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MODULE 01:

Meaning of international trade finance

The institutions or transactions involved in the financing of international trade. Trade finance

looks at banks, credit agencies, insurers, forfeiters, and any other person or institution whoenables importers and exporters to trade across borders.

Features International Trade Finance

Examine key FTA and Incoterms Foreign currency exchange rates

Foreign exchange market Factors determining foreign exchange rates Role of banks and financial institutions

Managing foreign currency fluctuation risks Foreign currency payment methods Managing foreign currency payment risks

COMPLEXITIES

Understand foreign currency exchange rates Identify the factors that determine foreign exchange rates

Appreciate the full impact of foreign currency rate fluctuations on the business Understand and evaluate options available to manage foreign currency fluctuation risks

Accurately evaluate quotations in foreign currency Recognize and understand the international trade finance services available

Effectively manage receipt of payments from international clients Effectively handle foreign currency payments Understand and appraise options available to manage foreign currency payment risks

What Is International Trade?

International trade is the exchange of goods and services between countries. This type of trade gives riseto a world economy, in which prices, or supply and demand, affect and are affected by global events.Political change in Asia, for example, could result in an increase in the cost of labor, thereby increasingthe manufacturing costs for an American sneaker company based in Malaysia, which would then result inan increase in the price that you have to pay to buy the tennis shoes at your local mall. A decrease in thecost of labor, on the other hand, would result in you having to pay less for your new shoes.

Trading globally gives consumers and countries the opportunity to be exposed to goods and services notavailable in their own countries. Almost every kind of product can be found on the international market:food, clothes, spare parts, oil, jewelry, wine, stocks, currencies and water. Services are also traded:tourism, banking, consulting and transportation. A product that is sold to the global market is an export,and a product that is bought from the global market is an import. Imports and exports are accounted for ina country's current account in the balance of payments.

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Exporter:

This term export is derived from the conceptual meaning as to ship the goods and services out of theport of a country. The seller of such goods and services is referred to as an "exporter" who is based in thecountry of export whereas the overseas based buyer is referred to as an "importer". In InternationalTrade, "exports" refers to selling goods and services produced in the home country to other markets.

Export of commercial quantities of goods normally requires involvement of the customs authorities in boththe country of export and the country of import. The advent of small trades over the internet such asthrough Amazon and eBay have largely bypassed the involvement of Customs in many countriesbecause of the low individual values of these trades. Nonetheless, these small exports are still subject tolegal restrictions applied by the country of export. An export's counterpart is an import.

Importer:

The term import is derived from the conceptual meaning as the goods and services into the port of a country.The buyer of such goods and services is referred to an "importer" who is based in the country of import wherethe overseas based seller is referred to as an "exporter"Thus an import is any good (e.g. a commodity)

or service brought in from one country to another country in a legitimate fashion, typically for use in trade. It is agood that is brought in from another country for sale imported goods or services are provided todomestic consumers by foreign producers. An import in the receiving country is an export to the sendingcountry.

Imports, along with exports, form the basics of international trade. Import of goods normally requiresinvolvement of the customs authorities in both the country of import and the country of export and are oftensubject to import quotas, tariffs and trade agreements. When the "imports" are the set of goods and servicesimported, "Imports" also means the economic value of all goods and services that are imported.Themacroeconomic variable I usually stands for the value of these imports over a given period of time, usuallyone year

Merchant:

A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.

Merchants can be one of two types:

1. Awholesale merchant operates in the chain between producer and retail merchant. Some wholesale merchantsonly organize the movement of goods rather than move the goods themselves.

2. Aretail merchant orretailer, sells commodities to consumers (including businesses). A shop owner is a retailmerchant.

A merchant class characterizes many pre-modern societies. Its status can range from high (the members even eventuallyachieving titles such as that ofMerchant Prince orNabob) to low, as in Chinese culture, owing to the presumeddistastefulness of profiting from "mere" trade rather than from labor or the labor of others as in agricultureand craftsmanship.

Trader

http://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Profit_(economics)http://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Retailerhttp://en.wikipedia.org/wiki/Retailerhttp://en.wikipedia.org/wiki/Retailerhttp://en.wikipedia.org/wiki/Class_(social)http://en.wikipedia.org/wiki/Pre-modern_societieshttp://en.wikipedia.org/wiki/Titles_of_nobilityhttp://en.wikipedia.org/wiki/Nawabhttp://en.wikipedia.org/wiki/Chinese_culturehttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Craftsmanshiphttp://en.wikipedia.org/wiki/Craftsmanshiphttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Chinese_culturehttp://en.wikipedia.org/wiki/Nawabhttp://en.wikipedia.org/wiki/Titles_of_nobilityhttp://en.wikipedia.org/wiki/Pre-modern_societieshttp://en.wikipedia.org/wiki/Class_(social)http://en.wikipedia.org/wiki/Retailerhttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/Profit_(economics)http://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Trade

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1. One who buys and sells securities for his/herpersonal account, not on behalf ofclients.

2. An investorwho holds stocks and securities for a short period of time (a few minutes, hours or days). The goal is

to profit from short-term gains in the market. The stock selection is generally based on technical

analysis orcharting which relate only to the stock price rather than a fundamental evaluation of the company as

a business. The IRS offers some tax benefits to traders: they can deduct theirinterest expense without itemizing, andseminarcosts can be deducted as well as home office expenses in connection with investing.

BANKS:

Bank's representation in emerging markets globally and strong relationships with international

correspondent banks in all major markets positions us well to provide superior trade services to

meet our clients' cross-border trade requirements.

Our skilled professionals have diverse industry expertise, and leverage the group's geographic

strength to deliver timeous and effective solutions to both established and new traders.

