE:

Globalization causes a significant change across the world economy. This occurs
because of an increase in interaction of households and firms all over the world who
exchange goods and services between each other. As technology and productivity of
many countries develop year by year the world community is less constrained with
political borders. Exports and Imports and the measure of economic openness more
than doubled over recent decades in countries with advanced economies. In order to
sustain a healthy trade among different nations it was sufficient for the world to
form one global institute which may control the overall performance and conduct
international trade policies. Consequently, after many negotiations organizations
such as General Agreements on Tariffs and Trade (GATT) and later the World
Trade Organization (WTO) were created. General Agreement on Tariffs and Trade
(GATT) was established in 1947, it was an agreement between 150 countries which
was done with an intention of reduction of tariffs and other trade barriers and the
elimination of preferences, on a reciprocal and mutually advantageous basis. It
lasted for 46 years and ended with a new agreement among 117 countries with a
name World Trade Organization (WTO) which had more comprehensive and
enforceable world trade rules. Nowadays WTO is the only global international
organization dealing with rules of trade between different countries. It is exist ―to
facilitate the implementation, administration, and operation as well as to further the
objectives‖ of the WTO agreements. The main goal of these agreements is to enrich
and enlarge free trade which has various advantages for global economy. After the
Great Depression of 1930th many countries preferred to apply trade barriers such as
tariffs and quotas which could help every single country to increase its Domestic
output and employment by stopping imports. However, those restrictions that were
implemented made the things even worse, since they prevented nations from
maximizing their specialization level and thus using factors of production
inefficiently. This politics which goes against free trade is called protectionism.
There are few arguments that protectionists use for implementing tariffs and quotas
on imported goods. Primarily they state that trade restrictions could protect infant
industries to survive, since those well-established foreign producers generate
smaller costs and are able to sell their products at lower price. In addition to law
costs, unfair competition might occur due to subsidies or other benefits that firms
receive from government. Even though free trade critics argue that protectionist
policies protect domestic jobs the net effect on employment is close to zero.

47
Government may save jobs in one industry where there is a direct foreign
competition, but lose jobs in other industries that you may not see.One of the most
important functions of WTO is to serve as a forum for trade negotiations since
international negotiations are very technical, detailed and politically sensitive.
Furthermore, their system helps to keep the peace which is achieved by helping
trade to flow smoothly plus an international confidence and cooperation are created
and reinforced. Moreover, trade is a core tool to raise income. At the time of 1994
Uruguay Round trade deal was $109 billion and after $510 billion was added to the
world income. Economists estimate that cutting trade barriers in agriculture,
manufacturing and services by only one third would expand the world economy by
$613 billion. Not only an appropriate and effective usage of resources in production
is offered by trading system of WTO, in addition it helps to reduce costs even more
because of principles established. Lower costs improve the well- being of society by
making the prices for goods and services, such as food, clothes, cars and real-estate,
cheaper. Another major benefit world economies could get from joining WTO is
Free Trade Agreements (FTAs) which is an example of preferential trade
agreements and certainly the most popular. FTAs are dependable on WTO rules.
One of the examples of the benefit a country may get from the agreement is an
Australian FTAs with New Zealand, Singapore, US, Thailand and Chile. By
facilitating access to these markets, FTAs provide significant commercial profits to
Australian exporters and more economic benefit to all Australians. Additionally,
these agreements may help to improve competitiveness through access to inputs
with lower costs and to encourage domestic producers to remain competitive against
imports. The idea of WTO appeared slowly from various needs and negotiations.
Despite there are still many protectionists who argue the necessity of markets to be
protected by various restrictions, the Great Depression of 1930s showed the reverse
situation and proved that protected markets are more likely to fail. WTO has a big
impact on international trade as it is the only global organization in the world which
sets the rules and controls performance among member countries and it is
considered as among most powerful international bodies in the world.

IMF (INTERNATIONAL MONETARY FUND):

The International Monetary Fund (IMF) is an international organization that was
initiated in 1944 at the Conference and formally created in 1945 by 29 member
countries. The IMF's stated goal was to assist in the reconstruction of the world's
international payment system post–World War II. Countries contribute money to a
pool through a quota system from which countries with payment imbalances can
borrow funds temporarily. Through this activity and others such as surveillance of
its members' economies and the demand for self-correcting policies, the IMF works
to improve the economies of its member countries. The IMF describes itself as ―an
organization of 188 countries, working to foster global monetary cooperation,
secure financial stability, facilitate international trade, promote high employment

48
and sustainable economic growth, and reduce poverty around the world. The
organization's stated objectives are to promote international economic co-operation,
international trade, employment, and exchange rate stability, including by making
financial resources available to member countries to meet balance of payments
needs. Its headquarters are in Washington, D.C., United States.

