Role Of Banks In Foreign Trade

Banks Extended credit facilities to the exporter to procure raw materials process them and prepare them for shipment to the importer. They also extend post shipment financing facility to the exporters. Besides financing, the banks render service to the exporters by advising, confirming Letter of Credit issued in favour of the exporters by their correspondent abroad. Banks may also execute guarantees on behalf of their export customers.


Banks issue Letter of Credit on behalf of their importer-customers. Thus they undertake financial guarantee of stipulated documents. They also extend post import financing facility to the importer.

Besides extending services to the importers and exporters banks perform activities of inward and outward remittances and also open and maintain non-resident accounts. Banks also buy and sell foreign exchange from and to the public.

Foreign exchange business is concentrated in selected branches of commercial bank. It is obviously a highly specialized business. The Concerned officers of the foreign exchange department should possess an in depth knowledge of the rules and regulations of foreign exchange business in particular and banking in general.Besides, the foreign exchange dealing branches of the commercial banks should meticulously follow the guidelines prescribed by their head office, From time to time.