We offer integrated solutions customized to our clients' specific requirements, and ensure that we

develop the most suitable solutions by collaborating with other specialist business units within thebank. These include:

Commodity and currency hedging

Foreign exchange

Structured trade finance

We also offer a range ofvalue-added services

Products and services

Our comprehensive range of trade-related products and services includes:

Airway release

Bank drafts

Clean bills of exchange

Customer foreign currency accounts

Documentary collections(foreign bills for collection)

Documentary credits(letters of credit)

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Escrow accounts

Forward exchange contracts

Inward and outward payments

Offshore guarantees

Shipping guarantees

Incoterms:The Incoterms rules orInternational Commercial terms are a series of pre-definedcommercial terms published by the International Chamber of Commerce (ICC) that are widelyused in International commercial transactions. A series of three-letter trade terms related tocommon contractual sales practices, the Incoterms rules are intended primarily to clearlycommunicate the tasks, costs, and risks associated with the transportation and delivery ofgoods.

The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwidefor the interpretation of most commonly used terms in international trade. They are intended toreduce or remove altogether uncertainties arising from different interpretation of the rules indifferent countries.

First published in 1936, the Incoterms rules have been periodically updated, with the eighthversionIncoterms 2010having been published on January 1, 2011. "Incoterms" is aregistered trademark of the ICC.

INCOTERMS 2012INCOTERMS are a set of three-letter standard trade terms most commonly used in international contractsfor the sale of Goods. It is essential that you are aware of your terms of trade prior to shipment.

EXWEX WORKS ( named place of delivery)

The Sellers only responsibility is to make the goods available at the Sellers premises. The Buyer bearsfull costs and Risk of moving the goods from there to destination.

FCAFREE CARRIER ( named place of delivery)

The Seller delivers the goods, cleared for export, to the carrier selected by the Buyer. The Seller loadsthe goods if the Carrierpickup is at the Sellers prem ises. From that point, the Buyer bears the costs andrisks of moving the goods to destination.

CPTCARRIAGE PAID TO ( named place of destination)

The Seller pays for moving the goods to destination. From the time the goods are transferred to the first carrier,the Buyer bears the risks of loss or damage.

http://en.wikipedia.org/wiki/International_Chamber_of_Commercehttp://en.wikipedia.org/wiki/Commercial_transactionhttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/Commercial_transactionhttp://en.wikipedia.org/wiki/International_Chamber_of_Commerce

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CIPCARRIAGE AND INSURANCE PAID TO ( named place of destination)

The Seller pays for moving the goods to destination. From the time the goods are transferred to the first carrier,the Buyer bears the risks of loss or damage. The Seller, however, purchases the cargo insurance.

DATDELIVERED AT TERMINAL ( named terminal at port or place of destination)

The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the

Buyers disposal at a named terminal at the named port or place of destination. Terminal includes any place,whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. TheSeller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port orplace of destination.

DAPDELIVERED AT PLACE ( named place of destination)

The Seller delivers when the goods are placed at the Buyers disposal on the arriving means of transport readyfor unloading at the names place of destination. The Seller bears all risks involved in bringing the goods to thenamed place.

DDPDELIVERED DUTY PAID ( named place)

The Seller delivers the goods -cleared for import to the Buyer at destination. The Seller bears all costs andrisks of moving the goods to destination, including the payment of Customs duties and taxes.

Defining Counterparty Risk

Counterparty risk is the risk to each party of a contract that the counterparty will not live up to itscontractual

obligations; it is otherwise known as default risk. Counterparty risk relates closely to performance risk. Itarises whenever one entity depends on another to honor the terms of a contract. If a parts supplier fails toprovide steering wheels to General Motors, GM will be damaged because of its inability to delivercomplete cars. The resulting profit reduction is defined as the exposure that GM runs to its supplier.Similarly, GM runs a credit exposure to its customers who have not yet paid for their cars. This wouldinclude dealers and end customers who are financed by GMAC, GMs financing subsidiary. Normally,performance risk is managed operationallyi.e., GM would use alternative suppliers, reserve supplies ofsteering wheels, and contractual nonperformance remedies to manage its performance risk. Also, tomanage risk to its dealers, it may retain title to vehicles, verify insurance coverage, obtain some advancepayment, and use legal means to minimize their collections risk. In addition to these counterparty risksituations, GM will experience counterparty risk from its derivative contracts. Suppose GM wanted topurchase steering wheels on an ongoing basis from a European supplier, and protect itself fromdevaluation of the US dollar. It would likely enter a foreign exchange swap transaction with a bank. Afterentering the contract, rates would continue to change, bringing the contract in-the-money to either GM orthe bank. If the dollar were to devalue, the contract would move in-the-money to GM, which would exposeGM to the possible failure of the bank to honor its contract. Conversely, if the dollar were to strengthen,the bank would have an in-the-money contract with GM, and subsequently become concerned aboutGMs possible default risk

Credit Risk Management Policy

Best practice credit risk management policy includes the following items:

Counterparty initiation and monitoring;

Contracting standards;

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Credit authorities and limits;

Transaction approval process;

Credit risk reporting;

A reserving and capital policy.

Counterparty initiation refers to the first time a company wishes to enter a transaction with a proposedcounterparty. The credit department typically reviews available public information, credit agency reports,and counterparty financials before agreeing to trade with the counterparty. The financial status of thecounterparty should be continually monitored to proactively detect situations where counterparty creditquality might deteriorate. It is also important to segregate counterparties according to legal entities;trading with a subsidiary of a triple-A company may provide little to no financial protection in the event of adefault. Furthermore, one should assume in general that a benefit of trading with one legal entity cannotbe netted

What is political risk and what can a multinational company do to minimize

exposure?For multinational companies, political risk refers to the risk that a host country will make political decisions that willprove to have adverse effects on the multinational's profits and/or goals. Adverse political actions can range from verydetrimental, such as widespread destruction due to revolution, to those of a more financial nature, such as thecreation of laws that prevent the movement of capital.