WORLD BANK:
The World Bank is a United Nations international financial institution that provides
loans to developing countries for capital programs. The World Bank is a component
of the World Bank Group, and a member of the United Nations Development
Group. The World Bank's official goal is the reduction of poverty. According to its
Articles of Agreement, all its decisions must be guided by a commitment to the
promotion of foreign investment and international trade and to the facilitation of
capital investment. The World Bank was created at the end of World War II as a
result of many European and Asian countries needing financing to fund
reconstruction efforts. Created out of the Bretton Woods agreement of 1944, the
Bank was successful in providing financing for these devastated countries. Today,
the Bank functions as an international organization that attempts to fight poverty by
offering developmental assistance to middle and poor-income countries. By giving
loans, and offering advice and training in both the private and public sectors, the
World Bank aims to eliminate poverty by helping people help themselves. The
World Bank is composed of two institutions: 1. International Bank for
Reconstruction and Development (IBRD) 2. International Development Association
(IDA).

World Bank performs the following functions:

 Granting reconstruction loans to war devastated countries.
 Granting developmental loans to underdeveloped countries.
 Providing loans to governments for agriculture, irrigation, power, transport,
water supply, educations, health, etc
 Providing loans to private concerns for specified projects.
 Promoting foreign investment by guaranteeing loans provided by other
organisations.
 Providing technical, economic and monetary advice to member countries for
specific projects
 Encouraging industrial development of underdeveloped countries by
promoting economic reforms.

49
NEED AND IMPORTANCE OF FOREIGN TRADE TO A NATION.
1. Division of labour and specialization - Foreign trade leads to division of labour
and specialization at the world level. Some countries have abundant natural
resources. They should export raw materials and import finished goods from
countries which are advanced in skilled manpower. This gives benefits to all the
countries and thereby leading to division of labour and specialization.
2. Optimum allocation and utilization of resources- Due to specialization,
unproductive lines can be eliminated and wastage of resources avoided. In other
words, resources are channelised for the production of only those goods which
would give highest returns. Thus, there is rational allocation and utilization of
resources at the international level due to foreign trade.
3. Equality of prices- Prices can be stabilized by foreign trade. It helps to keep the
demand and supply position stable, which in turn stabilizes the prices, making
allowances for transport and other marketing expenses.
4. Availability of multiple choices- Foreign trade helps in providing a better choice
to the consumers. It helps in making available new varieties to consumers all over
the world.
5. Ensures quality and standard goods- Foreign trade is highly competitive. To
maintain and increase the demand for goods, the exporting countries have to keep
up the quality of goods. Thus, quality and standardized goods are produced.
6. Raises standard of living of the people- Imports can facilitate standard of living
of the people. This is because people can have a choice of new and better varieties
of goods and services. By consuming new and better varieties of goods, people can
improve their standard of living.
7. Generate employment opportunities- Foreign trade helps in generating
employment opportunities, by increasing the mobility of labour and resources. It
generates direct employment in import sector and indirect employment in other
sector of the economy. Such as Industry, Service Sector (insurance, banking,
transport, communication), etc.
8. Facilitate economic development- Imports facilitate economic development of a
nation. This is because with the import of capital goods and technology, a country
can generate growth in all sectors of the economy, i.e. agriculture, industry and
service sector.
9. Assistance during natural calamities- During natural calamities such as
earthquakes, floods, famines, etc., the affected countries face the problem of
shortage of essential goods. Foreign trade enables a country to import food grains
and medicines from other countries to help the affected people.
10. Maintains balance of payment position- Every country has to maintain its
balance of payment position. Since, every country has to import, which results in
outflow of foreign exchange, it also deals in export for the inflow of foreign
exchange.

50
11. Brings reputation and helps earn goodwill- A country which is involved in
exports earns goodwill in the international market. For e.g. Japan has earned a lot of
goodwill in foreign markets due to its exports of quality electronic goods.
12. Promotes World Peace- Foreign trade brings countries closer. It facilitates
transfer of technology and other assistance from developed countries to developing
countries. It brings different countries closer due to economic relations arising out
of trade agreements. Thus, foreign trade creates friendly atmosphere for avoiding
wars and conflicts. It promotes world peace as such countries try to maintain
friendly relations among themselves.

