Mr. Singh is into the import-export business of garments. Due to COVID19, his sales have gone down. He is planning to import certain new items and for that he needs money. Mr. Singh can approach the bank for which of the following items?

Borrowing funds

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Letter of credit

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Bank guarantee

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Travellers' cheques

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Solution

The correct option is B Letter of credit
Mr. Singh can approach the bank for a loan and a letter of credit that is issued in case of international transactions. A letter of credit is a promise from the bank that they would step in in case the debtor fails to pay the committed amount. However, a bank guarantee is issued in case of domestic transactions like real estate contracts or infrastructure projects.

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