BANKERS CREDIT Meaning and
Definition
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Banker's credit refers to a financial facility provided by a bank to a customer to facilitate international trade transactions. It is a method used by banks to provide a guarantee to a beneficiary (often the exporter) that the customer (often the importer) will fulfill their payment obligations. This facility enables businesses engaged in cross-border trade to mitigate the risks associated with international transactions.
Banker's credit typically takes the form of a letter of credit (LC), which is a written undertaking issued by a bank on behalf of its customer, stating its commitment to pay a specified amount of money to the beneficiary upon the submission of certain documents, such as shipping documents, invoices, and inspection certificates. The LC acts as a contingent liability for the bank, as it ensures that the exporter will receive payment as long as the required documents conform to the terms and conditions stated in the credit.
The use of banker's credit provides security to both the exporter and importer involved in international trade. For the exporter, it reduces the risk of non-payment or default by the importer, as the bank assumes responsibility for payment. For the importer, it offers assurance that payment will only be made upon the successful completion of the agreed-upon conditions, ensuring that the goods or services are as specified and confirming their quality and quantity.
Overall, banker's credit is a crucial tool in international trade finance, as it enables businesses to engage in trade transactions with reduced risk and increased certainty regarding payment.
Common Misspellings for BANKERS CREDIT
- vankers credit
- nankers credit
- hankers credit
- gankers credit
- bznkers credit
- bsnkers credit
- bwnkers credit
- bqnkers credit
- babkers credit
- bamkers credit
- bajkers credit
- bahkers credit
- banjers credit
- banmers credit
- banlers credit
- banoers credit
- baniers credit
- bankwrs credit
- banksrs credit
Etymology of BANKERS CREDIT
The term "bankers credit" does not have a specific etymology as it consists of two separate words: "bankers" and "credit". However, understanding the origins of each word can provide insight.
- "Bankers": The word "banker" originated from the Italian word "banca", which referred to a bench or table used by money changers or lenders. It later evolved into "bancarius" in Old French and eventually became "banker" in English.
- "Credit": The word "credit" originated from the Latin term "creditum", which means "loan" or "trust". It comes from the verb "credere", meaning "to believe" or "to trust".
When combined, "bankers credit" refers to the trust or loan offered by bankers. It is likely used to describe the trustworthiness or reputation of a bank in extending credit to individuals or businesses.
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