Bills & Invoices are drawn by a customer upon successful completion of a job or delivery of the contracted goods. It is a promise to pay by the seller which is usually confirmed (not mandatory) by a reputable banker of the Country of the seller, or any other reputable person(s)/ organization(s). Such instruments are discounted with the Bank at the spot rate, with recourse to the buyer.
The NID Bank may also sanction facilities based on the confirmed receipt of funds to be received later based upon some business transaction(s). The Bank needs to be sure regarding the originality of the instrument, the reputation and market standing of the borrower as also satisfy itself of the genuineness of the transaction. Such a facility is allowed to existing customers who have a good reputation in the market and have a good credit record with the Bank. Before allowing such facility, the Bank officials are to ensure that in case of non- receipt of funds from the acceptor of the instrument (person who is acknowledging the liability to pay unconditionally), the borrower of the funds from the Bank can repay the Bank.
The following checklist needs to be observed.
Invoices to be discounted must be from reputable institutions to curb abuse of the facility. The Bank has recourse to the client in case of non-payment.
The product has a maximum tenor of 90 days depending on the customer’s trade cycle.
The maximum discount amount shall be limited to 80% of the invoice value. However, in no case the NID Bank shall finance profit.
Letter of assignment of accounts receivables with recourse.
An undertaking to pay the NID Bank directly by the drawer
It is a financing facility which provides the Bank’s customers with working capital to improve liquidity against bills of exchange drawn by the customers on their clients. The trade receivables must be duly acknowledged/confirmed for products and services duly delivered and accepted, and not in arrears. It is granted to customers who can authorize the Bank to collect for and in their behalf from the obligors.
The obligors, on the other hand, must conform to the assignment and agree to remit payments only to the NID Bank. Bills are either purchased or discounted by the Bank based on face value of the receivables less the required yield. Interest shall be computed on the amount discounted and will be deducted in advance from the amount discounted. Demand bills are purchased and usance bills are discounted.
