Avalisation of a Bill (Aval)

Definition (1):

Avalisation of a Bill (Aval) is a bank’s guarantee to honor payment of a Bill of Exchange. It is an irrevocable, unconditional promise to pay on the due date.

The use of avals is common in the practice of forfaiting.

Definition (2):

“Aval is the specific endorsement on a Bill of Exchange or Draft by a bank, which guarantees payment should the Drawee (the Importer) default on the payment of the bill at maturity.”

Definition (3):

Under a trade contract, exporters may need a third party, generally a bank, to guarantee a bill of exchange’s payment drawn on an importer. This action is called avalisation of a Bill (Aval). It can be given upon request, on behalf of the exporter. A bank commits itself unconditionally for paying should the drawee default.

Avalisation of a Bill (Aval) provides the exporters with the assurance that payment will be made and thus substitute the risk of the bank for the risk of the importers. This bill can be used or discounted to negotiate improved credit terms and can improve the trading relationship with the importer.

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