Page 139 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes Lease Financing

Leasing is an important alternative source of financing a capital outlay. It involves letting out
assets on lease for use by the lessee for a particular period of time.
Following are the important services provided in regard to leasing:

1. Providing advice on the viability of leasing as an alternative source for financing capital
investment projects.
2. Providing advice on the choice of a favourable rental structure.

In India, leasing is a non-banking financial activity. Commercial banks like State Bank of India
and Canara Bank also provide lease financing by forming subsidiaries under the amended
Banking Regulations Act of 1949.

Foreign Currency Financing

Foreign currency finance is the fund provided for foreign trade transactions. It may take the
form of export-import trade finance, euro currency loans, Indian joint venture abroad or foreign
collaborations. The main areas that are covered in this type of merchant activity are as follows:
1. Providing assistance for carrying out the study of turnkey and construction contract projects.
2. Providing guidance on forward cover for exchange risk.
3. Providing assistance in opening and operating banks accounts abroad.

4. Providing assistance in applications to working groups, liaison with RBI, ECGD and other
institutions.
5. Providing assistance in obtaining export credit facilities from the EXIM bank for export of
capital goods, and arranging for the necessary government approvals and clearance.
6. Assisting in arranging foreign currency guarantees and performance bonds for exporters.

Forms of Foreign Currency Loans

The various types of foreign currency loans are:

Euro-currency Loans
Financing Indian Joint Ventures abroad through:
Advice on the nature of client’s investment.
Financial structuring of the project
Syndication of Euro loans

Bank guarantees
Procuring euro-currency facilities in the form of management and syndication of
Euro-currency loans, bonds, Floating Rate Notes (FRNs), Floating Rate Certificates
of Deposits (FRCDs), US commercial papers, with the assistance of International
Treasury Management Limited (ITM).

Providing advice on currency swaps and interest rate swaps.
Arranging deferred term export finance to Indian entrepreneurs by maintaining a
quick liaison with the export country’s Export Credit Agencies who offer fixed rate

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