In general, there are two types of political risk, macro risk and micro risk. Macro risk refers to adverse actions that willaffect all foreign firms, such as expropriation or insurrection, whereas micro risk refers to adverse actions that willonly affect a certain industrial sector or business, such as corruption and prejudicial actions against companies fromforeign countries. All in all, regardless of the type of political risk that a multinational corporation faces, companiesusually will end up losing a lot of money if they are unprepared for these adverse situations. For example, after FidelCastro's government took control of Cuba in 1959, hundreds of millions of dollars worth of American-owned assetsand companies were expropriated. Unfortunately, most, if not all, of these American companies had no recourse forgetting any of that money back.

So how can multinational companies minimize political risk? There are a couple of measures that can be taken evenbefore an investment is made. The simplest solution is to conduct a little research on the riskiness of a country, eitherby paying for reports from consultants that specialize in making these assessments or doing a little bit of researchyourself, using the many free sources available on the internet (such as the U.S. Department of State's backgroundnotes ). Then you will have the informed option to not set up operations in countries that are considered to be politicalrisk hot spots.

While that strategy can be effective for some companies, sometimes the prospect of entering a riskier country is solucrative that it is worth taking a calculated risk. In those cases, companies can sometimes negotiate terms ofcompensation with the host country, so that there would be a legal basis for recourse in the event that somethinghappens to disrupt the company's operations. However, the problem with this solution is that the legal system in thehost country may not be as developed and foreigners rarely win cases against a host country. Even worse, arevolution could spawn a new government that does not honor the actions of the previous government.

If you do go ahead and enter a country that is considered at risk, one of the better solutions is to purchase politicalrisk insurance. Multinational companies can go to one of the many organizations that specialize in selling political riskinsurance and purchase a policy that would compensate them if an adverse event occurred. Because premium ratesdepend on the country, the industry, the number of risks insured and other factors, the cost of doing business in onecountry may vary considerably compared to another.

However, be warned: buying political risk insurance does not guarantee that a company will receive compensationimmediately after an adverse event. Certain conditions, such as trying other channels for recourse and the degree towhich the business was affected, must be met. Ultimately, a company may have to wait months before anycompensation is received.

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Meaning and definition of economic risk

Generally speaking, economic risk can be described as the likelihood that an investment will be affected bymacroeconomic conditions such as government regulation, exchange rates, or political stability, most commonly onein a foreign country. In other words, while financing a project, the risk that the output of the project will not produceadequate revenues for covering operating costs and repaying the debt obligations.

Economic risk is, however, a nebulous term with various definitions. In a nutshell, economic risk refers to the risk thata venture will be economically unsustainable, due to various reasons vitiating from an alteration in economic trends tofraudulent activities which ruin a projects outcome. Before starting with the projects, it is important to considereconomic risk for determining the likelihood of potential risks being outweighed by the benefits.

Portfolio RiskThe political climate of foreign countries creates portfolio risks because governments and political systemsare constantly in flux. This typically has a very direct impact on economic and business sectors. Political riskis considered a type of unsystematic risk associated with specific countries, which can be diversified awayby investing in a broad range of countries, effectively accomplished with broad-based foreign mutual fundsor exchange-traded funds (ETFs).

TaxationForeign taxation poses another complication. Just as foreign investors with U.S. securities are subject toU.S. government taxes, foreign investors are also taxed on foreign-based securities. Taxes on foreign

investments are typically withheld at the source country before an investor can realize any gains. Profits arethen taxed again when the investor repatriates the funds.

Currency RiskFinally, there's currency risk. Fluctuations in the value of currencies can directly impact foreign investments,and these fluctuations affect the risks of investing in non-U.S. assets. Sometimes these risks work in yourfavor, other times they do not. For example, let's say your foreign investment portfolio generated a 12% rateof return last year, but your home currency lost 10% of its value. In this case, your net return will beenhanced when you convert your profits to U.S. dollars, since a declining dollar makes internationalinvestments more attractive. But the reverse is also true; if a foreign stock declines but the value of thehome currency strengthens sufficiently, it further dampens the returns of the foreign position.

Minimizing Currency Risk

Despite the perceived dangers of foreign investing, an investor may reduce the risk of loss from

fluctuations in exchange rates by hedging with currency futures. Simply stated, hedging involves takingon one risk to offset another. Futures contracts are advance orders to buy or sell an asset, in this case acurrency. An investor expecting to receive cash flows denominated in a foreign currency on some futuredate can lock in the current exchange rate by entering into an offsetting currency futures position.

In the currency markets, speculators buy and sell foreign exchange futures to take advantage of changesin exchange rates. Investors can take long orshort positions in their currency of choice, depending onhow they believe that currency will perform. For example, if a speculator believes that the euro will riseagainst the U.S. dollar, they will enter into a contract to buy the euro at some predetermined time in thefuture. This is called having a long position. Conversely, you could argue that the same speculator hastaken a short position in the U.S. dollar.

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Transit Risks - Implementation and Management :

Where a party to an export-import transaction seeks a guarantee to support a series or an individual transaction and ensuprotection of his assets, trade risk management solutions should be used to cover the perils involved in the transit of the go

If a prudent trader did not have the opportunity to ensure the protection of his assets he would need to set aside a considesum of money as a contingency against risks and losses .There is no law to make insurance of property in transit compulsowhile property is in transit it is at risk and there are several ways to manage the risk involved in the physical movement of you trade across international borders:

You can minimize the impact of such incidents on your business by being properly insured.

In order for insurance cover to be valid, you have to be able to show that you have an "insurable interest" in the insured

goods, that the goods are yours and that you bear the risks associated with them.

Do nothing and carry the risk yourself.

If an incident occurs resulting in damage or loss to the goods you could take action against the carrier. In such a case you

need the expertise and perseverance to sustain a successful claim. Also you should remember that shipping companies lifor the cargo they carry is set by various internationally ratified conventions, is strictly limited and does not always equate

full value of the goods. This could have an impact on your business.

