Commercial banks provide various credit facilities and payment services designed to facilitate smooth trade transactions. Match each commercial banking service or payment instrument on the left with the specific operational requirement it fulfills for a trader on the right.
- Discounting Bills of ExchangeSelling an accepted trade bill to a bank before its due date at less than face value to obtain immediate liquidity
- Credit TransferRemitting funds directly to multiple trade creditors' accounts across different financial institutions using a single payment instruction
- Standing OrderInstructing a commercial bank to pay a fixed amount at regular specified intervals to a named beneficiary
- Bank OverdraftAllowing a current account holder to withdraw funds exceeding their account balance up to an agreed limit for short-term cash needs
Answer
Discounting Bills of Exchange matches selling an accepted trade bill to a bank before its due date at less than face value to obtain immediate liquidity; Credit Transfer matches remitting funds directly to multiple trade creditors' accounts across different financial institutions using a single payment instruction; Standing Order matches instructing a commercial bank to pay a fixed amount at regular specified intervals to a named beneficiary; Bank Overdraft matches allowing a current account holder to withdraw funds exceeding their account balance up to an agreed limit for short-term cash needs.
Each banking service directly aligns with its specific trade function: Discounting bills provides immediate cash before maturity; credit transfer simplifies bulk supplier payments; standing orders handle regular fixed commitments; overdrafts satisfy short-term working capital deficits.
Step-by-Step Solution
Key Concept
Commercial Banking Functions and Services to Trade