Interview Questions.

Question 1. What Is The Difference Between Fiscal Deficit And Current Account Deficit?

Answer :

Fiscal deficit can be understood as when government’s overall expenditure is greater than the revenue earned (except for cash borrowed).
A current account deficit manner the price of imports of products / services / funding incomes is extra than the price of exports. It is sometimes referred to as a trade deficit.

Question 2. What Do You Understand By Balance Of Trade?

Answer :

stability of alternate may be understood by means of the distinction of general cost of exports and overall price of imports. If imports are extra than exports there's a trade deficit, and in vice versa situation it's far known as trade surplus.

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Question three. Name A Few Items Which India Import The Most?

Answer :

India imports many items, fundamental of which can be petroleum products and coal.

Question four. Banks Issue Letter Of Credit To Customers. What Is Letter Of Credit?

Answer :

Letter of credit score is a non fund based totally banking improve in which branch acts as a marketing consultant or confirming function. Importers and Exporters are commonly unknown to each different. In such cases they create banking channel in between. A letter of credit score is a dedication from the bank that they'll pay the dues of the importer/exporter in case the fee fails or goods received are not of the equal first-rate as agreed upon. All Transactions are accomplished between . 

Exporter >> Exporter Bank >>>> Importer Bank >>> Importer 

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Question 5. Why Are Letter Of Credit Known As Non Fund Based Advance?

Answer :

In Letter of credit score, no cash charge is finished by using the bank directly. Bank problems a letter of credit score that is a affirmation to the Exporter/Importer approximately charge from the Importer/Exporter respectively. Bank problems Letter of credit on foundation of security that is forfeited if Letter of credit issued with the aid of the bank on behalf of the customer is invoked.

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Question 6. Why Letter Of Credit Is A Contingent Liability?

Answer :

Contingent liabilities are those liabilities which aren't a liability today however can become a legal responsibility day after today. Letter of credit score are non fund based totally advances, which of invoked turns into a liability because it turns into a fund based totally boost.

Question 7. What Is Direct Benefit Transfer?

Answer :

Sir When a LC is issued in continuation of an existing Letter of Credit. Arrangement wherein one irrevocable letter of credit score serves because the collateral for any other; the advising bank of the first letter of credit score will become the issuing bank of the second letter of credit score.

Modern Banking Tutorial Accounts and Finance for Managers Interview Questions
Question 8. How Long Can A Usance Letter Of Credit Be Opened For?

Answer :

There aren't any specific or implicit mentions within the UCP 600 or ISBP concerning the most time period in which a usance Letter of Credit may be issued. So the term is regularly defined through the local legal guidelines of the issuing financial institution’s united states of america which control LC phrases.

Question nine. Can A Bank Guarantee Be Issued For Services And Goods Such As Commodities?

Answer :

The tool itself, be that a Bank Guarantee or a Standby Letter of Credit, is not as important as the contractual wording of the economic tool, and the relevant UCP Rules governing the instrument.
Generally Standby Letters of Credit, or commercial SBLCs are the less expensive and greater normal fee guarantee over Bank Guarantees. Furthermore, looking at the techniques of obtaining BGs as opposed to SBLCs (issuance protocols and record examination- prices, time and understanding spent) and risk protected, LCs are the greater famous manner of payment in alternate finance.

BG and SBLCs are triggered out of default (a breach of any type underneath any sort of contract- financial, fee, soft/bid, coverage, and many other varieties of settlement). LCs, we all realize, cowl overall performance.

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Question 10. What’s Deferred Payment And How Does It Differ From A Usance Letter Of Credit?

Answer :

A usance Letter of Credit can be issued that means that the charge is not on time until a period for time has exceeded or the consumer has had an opportunity to investigate or sell the related items.

There isn't always a huge difference between usance and deferred payment LCs, despite the fact that the latter are not often issued.

The vital distinction is the absence of the draft. The draft serves no substantially useful reason in an LC besides, so LCs calling for usance drafts would be simply as powerful if they did now not name for the draft and had been simply issued as a deferred payment LC.