Let your customer or supplier insure the goods

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Module 2

The New York Stock Exchange, commonly referred to as the NYSE and occasionally as the "BigBoard", is a stock exchangelocated at 11 Wall Street, Lower Manhattan, New York City, NewYork, United States. It is by far the world's largest stock exchangeby market capitalization of its listedcompanies at US$14.242 trillion as of Dec 2011. Average daily trading value was

approximately US$153 billion in 2008.

The NYSE is operated by NYSE Euro next (NYSE: NYX ), which was formed by the NYSE's 2007 mergerwith the fully electronic stock exchange Euro next. The NYSE trading flooris located at 11 Wall Streetand is composed of four rooms used for the facilitation of trading. A fifth trading room, located at 30 BroadStreet, was closed in February 2007. The main building, located at 18 Broad Street, between the cornersof Wall Street and Exchange Place, was designated a National Historic Landmark in 1978,[6]as was the11 Wall Street building.

Bond Market

The bond market (also known as the credit, orfixed income market) is a financial market whereparticipants can issue new debt, known as the primary market, or buy and sell debt securities, known asthe Secondary market, usually in the form ofbonds. The primary goal of the bond market is to provide a

mechanism for long term funding of public and private expenditures. Traditionally, the bond market waslargely dominated by the United States, but today the US is about 44% of the market.[1]As of 2009, thesize of the worldwide bond market (total debt outstanding) is an estimated $82.2 trillion,[2]of which thesize of the outstanding U.S. bond market debt was $31.2 trillion according to Bank for InternationalSettlements (BIS), or alternatively $35.2 trillion as of Q2 2011 according to Securities Industry andFinancial Markets Association (SIFMA).

Nearly all of the $822 billion average daily trading volume in the U.S. bond market[3]takes placebetween broker-dealers and large institutions in a decentralized, over-the-counter(OTC) market.However, a small number of bonds, primarily corporate, are listed on exchanges.

References to the "bond market" usually refer to the government bond market, because of its size,liquidity, relative lack ofcredit risk and, therefore, sensitivity to interest rates. Because of the inverserelationship between bond valuation and interest rates, the bond market is often used to indicate changes

in interest rates or the shape of the yield curve. The yield curve is the measure of "cost of funding".

FOREX EXCHANGE MARKET:

The foreign exchange market (forex, FX, orcurrency market) is a form ofexchange for the globaldecentralized trading of international currencies. Financial centers around the world function as anchorsof trading between a wide range of different types of buyers and sellers around the clock, with theexception of weekends. EBS and Reuters' dealing 3000 are two main interbank FX trading platforms. Theforeign exchange market determines the relative values of different currencies.[1]

The foreign exchange market assists international trade and investment by enabling currency conversion.For example, it permits a business in the United States to import goods from the European

Union member states especially Euro zone members and pay Euros, even though its income is in UnitedStates dollars. It also supports direct speculation in the value of currencies, and the carry trade,speculation based on the interest rate differential between two currencies.[2]

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_(finance)http://en.wikipedia.org/wiki/Secondary_markethttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Primary_markethttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/New_York_Stock_Exchange#cite_note-NHL_designation-6http://en.wikipedia.org/wiki/National_Historic_Landmarkhttp://en.wikipedia.org/wiki/Broad_Street_(Manhattan)http://en.wikipedia.org/wiki/Broad_Street_(Manhattan)http://en.wikipedia.org/wiki/Trading_roomhttp://en.wikipedia.org/wiki/Euronexthttp://www.nyse.com/about/listed/quickquote.html?ticker=nyxhttp://en.wikipedia.org/wiki/NYSE_Euronexthttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/List_of_stock_exchangeshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/New_York_Cityhttp://en.wikipedia.org/wiki/Lower_Manhattanhttp://en.wikipedia.org/wiki/Wall_Streethttp://en.wikipedia.org/wiki/Stock_exchange

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The foreign exchange market is unique because of the following characteristics:

Its huge trading volume representing the largest asset class in the world leading to high liquidity;

its geographical dispersion;

Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sundayuntil 22:00 GMT Friday;

The variety of factors that affect exchange rates; The low margins of relative profit compared with other markets of fixed income; and

The use ofleverage to enhance profit and loss margins and with respect to account size.

Commodity markets are markets where raw or primary products are exchanged. These rawcommodities are traded on regulated commodities exchanges, in which they are bought and sold instandardized contracts.

This article focuses on markets. It covers physical product (food, metals, energy) markets but not theways that services, including those of governments, nor investment, nor debt, can be seen as acommodity. Articles on reinsurance markets, stock markets, bond markets and currency markets coverthose concerns separately and in more depth. One focus of this article is the relationship betweensimple commodity money and the more complex instruments offered in the commodity markets.

The Worlds Benchmark for Commodities TradingNYSE Liffe has experienced unprecedented growth in its portfolio of commodity futures contracts inrecent years in response to market needs. Our commodity contracts have long been relied upon astrusted global and European benchmarks forCocoa, Robusta Coffee, White Sugar, Feed Wheat, MillingWheat, Rapeseed and Corn.These futures contracts, alongside the associated options contracts, are used extensively as pricediscovery and risk management tools by producers, exporters, trade-houses, refiners and manufacturers.In addition, they are actively traded by managed funds, institutional investors and proprietary traderslooking for exposure to soft and agricultural commodity markets.

International financial institutions;

International financial institutions (IFIs) are financial institutions that have been established (orchartered) by more than one country, and hence are subjects of international law. Their owners orshareholders are generally national governments, although otherinternational institutions and otherorganizations occasionally figure as shareholders. The most prominent IFIs are creations of multiplenations, although some bilateral financial institutions (created by two countries) exist and are technicallyIFIs. Many of these are multilateral development banks (MDB).

The World Bank is an international financial institution that provides loans[3]to developingcountries forcapital programs.