51
 CHAPTER 5
DATA ANALYSIS & INTERPRETATION

52
Q.1 Which types of Banks do you prefer?

32

13

Private Public Co-operative

Interpretation

Most of the people have preferred private banks over public banks and co-
operative banks as the services offered by then are more efficient and the
services by them are also up to the mark.

53
Q.2 Are the Banks playing a crucial role in international trade?

40

0 5 10 15 20 25 30 35 40 45

MAYBE NO YES

Interpretation

Most of the people here give a positive response towards banks playing a crucial
role in international trade as without banks there would be a leap of faithbetween
both the exchanging parties and the transactions would also not happenso easily
and quickly as it is possible today.

54
Q.3 Do you think commercial banks play a crucial role in international
Business?

16%

6% YES

NO

MAYBE

78%

Interpretation

Out of all the major responses majority of the people say that commercial banks
play a very critical or crucial role in international business as without it ,itwould not
be possible to carry on the transactions over a period of time.

55
Q.4 Do you think the INDIAN BANK play a crucial role in International
Trade?

42

7
1

YES NO MAYBE

Interpretation

Yes a major response points that INDIAN bank play a crucial role in internationals
trade as it is the most important aspect of international trade as allof the export or
import transaction would not be able to happen without the helpof INDIAN Bank as
it keeps a proper check on all the exports or import happeningin the country.

56
Q.5 Which modes are mostly used for payment in international trade?

Not used as much Documentry credit with letter or credit Documentry Credit Advance Payment

0 5 10 15 20 25 30 35

Interpretation

out of all the four payment options mentioned in the chart majority of the people
use advance payment as it gives an assurance to the exporter that the trade will
not be a bad debt and other than that mode another major mode usedis
documentary credit or letter of credit as in that banks gives a credit letter to the
concerning authority that it will pay on behalf of the concerned person if they
fail to do so.

57
Q.6 How often do you participate in International Trade?

Interpretation

A majority of the people responded that they participate weekly in international

trade it states that the usage of international trade by the people isused mostly by
the people in week-to-week basis it means that the export or import function
performed by them is mostly weekly other than using daily ormonthly or yearly.

58
Q.7 Do banks reduce exporting risk by providing trade finance
products?

40

35

30

25

20

15

10

YES NO MAYBE

Interpretation

Yes, according to the responses received it Clearly states that banks reduce
exporting risks by providing trade finance products as it minimizes the trade risks
and it diversifies the risk among various participants or various other persons.

59
Q.8 Which product do you chose in international trade finance?

21

0 5 10 15 20 25

Not yet Used All of the above Counter Trade

Letter of credit Forfeiting Factoring
Accounts Receivable Financing Discounting Bankers Acceptance

Interpretation

A majority of the people say that they use the product banker’s acceptance and
then they use letter of credit as they are first accepted by the bank and then they
are given to the respected customers for further use of it.

60
Q.9 Which types of letters of credit do you prefer?
14

12

10

Irrecoverable Recoverable Confirmed Unconfirmed

Sight Term Credits Acceptance Credit Deffered Payment Credit
Revolving Not Yet Used

Interpretation

Mostly people prefer irrevocable or confirmed or acceptance credit as they are

confirmed or perfectly approved letter of credit and there are no chances to change
or make any changes to it as its duly checked and approved by the concerned
authority without giving any second thought to it.

61
Q.10 According to you is it advisable to trade through international finance
products?

10%
2%

YES
NO
MAY BE

88%

Interpretation

The most of the people say that it is advisable to trade through international trade
finance products as it gives an assurance to the supplier that there is a middleman to
watch their trade and give a backing to the trade if anything does not happen as per
the required guidelines.

62
Q.11 On Overall basis do you think role of banks in International Trade
will help to boost the growth of India?

45

40

35

30

25

20

15 MAY BE

10
NO
5

0
YES

YES NO MAY BE

Interpretation

India is eyeing giving a boost to its exports of food and agro products,
pharmaceuticals, information technology (IT) and services such as tourism to China
as it participates in the first China International Import Expo (CIIE). China is
India’s largest trading partner with a total trade of $89.71 billion in 2022-23.

63
 CHAPTER 6
CONCLUSION & SUGGESTION

64
 CONCLUSION

 People prefer private banks over public banks and co-operative banks due to
the perception of more efficient and up-to-the-mark services.

 Respondents generally recognize the crucial role of banks in international

trade. Banks provide security, facilitate transactions, and reduce risks, which
is essential for international trade to function smoothly.

 The majority of people acknowledge that commercial banks play a critical

role in international business by facilitating transactions and providing
financial services.

 Respondents believe that Indian Bank plays a crucial role in international

trade by monitoring and facilitating import and export transactions, ensuring
the smooth flow of goods and capital.