Question eleven. What Documents Are Required For A Letter Of Credit?

Answer :

When financiers prepare a Letter of Credit, commonly, the subsequent files are required for instruction:

B/E
Commercial Invoice
Packing list
Bill of Lading, B/L
C/O
Generalized System of Preferences (GSP)
Beneficiary certificate, fax, e-mail and many others.
Phytosanitary and fumigation certificates
Shipping agency certificates
All above files are in practice however some buyers require brief files in place of “Container of Documents”.

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Question 12. How Many Times Can A Letter Of Credit (lc) Can Be Amended?

Answer :

None of the prevailing relevant ICC published policies (UCP 600, URDG 758, ISP 98) restrict the wide variety of amendments to which an LC may be amended. That stated, it's miles frequently hard to observe files towards LCs with multiple amendments, and mainly when beneficiaries do now not speak which amendments are widespread.

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Question thirteen. How Relevant Is A Letter Of Credit In A World Where Most Trade Is Done Under ‘open Account’ Terms?

Answer :

The extensive majority of change is intra-national (in-country), that's actually much less unstable. Yet in the worldwide international alternate area, where there's danger of no payment and no coverage available, LC’s unexpectedly grow to be a should have item.

We do but be aware that the recent topic proper now's the blockchain, and the way it could disrupt trade finance. However, while we look closely, the equal method taken for Letters of Credit in giving each parties the proof that the transaction is truthful. As marketplace complexity increases, and pace of transaction and efficiency is critical, we assume that there might be a new set of opportunities within the destiny.

Question 14. What Is Avalisation?

Answer :

In easy terms Avalisation is some other phrase for endorsing a Bill of Exchange. This is in which someone or a company effectively acts as a guarantor for the duties of the Bill. In maximum cases this will be a Bank. An endorser of exact credit will increase the value of the Bill ought to drawer of the Bill desire to bargain it with a economic institution.

In other words, it's miles a guarantee on a negotiable instrument which states that the birthday celebration providing it’s AVAL will pay the instrument upon its maturity if the drawee or obligor fails to fulfill their responsibility. When foreign places agencies are the obligors on negotiable units, the supply of an AVAL by a financial institution is often essential to make the instrument perfect for discounting.

Question 15. What Is Reverse Factoring? How Is This Different From Factoring?

Answer :

Reverse factoring (additionally a shape of Supply Chain Finance) is while a finance company, along with a financial institution, places itself among a enterprise and its providers, and commits to pay the corporation’s invoices to the providers at an expanded price.

Reverse factoring allows suppliers to receive discounted bills of invoices which can be due to be paid by means of a purchaser (i.E. An account payable (AP)). Once the customer has accredited the bill for price, the finance is raised separately against the AP through the provider from a finance provider (typically a financial institution or factoring organization), who is predicated at the creditworthiness of the customer. The purchaser can pay the finance issuer on the agreed invoice due date, and the provider receives a miles prompter discounted charge from the Factor.

Business Finance Interview Questions
Question 16. Is The Issuing Bank Allowed To Make Payment In A Currency Other Than The Currency Agreed In The Letter Of Credit?

Answer :

Generally speakme, the currency detailed in the Letter of Credit ought to be what is paid by means of the Issuing Bank to the beneficiary. However, even as the bank is obliged to pay in the currency of the LC, there may be nothing to prevent the financial institution agreeing to the beneficiary’s request to settle the equal amount in a exclusive foreign money.

Question 17. Does The Marine Insurance Cover The Risk Of Damage To Goods At A Warehouse At Port Of Discharge Or Just During Voyage?

Answer :

It is standard practice for perishable goods to be shipped below temperature-managed situations, no matter whether carried in boxes or in any other case.

The exporter need to have blanketed this sort of condition in his commands to the carrier and if the settlement of carriage covered storage at a warehouse inside the port of destination, the temperature-controlled circumstance need to have applied there also. These situations have to also were contemplated in the agreement of insurance, but you haven't given us this statistics for both of these two contracts. If delivery is at the port, fashionable insurance terminates there.

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