The World Bank's official goal is the reduction of poverty. According to the World Bank's Articles ofAgreement (as amended effective 16 February 1989), all of its decisions must be guided by acommitment to promote foreign investment, international trade, and facilitate capital investment.[4]

The World Bank differs from the World Bank Group, in that the World Bank comprises only twoinstitutions: the International Bank for Reconstruction and Development (IBRD) and the InternationalDevelopment Association (IDA), whereas the latter incorporates these two in addition to three more: International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), andInternational Centre for Settlement of Investment Disputes (ICSID).

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International Monetary Fund

The International Monetary Fund (IMF) is an international organization that was created on July 22,

1944 at the Bretton Woods Conference and came into existence on December 27, 1945 when 29

countries signed the Articles of Agreement. It originally had 45 members. The IMF's stated goal was to

stabilize exchange rates and assist the reconstruction of the worlds international payment system post-

World War II. Countries contribute money to a pool through a quota system from which countries withpayment imbalances can borrow funds temporarily. Through this activity and others such as surveillance

of its members' economies and policies, the IMF works to improve the economies of its member

countries.[2]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

and sustainable economic growth, and reduce poverty around the world. The organization's stated

objectives are to promote international economic cooperation, international trade, employment, and

exchange rate stability, including by making financial resources available to member countries to

meet balance of payments needs.[4]Its headquarters are in Washington, D.C., United States.

Asian development Bank

The Asian Development Bank (ADB) is a regional development bank established on 22 August 1966 to

facilitate economic development of countries in Asia.[2]The bank admits the members of the United Nations

Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly known as the United Nations

Economic Commission for Asia and the Far East) and non-regional developed countries.[2]From 31 members

at its establishment, ADB now has 67 members - of which 48 are from within Asia and the Pacific and 19

outside. ADB was modeled closely on the World Bank, and has a similar weighted voting system where votes

are distributed in proportion with member's capital subscriptions. At present, both the United

States and Japan hold 552,210 shares, the largest proportion of shares at 12.756% each. China holds 228,000

shares (6.429%), India holds 224,010 shares (6.317%), the 2nd and 3rd largest proportion of shares

respectively

Organization

The highest policy-making body of the bank is the Board of Governorscomposed of one representativefrom each member state. The Board of Governors, in turn, elect among themselves the 12 members ofthe Board of Directorsand their deputy. Eight of the 12 members come from regional (Asia-Pacific)members while the others come from non-regional members.

The Board of Governors also elect the bank's Presidentwho is the chairperson of the Board of Directorsand manages ADB. The president has a term of office lasting five years, and may be reelected.Traditionally, and because Japan is one of the largest shareholders of the bank, the President has alwaysbeen Japanese. The current President is Haruhiko Kuroda, who succeeded Tadao Chino in 2005.

The headquarters of the bank is at 6 ADB Avenue, Mandaluyong City, Metro Manila, Philippines,[4][5]andit has representative offices around the world. The bank employs approximately 3,000 people, comingfrom 55 of its 67 member countries, and with more than half of the staff being Filipino

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European bank for Reconstruction and development

Founded in 1991, the European Bank for Reconstruction and Development (EBRD) uses the tools ofinvestment to help build market economies and democracies in 30 countries from central Europe to central

Asia. Its mission was to support the formerly communist countries in the process of establishing their privatesectors.[1]By the seventh meeting, representatives of 40 nations and two European institutions had reachedagreement on the bank's charter, its initial size, and the distribution of power among shareholders.[2]

Headquartered in London, the EBRD is now owned by 63 countries and two intergovernmental institutions.Despite its public sector shareholders, it invests mainly in private enterprises, usually together with commercialpartners.

EBRD provides project financing for banks, industries and businesses, both new ventures and investments inexisting companies. It also works with publicly owned companies to support privatization, restructuring state-owned firms and improvement of municipal services.

The EBRDs mandate stipulates that it must only work in countries that are committed to democratic principles.The EBRD is directed by its founding agreement to promote, in the full range of its activities, environmentallysound and sustainable development.

The following countries are members and recipients

ofinvestments:

[3]

Albania, Armenia, Azerbaijan, Belarus, Bosnia andHerzegovina, Bulgaria, Croatia, Estonia, Georgia, Hungary, Jordan, Kazakhstan, Kyrgyzstan, Latvia, Liechtenstein,Lithuania, Macedonia, Moldova, Mongolia, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Tajikistan,Tunisia, Turkmenistan, Ukraine and Uzbekistan. The Republic of Kosovo is set to join as arecipient member on 17 December 2012.[4]

The following countries are financing members only: Australia, Austria, Belgium, Canada, Cyprus, CzechRepublic(receiving member until 2007-12-31[5]), Denmark, Egypt, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy,Japan, Luxembourg, Malta, Mexico, Morocco, Netherlands, New Zealand, Norway, Portugal, South Korea, Spain, Sweden,Switzerland, Turkey, the United Kingdom and the United States of America.

Two European Union institutions are also financing members: the European Community and the EuropeanInvestment Bank.

In 2006 the organization stated that it would cease spending in the Baltic and central European nations by2010, and funding would be shifted to Russia, Ukraine, Armenia, Kazakhstan and Uzbekistan.[6]Due tothe financial crisis this graduation process was postponed till 2015.[7]Among the former communist countriesonly the Czech Republic has graduated within EBRD so far (this happened in 2007) and gained the status ofthe only ex-communist country that is a shareholder within EBRD and not a borrower any more.[8]

The EBRD is not to be confused with the European Investment Bank (EIB) which is owned by the EU memberstates and supports EU policy.

