Banker's acceptance

A bankers acceptance is used for international trade as means of ensuring payments.It is a short-term debt.obligations that are secured by banks.That is a bank promises to pay creditor a specified amount on a specified date if a borrower default. The term of bankers acceptance is typically 90 days from the date of issue but can range from 1 to 180 days.

According to L.J. Gitman, “Bankers acceptance arise from a sort term credit arrangement used by business to finance transaction, especially, those involving firms in foreign countries of firm with unknown credit capacities.”

Definition Two:

Banker's acceptance is a Bill of Exchange accepted by a bank usually for the purpose of financing a sale of goods to or by the bank’s customer. The bill may be drawn by an exporter on the importer’s bank and be sold on the open market at a discount.

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