Commercial Banking Products
Commercial banking, often known as corporate banking, provides financial services to businesses, corporations, institutions, and governments. They have small client base but they gives higher revenue as compared to retail base. Commercial Loan is a short-term loan used to increase a company’s working capital and pay for large expenses and operational costs. These loans are sanctioned by banks and other financial organizations based on the debtor’s financials and credit score.
Commercial Banking Products
Commercial Banking has been traditionally backbone of banking. Over the period of time the products of the nature of products provided to commercial customers has undergone a huge change. Several new types of products have been introduced in the market in response to the changing demand.
We are providing the list of products currently available in the market. Banks provide many more services to their commercial customers. For customers banks may even customize or create new products to meet their requirements.
The primary business of commercial banks is to make loans to large industrial corporations. Corporations in any nation are interested in obtaining debt at favorable terms. The bank is in a position to fulfill this demand through the services that they offer.
Project finance is one type of loan for which mega corporations largely rely on banks till date. In case of project finance, the banker finances the project as an individual entity. The parent company that is sponsoring the project has a limited liability in case the loan goes bad. For instance, if bank funds DEF project that was initiated by ABC Corporation and the project goes bankrupt over time.
In this case, banks only have access to the assets owned by DEF project. ABC Corporation does not have to assume any liability for the losses the bank incurred while financing the project. The project is treated as a separate entity in its own right.
Sometime the dept requirements of a particular corporation is huge so that single bank may not be in a position to fulfill them without creating a significant risk on their books. Hence, in such cases, several banks have to form a syndicate to fulfill the loan requirement.
One bank play a lead role known as “lead financier” coordinates with other banks and making the funds available to the corporation and would be entitled to a special fee over and above the regular interest that is earned on the loan. Also, the corporation will pay the payments to this bank only and the lead arranger will have to create a mechanism to redistribute the monthly payments to the other banks proportionately.
Financial leases are being signed by companies for acquiring real estate, automobiles, factory equipment or such other major fixed assets. A lot of companies have started using leasing as a financing method. This is because it provides control of the said asset without leveraging the balance sheet of the given corporation. Banks have become heavily involved in the business of such financial leases.
Today in the world a lot of the corporations are multi-nationals and their business interests cross national borders. This means that foreign trade is need and has become the norm. Banks have traditionally specialized in such financing. In the modern world too, banks provide letters of credit, export financing, bank guarantees and other such services to corporations which help them to conduct foreign trade in an efficient manner.
Companies often use Bills of Exchange for accounts receivables and accounts payables purposes. For example if one company agrees to pay another company at a later date, they could sign a bill of exchange for the same. First company can then take this bill of exchange to the bank at get the bill discounted.
This means that the bank will take over the right to collect receivables from second company. They will do so by purchasing the bill at a discount. This means that they will pay first company, a discounted amount for the bill. The difference between the face value of the bill and the discounted price for which the bank bought it is considered to be the interest earned by the bank.
Bills discounting is an important service provided by banks to many commercial corporations. This service helps them streamline their accounts receivable processes.
Benefits of Commercial Banking Products
Retail banking provides products and services to regular customers. If you need a loan, want to open an account, get a credit card, set up auto debit for various purchases or invest to reach your financial goal you can use these services.
Multiple products and services under one roof
commercial loan is hassle-free with reasonable interest rates
Innovative products that can be accessed easily via netbanking
Commercial loans are available with either fixed or floating interest rates.
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