6.3 Motivation for Letter of Credit Operation Specially Prime Bank Ltd.

Prime Bank Ltd. has committed to Boost up the export position and diminishes the import position, raising of Gross Domestic Product (GDP) maximizing the national growth & abolishing the unemployment percent of a educated sector of the nation.

All the brunches of Prime Bank Limited are authorized dealer of Foreign Exchange Business. The authorized dealer motivate the importer to import Raw materials, Fabrics, Accessories, Chemicals, Vegetable Fat etc.             
 
The import or export are motivated by the Prime Bank Limited to the foreign exchange business, particularly to open the letter of credit. A letter credit offer advantages both to the importer and exporter. The advantages accuring to either of the parties differ depending upon the nature of credit opened There Certain Common benefit accuring from the use of credit as under.

Advantages to the Importers :

i) Ability : The letter of credit enables the importer of purchase materials (particularly in sellers market) without making full advance payment.         
ii) Assurance : If the importer task certain safe guards, like calling for packing list, invoice ate, the quality and quantity of the goods consigned is assured.
iii) Without Payment : Prided the buyer has buying credit with the Prime Bank he may get goods released by the Bank under trust (e.s. LTR, LIM etc), i.e without payment and pay for then on sale.

Advantages of the Exporters :

i) Undertaking : A superior undertaking of the bank under the letter of credit assures the importer that when the documents are tendered as per the turns of the credit payment would be made to him.
ii) Controlling : The exporter is absolved of the botheration of knowing in details the exchange control regulations of the importer country and is also increased to some extent against charges in such regulations.

 

CONCLUSION

Modern Commercial Banking is exacting business. The reward are modest, the penalties for bad looking are enormous. And Commercial bank's are great monetary institutions, important to the general welfare of the economy more than any other financial institution. It has a vastly sobering and exacting responsibility.

Prime Bank Limited (PBL) playing a vital role in financing import and exports of the country. Without Bank's co-operation, it is not possible to run any business or production activity in this age. Exports and import need finance in various stages of their activities. Export and import financing are letter of credit (L/C), payment against documents (PAD), loan against imported merchandise (LIM) etc. All these facilities are provided by PBL. For this purpose Bank's consider the borrower's business standing, integrity, liability with the bank term and conditions of the L/C. There are lot of risks involved in foreign business. So, the Prime Bank Limited (PBL) have to clearly justify the customers from a neutral point and gather the current information about the market.

Bibliography

1. Transactions in foreign exchange : Principles and practices
-    M.A. Yousuf & M.R. Sinha

2. Foreign exchange & exchange control
-     V.V. Keshkamat

3. Foreign exchange and financing of foreign trade
-     Syed Ashraf Ali

4. PBL's Annual Report 1995 To 1999.

5. Foreign Exchange
- C. Jeevanandam

6. Organizational Behavior
- John W. Newstrom and Keith Davis

7. Personnel / Human Resource Management
- David A. De-cenzo 
- Stephen P. Robbins