TRADE FINANCE :

Banks play a vital role in providing financial assistance and also comfort levels to the traders through their financing called as “Trade Finance”. Trade finance is granted in the form of fund based finance and non- fund based finance to enable the traders in their trading activities. The borrower may be a manufacturer/ trader or trader a who require work capital and term finance for his production and managing his cash flows. Apart from these type of loans, wherein the banker allows the borrower to draw down actual funds, banks also extend credit facility in the form of non -fund based facilities, called non fund based limits like letters of credit, bank guarantees.

Trade finance is granted to the domestic traders as well as traders who are handling EXIM trade (export and import). If the bank extends finance mainly in rupee funds to assist his borrower to sell or buy goods and services within India, it is classified as inland trade finance. On the other hand if a banker assists his borrower to handle international trade activities of export and import the banker is extending credit called overseas trade finance.

Banks also extend trade finance in the form of bills finance for their clients.