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TitleA PROJECT REPORT ON CREDIT APPRAISAL
File Size517.5 KB
Total Pages107
Table of Contents
                            Reasons for declining trend of bank credit
Objectives of credit policy
Ratios for appraising term loans:
	COMMITMENT CHARGES
	RATE OF PENAL INTEREST
	AMOUNT ON WHICH PENAL INTEREST TO BE CHARGED
                        
Document Text Contents
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CREDIT APPRAISAL

discount represents the interest on the advance from the date of purchase of the bill until it is

due for payment.

Bills of exchange- A bill of exchange or "draft" is a written order by the drawer to the

drawee to pay money to the payee. A common type of bill of exchange is the cheque (check

in American English), defined as a bill of exchange drawn on a banker and payable on

demand. Bills of exchange are used primarily in international trade, and are written orders by

one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent

of paper currency, bills of exchange were a common means of exchange. They are not used

as often today.

A bill of exchange is an unconditional order in writing addressed by one person to another,

signed by the person giving it, requiring the person to whom it is addressed to pay on

demand or at fixed or determinable future time a sum certain in money to order or to bearer.

It is essentially an order made by one person to another to pay money to a third person.

A bill of exchange requires in its inception three parties--the drawer, the drawee, and the

payee.

The person who draws the bill is called the drawer. He gives the order to pay money to third

party. The party upon whom the bill is drawn id called the drawee. He is the person to whom

the bill is addressed and who is ordered to pay. He becomes an acceptor when he indicates

his willingness to pay the bill. The party in whose favor the bill is drawn or is payable is

called the payee.

Promissory Note- A promissory note is a written promise by the maker to pay money to the

payee. Bank note is frequently transferred as a promissory note, a promissory note made by a

bank and payable to bearer on demand. A maker of a promissory note promises to

unconditionally pay the payee (beneficiary) a specific amount on a specified date.

A promissory note is an unconditional promise to pay a specific amount to bearer or to the

order of a named person, on demand or on a specified date.

A negotiable promissory note is unconditional promise in writing made by one person to

another, signed by the maker, engaging to pay on demand, or at fixed or determinable future

time, sum certain in money to order or to bearer

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CREDIT APPRAISAL

II. EXPORT FINANCE -

This type of a credit facility is provided to exporters who export their goods to different

places. It is divided into two parts- pre-shipment finance and post-shipment finance.

• Pre Shipment Finance is issued by a financial institution when the seller want the

payment of the goods before shipment.

• Post Shipment Finance is a kind of loan provided by a financial institution to an

exporter or seller against a shipment that has already been made. This type of export

finance is granted from the date of extending the credit after shipment of the goods to

the realization date of the exporter proceeds. Exporters don’t wait for the importer to

deposit the funds.

Non Fund Based loans generate income for the bank without committing the funds of
the bank. Bank generates substantial income under this head. There are two types of credit

under this category which are discussed as follows:-

I. BANK GUARANTEE-

A bank guarantee is a written contract given by a bank on the behalf of a customer. By

issuing this guarantee, a bank takes responsibility for payment of a sum of money in case, if

it is not paid by the customer on whose behalf the guarantee has been issued. In return, a

bank gets some commission for issuing the guarantee.

Any one can apply for a bank guarantee, if his or her company has obligations towards a

third party for which funds need to be blocked in order to guarantee that his or her company

fulfils its obligations (for example carrying out certain works, payment of a debt, etc.).

In case of any changes or cancellation during the transaction process, a bank guarantee

remains valid until the customer dully releases the bank from its liability.

In the situations, where a customer fails to pay the money, the bank must pay the amount

within three working days. This payment can also be refused by the bank, if the claim is

found to be unlawful.

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