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_note-8http://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-8http://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-8http://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-8http://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-CRR4-7http://en.wikipedia.org/wiki/Financial_crisishttp://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-6http://en.wikipedia.org/wiki/Uzbekistanhttp://en.wikipedia.org/wiki/Ukrainehttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Baltic_stateshttp://en.wikipedia.org/wiki/European_Investment_Bankhttp://en.wikipedia.org/wiki/European_Investment_Bankhttp://en.wikipedia.org/wiki/European_Communityhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Turkeyhttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Portugalhttp://en.wikipedia.org/wiki/Norwayhttp://en.wikipedia.org/wiki/New_Zealandhttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Moroccohttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Maltahttp://en.wikipedia.org/wiki/Maltahttp://en.wikipedia.org/wiki/Luxembourghttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Israelhttp://en.wikipedia.org/wiki/Republic_of_Irelandhttp://en.wikipedia.org/wiki/Icelandhttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/Egypthttp://en.wikipedia.org/wiki/Denmarkhttp://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-5http://en.wikipedia.org/wiki/Czech_Republichttp://en.wikipedia.org/wiki/Czech_Republichttp://en.wikipedia.org/wiki/Cyprushttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-KosovoMembership-4http://en.wikipedia.org/wiki/Republic_of_Kosovohttp://en.wikipedia.org/wiki/Uzbekistanhttp://en.wikipedia.org/wiki/Ukrainehttp://en.wikipedia.org/wiki/Turkmenistanhttp://en.wikipedia.org/wiki/Tunisiahttp://en.wikipedia.org/wiki/Tajikistanhttp://en.wikipedia.org/wiki/Sloveniahttp://en.wikipedia.org/wiki/Sloveniahttp://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Serbiahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Romaniahttp://en.wikipedia.org/wiki/Polandhttp://en.wikipedia.org/wiki/Montenegrohttp://en.wikipedia.org/wiki/Mongoliahttp://en.wikipedia.org/wiki/Moldovahttp://en.wikipedia.org/wiki/Republic_of_Macedoniahttp://en.wikipedia.org/wiki/Lithuaniahttp://en.wikipedia.org/wiki/Liechtensteinhttp://en.wikipedia.org/wiki/Liechtensteinhttp://en.wikipedia.org/wiki/Latviahttp://en.wikipedia.org/wiki/Kyrgyzstanhttp://en.wikipedia.org/wiki/Kazakhstanhttp://en.wikipedia.org/wiki/Jordanhttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/Georgia_(country)http://en.wikipedia.org/wiki/Estoniahttp://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Belarushttp://en.wikipedia.org/wiki/Azerbaijanhttp://en.wikipedia.org/wiki/Armeniahttp://en.wikipedia.org/wiki/Albaniahttp://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-3http://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-2http://en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development#cite_note-1http://en.wikipedia.org/wiki/Transition_economyhttp://en.wikipedia.org/wiki/Transition_economyhttp://en.wikipedia.org/wiki/Communist

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EXIM BANK (INDIA):

Export-Import Bank of India is the premier export finance institution of the country, established in 1982under the Export-Import Bank of India Act 1981.

Description

Government of India launched the institution with a mandate, not just to enhance exports from India, butto integrate the countrys foreign trade and investment with the overall economic growth. Since itsinception, Exim Bank of India has been both a catalyst and a key player in the promotion of cross bordertrade and investment. Commencing operations as a purveyor of export credit, like otherExport CreditAgencies in the world, Exim Bank of India has, over the period, evolved into an institution that plays amajor role in partnering Indian industries, particularly the Small and Medium Enterprises, intheirglobalisation efforts, through a wide range of products and services offered at all stages of thebusiness cycle, starting from import oftechnology and export product development to exportproduction, export marketing, pre-shipment and post-shipment and overseas investment.[3]

[edit]Organization

Exim Bank is managed by a Board of Directors, which has representatives from the

Government, Reserve Bank of India, Export Credit Guarantee Corporation of India, a financialinstitution, public sectorbanks, and the business community.

The Bank's functions are segmented into several operating groups including:

Corporate Banking Group which handles a variety of financing programmes forExport OrientedUnits (EOUs), Importers, and overseas investment by Indian companies.

Project Finance / Trade Finance Group handles the entire range of export credit services such assupplier's credit, pre-shipment Agri Business Group, to spearhead the initiative to promote andsupport Agri-exports. The Group handles projects and export transactions in the agriculturalsectorfor financing.

Small and Medium Enterprise: The group handles credit proposals from SMEs under various lendingprogrammes of the Bank.

Export Services Group offers variety of advisory and value-added information services aimed atinvestment promotion.

Export Marketing Services Bank offers assistance to Indian companies, to enable them establishtheirproducts in overseas markets. The idea behind this service is to promote Indian export. ExportMarketing Services covers wide range of export oriented companies and organizations. EMS groupalso covers Project exports and Export of Services.

Besides these, the Support Services groups, which include: Research & Planning, Corporate

Finance, Loan Recovery, Internal Audit, Management Information Services, Information Technology,Legal, Human Resources Management and Corporate Affairs.

http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Export_credit_agencyhttp://en.wikipedia.org/wiki/Export_credit_agencyhttp://en.wikipedia.org/wiki/Globalisationhttp://en.wikipedia.org/wiki/Technologyhttp://en.wikipedia.org/wiki/Product_developmenthttp://en.wikipedia.org/wiki/Export_marketinghttp://en.wikipedia.org/wiki/Exim_Bank_(India)#cite_note-3http://en.wikipedia.org/wiki/Exim_Bank_(India)#cite_note-3http://en.wikipedia.org/wiki/Exim_Bank_(India)#cite_note-3http://en.wikipedia.org/w/index.php?title=Exim_Bank_(India)&action=edit&section=2http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Export_Credit_Guarantee_Corporation_of_Indiahttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Public_sectorhttp://en.wikipedia.org/wiki/Export-orientedhttp://en.wikipedia.org/wiki/Export-orientedhttp://en.wikipedia.org/wiki/Importerhttp://en.wikipedia.org/wiki/Agricultural_sectorhttp://en.wikipedia.org/wiki/Agricultural_sectorhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Agricultural_sectorhttp://en.wikipedia.org/wiki/Agricultural_sectorhttp://en.wikipedia.org/wiki/Importerhttp://en.wikipedia.org/wiki/Export-orientedhttp://en.wikipedia.org/wiki/Export-orientedhttp://en.wikipedia.org/wiki/Public_sectorhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Export_Credit_Guarantee_Corporation_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/w/index.php?title=Exim_Bank_(India)&action=edit&section=2http://en.wikipedia.org/wiki/Exim_Bank_(India)#cite_note-3http://en.wikipedia.org/wiki/Export_marketinghttp://en.wikipedia.org/wiki/Product_developmenthttp://en.wikipedia.org/wiki/Technologyhttp://en.wikipedia.org/wiki/Globalisationhttp://en.wikipedia.org/wiki/Export_credit_agencyhttp://en.wikipedia.org/wiki/Export_credit_agencyhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Government_of_India

