Current Affairs · Banking and Finance
Under the Two-Factor system of International Factoring, an Indian exporter utilizes an Indian Bank (Export Factor) and a UK-based bank (Import Factor). The Import Factor approves a credit limit and provides a 100% credit guarantee for a UK buyer. If the UK buyer files for bankruptcy before the payment credit period expires, which of the following describes the correct legal outcome?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The Export Factor takes operational control of the bankrupt UK entity to directly liquidate its retail assets.
- 2The Indian government pays the exporter from its Export Promotion Fund to maintain bilateral trade relations.
- 3The UK-based Import Factor is legally bound to pay the Indian Export Factor, who will then ensure the exporter receives the guaranteed amount.✓
- 4The exporter loses all the money because international factoring only offers collection services without credit risk protection.
Correct answer
The UK-based Import Factor is legally bound to pay the Indian Export Factor, who will then ensure the exporter receives the guaranteed amount.
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