Banker’s Acceptance (B/A)

Banker’s Acceptance (B/A) is a short-term credit instrument guaranteed by a bank. It is used in international trade to finance the import and export of goods, promising payment at a future date.

Banks guarantee the payment of B/As, making them low-risk. They are typically used in transactions involving goods like electronics, textiles, and machinery. B/As are often traded in secondary markets, providing liquidity.

For example, an importer may use a B/A to pay for goods from an exporter, with the bank guaranteeing payment within 90 days. This instrument helps facilitate trade by ensuring payment security for both parties.