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BUYERS CREDIT

Buyer's credit is the credit availed by an importer (buyer) from overseas lenders, i.e. banks and financialinstitutions for payment of his imports on due date. The overseas banks usually lend the importer (buyer)based on the letter of comfort (a bank guarantee) issued by the importers bank. Importer's bank or BuyersCredit Consultant or importer arranges buyer's credit from international branches of a domestic bank orinternational banks in foreign countries. For this service, importer's bank or buyer's credit consultantcharges a fee called an arrangement fee.

Buyer's credit helps local importers gain access to cheaper foreign funds close to LIBOR rates asagainst local sources of funding which are costly compared to LIBOR rates.

The duration of buyer's credit may vary from country to country, as per the local regulations. Forexample in India, buyer's credit can be availed for one year in case the import is for trade-ablegoods and for three years if the import is for capital goods. Every six months, the interest onbuyer's credit may get reset.

A financial arrangement in which a bank or financial institution, or an export credit agency in theexporting country, extends a loan directly to a foreign buyer or to a bank in the importing countryto pay for the purchase of goods and services from the exporting country. Also known as financialcredit. This term does not refer to credit extended directly from the buyer to the seller (for

example, through advance payment for goods and services).

The Practicla example is that foreign Bank makes payment to exporter based on either Letter ofUndertaking from the Importer bank or based on their risk on Importer. Letter of Undertaking issimply confirmation by a bank here in importer country to pay to exporter bank thus exporter bankrisk get reduced. The Letter of undertaking is issued by Importer bank on the basis of risk onImporter.

Simply , Importer Bank takes risk on Importer , This bank sends LOU to exporter bank which inturn takes risk on Imprter bank and makes payment. On fimal day Importer bank recover moneyfrom importer and makes payment to exporter bank.

Supplier credit

Supplier credit is an offer of credit that is extended to a buyer by a seller or supplier. This model is oftenused in a number of settings, including the importing/exporting business, as well as in supplying goods and

services to businesses of all sizes. Credit of this type allows the buyer to receive the products needed now,

paying for them later in accordance with the terms and conditions agreed upon with the seller.

One example of supplier credit can be found with the exporting of goods for sale in another country. Withthis model, the entity selling the goods extends credit to the entity that is purchasing the goods, with the plan

of offering them for sale at a profit. The supplier may issue a line of credit to the importer, assuming that the

client can demonstrate to the supplier that the importer is credit worthy.

In many cases, this line of supplier credit may be structured in a manner that calls for the importer to pay apercentage of the total contract price up front, and issue some type of promissory note to the supplier for the

remainder of the outstanding balance. The importer may also arrange a delayed draft to settle the

difference, with the draft set to clear the importers bank account at a specified future date. Often, this date

will be at a time after the importer believes that the imported goods will be sold at a profit, allowing the

transaction to take place without the need for the importer to tie up cash assets in the interim.

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This form of self-financing has many benefits for both the supplier and the customer. For the customer, the

establishment of a line of credit means it is possible to order what is needed now and pay for it incrementally

while earning a return from the use of the items ordered. For the supplier, extending the line of credit means

that steady flows of revenue are created, assuming that all customers who are granted supplier credit make

timely payments on their outstanding balances.

Like most type of credit situations, supplier credit usually is provided with the provision that finance chargeswill apply to the outstanding balance in the clients credit account. The amount of interest charged is

normally determined based on governmental regulations that apply in the jurisdictions involved, thus

ensuring that customers are not charged an inordinate amount of interest as part of the

supplier credit option. This rate of interest is usually competitive with the interest rates the customer would

have to pay if some other source of credit were used to manage the purchase.

Credit rating Agency:

A credit rating agency (CRA) is a company that assigns credit ratings forissuers of certain types

ofdebt obligations as well as the debt instruments themselves. In some cases, the servicers of theunderlying debt are also given ratings.

In most cases, the issuers ofsecurities are companies, special purpose entities, state and local

governments, non-profit organizations, or national governments issuing debt-like securities (i.e., bonds)

that can be traded on a secondary market. A credit rating for an issuer takes into consideration the

issuer's credit worthiness (i.e., its ability to pay back a loan), and affects the interest rate applied to the

particular security being issued.

The value of such security ratings has been widely questioned after the 2007-09 financial crisis. In 2003,

the U.S. Securities and Exchange Commission submitted a report to Congress detailing plans to launch

an investigation into the anti-competitive practices of credit rating agencies and issues including conflicts

of interest.[1]More recently, ratings downgrades during the European sovereign debt crisis of 2010-11

have drawn criticism from the EU and individual countries.

A company that issues credit scores for individual credit-worthiness is generally called a credit

bureau (US) or Uses of ratings

Credit ratings are used by investors, issuers, investment banks, broker-dealers, and governments. For

investors, credit rating agencies increase the range of investment alternatives and provide independent,

easy-to-use measurements of relative credit risk; this generally increases the efficiency of the market,

lowering costs for both borrowers and lenders. This in turn increases the total supply of risk capital in the

economy, leading to stronger growth. It also opens the capital markets to categories of borrower who

might otherwise be shut out altogether: small governments, startup companies, hospitals, and

universities.

