APG (Advance payment Guarantee)
A
guarantee issued by bank, on behalf of a seller to a buyer, in relation to any
advance payment that is made by the buyer to seller to allow the contract to commence. If the contract is not
completed the buyer can claim reimbursement of the advance payment under the
guarantee
APG
issued by banks on behalf of their clients in the context of large construction
project or export sales contract. The bank undertakes to repay up-front
payments that the client has received from the contract awarding authority in
the event that the client does not fulfill the terms of its contract.
PG (Performance Bank Guarantee)
The
performance bank guarantee is an irrevocable
undertaking of bank to pay a certain amount to the beneficiary of
the guarantee within the specified limits of the guarantee if the bank’s
customer who has requested the bank to issue such guarantee – the principal-
has failed to fulfill his obligations
towards the beneficiary.
BG (Bank Guarantee)
A guarantee from a lending institution
ensuring that the liabilities n of a debtors will be met. In other words, if
the debtors fail to settle a debts, the bank will cover it.
Performance Bond
A
performance bond is a surety bond that is issued by a bank or insurance company
to guarantee satisfactory completion
project by a person.
Bid Bond: A written guarantee from a third party
guarantor (usually a bank or an insurance company) submitted to a principal
(Client/ customer/) by a contractor (bidder) with a bid. It is ensure that on
acceptance of bid by the customer the contractor will proceed with the contract
and will replace the bid bond with a performance bond. Otherwise, the guarantor
will pay the customer the difference between the contractor’s bid and the next
highest bidder. This difference is called liquidated damages pf the bid bond.
Continuous Loan: The loan
accounts in which transactions may be made within certain limit and have an
expiry date for full adjustment will be treated as Continuous Loan. Examples
are: Cash Credit, Overdraft, etc.
Demand Loan: The loans that
become repayable on demand by the bank will be treated as Demand Loan. If any
contingent or any other liabilities are turned to forced loan (i.e. without any
prior approval as regular loan) those too will be treated as Demand Loan. Such
as: Forced Loan against Imported Merchandise, Payment against Document, Foreign
Bill Purchased, and Inland Bill Purchased, etc.
Fixed Term Loan: The loans,
which are repayable within a specific time period under a specific repayment
schedule, will be treated as Fixed Term Loan.
Post Import Finance
A loan facility given by the bank to importer (customer) to settle bills of exchange that have matured and the
importer has not mobilized adequate resources to settle the same. Banks are
allowing its client an additional credit period, which is un-disclosed to the
seller. The facility is usually granted for bill drawn under an importer usance
letter of credit.
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Purpose
Extended credit period
Lower lending rate (LIBOR plus a small
margin)
Eases cash flow problem
Sales proceeds realized before making
payment.
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Banks extended this facility in
following forms:
Payment against documents (PAD)
Letter of Trust Receipts (LTR)
Loan against imported merchandise (LIM)
Subsequent Time loan
Subsequent Leas finance
Subsequent Term Loan
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Pre- Shipment Finance
Pre- shipment finance is working capital finance that is provided by bank
to an exporter, with – recourse basis against either a confirmed export order
or a Letter of Credit. This facility is allow to the exporter to meet the
working capital requirement to purchase goods or raw material subsequent
manufacturing of final goods. Warehousing, or to arrange for the transportation
of goods. Banks extended this facility in following forms:
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i)
Back to Back L/c (BTB L/c)
ii)
Advance bill purchase (ABP)
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i)
Export Cash Credit ECC
ii)
Packing Cash Credit (PC)
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Post Shipment Finance
Post shipment finance is kind of loan
provided by the bank to exporter or seller against a shipment that has already
been made. This type of finance is granted from the date of extending the
credit after shipment of goods to the realization date of the export proceeds.
It is provided against evidence of shipment of goods or supplies made to the
importer or seller or any other designated agency. Banks extended this facility in form of
Foreign documentary bill purchase (FDBP)
Forced Loan:
The loan which
creates without any prior approval as regular loan
in case of failure of the borrower to meet the
obligation there off as it was committed by the bank for payment of
any legal claim by the beneficiary against any contingent or any other
liabilities.
The loan which
creates by the bank as an obligatory without any prior approval as regular loan
against any contingent or any other liabilities
which is become due for repayment but the borrower fails to meet the obligation
there off.
Normally banks
have to create forced loan in the following case:
Loan against Imported Merchandise
Payment against Document
Foreign Bill Purchased,
Inland Bill Purchased,
Large Loan:
The
large loan is an exposure of a particular borrower which is 10% or above of
paid up capital. Presently bank can extend credit facility as large loan as follows:
% of Classified Loan
Maximum limit
of total
Exposure
for large loan
Up to 5%
56% of total loan portfolio
Above 5% to 10%
52% of total loan portfolio
Above 10% to 15% 48% of total
loan portfolio
Above 15% to 20%
44% of total loan portfolio
Above 20%
40% of total loan portfolio
Revolving
Credit.
A line of credit
that permits the borrower to withdraw funds or charge purchases up to a
specified dollar amount. The outstanding balance may fluctuate at various times
from zero up to the maximum amount. Also referred to as open-end credit.