Banking · Non-Fund Based Credit Facilities
Which of the following non-fund based credit facilities involves a tripartite agreement where the bank guarantees that a buyer will pay the seller on time and for the correct amount, and if not, the bank will be required to cover the full or remaining amount of the purchase?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A Term Loan facility which provides a lump sum for infrastructure acquisition.
- 2A Cash Credit facility which allows the borrower to withdraw funds against stocks.
- 3A Letter of Credit which is widely used in domestic and international trade.✓
- 4A Bank Guarantee which is used for performance or financial obligations.
Correct answer
A Letter of Credit which is widely used in domestic and international trade.
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