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Criticism

Credit rating agencies have been subject to the following criticisms:

Credit rating agencies do not downgrade companies promptly enough. For example, Enron's rating

remained at investment grade four days before the company went bankrupt, despite the fact thatcredit rating agencies had been aware of the company's problems for months. Or, for example,

Moody's gave Freddie Mac preferred stock the top rating until Warren Buffett talked about Freddie

on CNBC and on the next day Moody's downgraded Freddie to one tick above junk bonds.[11]Some

empirical studies have documented that yield spreads of corporate bonds start to expand as credit

quality deteriorates but before a rating downgrade, implying that the market often leads a downgrade

and questioning the informational value of credit ratings.[12]This has led to suggestions that, rather

than rely on CRA ratings in financial regulation, financial regulators should instead require banks,

broker-dealers and insurance firms (among others) to use credit spreads when calculating the risk in

theirportfolio.

Large corporate rating agencies have been criticized for having too familiar a relationship withcompany management, possibly opening themselves to undue influence or the vulnerability of being

misled. These agencies meet frequently in person with the management of many companies, and

advise on actions the company should take to maintain a certain rating. Furthermore, because

information about ratings changes from the larger CRAs can spread so quickly (by word of mouth,

email, etc.), the larger CRAs charge debt issuers, rather than investors, for their ratings. This has led

to accusations that these CRAs are plagued by conflicts of interest that might inhibit them from

providing accurate and honest ratings. At the same time, more generally, the largest agencies

(Moody's and Standard & Poor's) are often seen as promoting a narrow-minded focus on credit

ratings, possibly at the expense of employees, the environment, or long-term research and

development. These accusations are not entirely consistent: on one hand, the larger CRAs are

accused of being too cozy with the companies they rate, and on the other hand they are accused of

being too focused on a company's "bottom line" and unwilling to listen to a company's explanationsfor its actions

http://en.wikipedia.org/wiki/Freddie_Machttp://en.wikipedia.org/wiki/Warren_Buffetthttp://en.wikipedia.org/wiki/CNBChttp://en.wikipedia.org/wiki/High-yield_debthttp://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-AP-20080922-11http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-AP-20080922-11http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-AP-20080922-11http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-12http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-12http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-12http://en.wikipedia.org/wiki/Credit_spread_(bond)http://en.wikipedia.org/wiki/Portfolio_(finance)http://en.wikipedia.org/wiki/Bottom_linehttp://en.wikipedia.org/wiki/Bottom_linehttp://en.wikipedia.org/wiki/Portfolio_(finance)http://en.wikipedia.org/wiki/Credit_spread_(bond)http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-12http://en.wikipedia.org/wiki/Credit_rating_agency#cite_note-AP-20080922-11http://en.wikipedia.org/wiki/High-yield_debthttp://en.wikipedia.org/wiki/CNBChttp://en.wikipedia.org/wiki/Warren_Buffetthttp://en.wikipedia.org/wiki/Freddie_Mac

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Export Credit Guarantee Corporation of India:

The Export Credit Guarantee Corporation of India Limited(ECGC) is a company wholly owned by

the Government of India based in Mumbai, Maharashtra It provides export credit insurance support toIndian exporters and is controlled by the Ministry of Commerce. Government of India had initially set up

Export Risks Insurance Corporation (ERIC) in July 1957. It was transformed into Export Credit and

Guarantee Corporation Limited (ECGC) in 1964 and to Export Credit Guarantee of India in 1983.

ECGC of India Ltd was established in July, 1957 to strengthen the export promotion by covering the risk

of exporting on credit. It functions under the administrative control of the Ministry of Commerce & Industry,

Department of Commerce, and Government of India. It is managed by a Board of Directors comprising

representatives of the Government, Reserve Bank of India, banking, and insurance and exporting

community.

ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present

paid-up capital of the company is Rs.900 crores and authorized capital Rs.1000 crores.

What does ECGC do?

Provides a range of credit risk insurance covers to exporters against loss in export of goods and services.

Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities fromthem.

Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in theform of equity or loan.

.How does ECGC help exporters?

Offers insurance protection to exporters against payment risks

Provides guidance in export-related activities

Makes available information on different countries with its own credit ratings

Makes it easy to obtain export finance from banks/financial institutions

Assists exporters in recovering bad debts

Provides information on credit-worthiness of overseas buyers

http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Ministry_of_Commerce_and_Industry_(India)http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Ministry_of_Commerce_and_Industry_(India)http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Government_of_India

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Module III: International Trade Finance & Payment Systems

Modes of Payments in Trade:

International trade differs from domestic trade with respect to methods and documents used. In

a domestic transaction the buyer and the seller are closer to each other, than in case of foreign

trade. In international trade it is usually difficult for the seller to obtain correct information about

the credit worthiness of the buyer abroad. There are also the problems of communication.

Moreover the means of transportation are less certain. This increases the problems of

collection, since any legal recovery process will be costly and time consuming. In any case

whether the sale is for cash or credit, payment has to be made. Following are the some of the

basic modes of payment in international trade.

Open Account:

The seller debits the account of the importer whenever he exports goods. The account is

settled periodically in accordance with the terms of credit and rate of interest agreed upon in

advance. The exporter sends the documents of title directly to the importer. This method saves

the exporter from the trouble of drawing and discounting bills of exchange. But a great degree

of risk in payments is involved.

Consignment Sale:

The exporter has selling agents abroad. The consignment is dispatched to the agent, who

receives the goods without making any payment for them. The little of the goods remains with

the exporter. Sale is made by the agent for and on behalf of the exporter.

Deferred Payments:

This mode of payment is adopted in case of expensive capital equipment or machinery. The

importer pays a part of the price in advance and another part on receiving the shipping

documents. The balance is payable in periodical installments spread over a period of two toseven years. The unpaid balance is generally guaranteed by the importer's bank.

Bank Transfers:

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The importer makes