 Advance payment is the most preferred payment mode, providing assurance

to exporters. Documentary credit, such as letters of credit, is also widely used
for its security and reliability.

 Most people participate in international trade on a weekly basis, indicating

that international trade activities are common and frequent among the
respondents.

 Respondents agree that banks reduce exporting risks by providing trade

finance products, helping to minimize risk and distribute it among various
participants.

 Banker's acceptance and letter of credit are the most preferred trade finance
products, as they provide security and trust in international transactions.

 Most people prefer irrevocable or confirmed or acceptance credit for their

reliability and inability to be altered without due approval.

 The majority of respondents find it advisable to trade through international

trade finance products, as they offer a safety net and ensure compliance with
trade guidelines.

 The last question provides additional information, suggesting that India is

looking to boost its exports to China. While it doesn't directly relate to the

65
 previous questions, it highlights the importance of international trade for
India's economic growth.

 International trade theory has historically struggled to hold up empirically in

terms of being able to predict countries trade patterns and volume.
This is most famously demonstrated by the “Leontief Paradox”, which
exposed the inconsistencies of the United States‟ trade flows based on its
resource abundance.

66
 SUGGESTIONS

 Public and co-operative banks should focus on improving their services to

compete with private banks and meet the expectations of customers.

 Banks should continue to play a pivotal role in international trade by

providing efficient and secure financial services.

 Commercial banks should expand and improve their international business

services to support the growing demands of businesses engaged in
international trade.

 Indian Bank should maintain their vigilance in monitoring international trade

transactions to ensure the country's economic interests are safeguarded.

 Businesses involved in international trade should consider the preferences for

payment modes and trade finance products when conducting transactions.

 As participation in international trade is frequent, businesses should plan and

manage their international trade activities effectively.

 Banks should continue to offer trade finance products to reduce risks and
support international trade growth.

 Businesses should consider the use of irrevocable or confirmed letters of

credit for secure international transactions.

 Utilizing international trade finance products is advisable for businesses to

ensure the safety and success of international transactions.

 Indian businesses should leverage the role of banks to boost their

international trade, especially in key sectors like food, pharmaceuticals, IT,
and services, to increase exports and growth.

67
 WEBLIOGRAPHY

www.export.gov.com
www.ecgc.in
www.exportscale.com
www.buyerscredit.wordpress.com
www.export-importcompanies.com
www.un.org
www.tedo.iridiuminteractive.in
www.fieo.org
www.EXIMguru.com
www.efic.gov.au
www.intracen.org

BIBLIOGRAPHY

 Export Incentives. Delhi s Anupam.

 Export Strategy in India - Since Independence. New Delhi S. Chand.

 International Trade and Export Management. Bombay

 Indian Export Trade - A Critical Analysis. Bombay

 Export Performance in Indian Engineering Industry. Delhi s Seema

 India's Exports and Export Policy in the 1960's.

 International Trade - Policies and Prospective in Developing Economy. Jaipur

Prateeksho.

 Export Strategy for India. New Delhi

68
 ANNEXURE

1. Which type of banks do you prefer?

A. Private Banks
B. Public Banks
C. Co-operative Banks

2.Are the banks playing a crucial role in international trade?

A. Yes
B. No
C. May Be

3.Do you think commercial banks play a crucial role in International Business?

A. Yes
B. No
C. May Be

4.Do you think the functions of Indian BANK play a crucial role in International
Trade?

A. Yes
B. No
C. May Be

5.which modes are mostly used for payment in international trade?

A. Advance Payment
B. Documentary Credit
C. Documentary Credit with Letter Of Credit
D. Other

6. How often do you participate in International Trade?

A. Daily
B. Weekly
C. Monthly
D. Yearly

69
7. Do banks reduce exporting risk by providing trade finance products?

A. Yes
B. No
C. May Be

8.Which product do you chose in international trade finance?

A. Bankers’ Acceptance
B. Discounting
C. Accounts Receivable Financing
D. Factoring
E. Forfeiting
F. Letter Of Credit
G. Counter Trade
H. All of the above

9. Which Type of letter of credit do you prefer?

A. Irrevocable
B. Revocable
C. Confirmed
D. Unconfirmed
E. Sight
F. Term Credits
G. Acceptance Credit
H. Deferred Payment Credit
I. Revolving
J. Other

10. According to you is it advisable to trade through international finance products

A. Yes
B. No
C. May Be

11.On overall basis do you think role of banks in International Trade will help to
boost the growth of India?

A. Yes
B. No
C. May Be

70