Top 4 Types of Domestic Issues | International

This article throws light upon the top four types of domestic issues. The types are: 1. Commercial Banks 2. Development Banks and Financial Institutions 3. Discounting of Trade Bills 4. International Capital Market.

Domestic Issue: Type # 1. Commercial Banks:

Commercial banks, like domestic loans, extend foreign currency loans for international transactions all over the world. Like usual transactions, they give various facilities, e.g., overdrawing above the loan amount already sanctioned, although interest on overdraft is charged by the bank at its usual rate.

Domestic Issue: Type # 2. Development Banks and Financial Institutions:

Various development banks, all over the world, provide medium and long-term loans along with foreign currency for the development of the country.

Moreover, various agencies offer a number of concessions to foreign firms to invest in their country and also to finance for exports (i.e., the merchandise that are imported by them), e.g., EXIM (Export-Import Bank of India) extends loans to buyers outside India for buying Indian manufactured goods).

Domestic Issue: Type # 3. Discounting of Trade Bills:

But the same is also applicable in case of foreign bills. This is quite familiar in some Asian and European countries. For this purpose, the firms who obtain trade bill, discounted the same at the cost of certain amount of discount before maturity of the bills from the various commercial banks. Thus, it is also regarded as a source of international finance.

Domestic Issue: Type # 4. International Capital Market:

At present, it is quite common that most of firms, particularly the multinationals, obtain a large amount of borrowing both in Indian and foreign currency as well in order to provide the financial needs which require sufficient funds for their projects specially for capital expenditure.

Since, interest paid on borrowed money is an allowable deduction under Income-tax rule, taxation benefits induce them to take that opportunity. Needless to mention here that in order to meet the financial requirements of the firm, the financial centre or, the international capital market have developed whenever the question of international trade centres arise.

In order to finance the international trade and industry for lending and borrowing in foreign currency international capital market has been developed In some countries, like U.K., USA, Japan etc. international capital transactions arise even in domestic capital market.

By issuing foreign bonds (known as Euro-Bonds) foreign borrowers raise their funds in the capital market. A syndicate of international bank managed its issue and presented with the lenders as well as investors all over the world.

It is important to note that this supply of foreign currency in international market depends on the following sources, viz:

(a) Bonds issues,

(b) Euro-Currency market,

(c) Financial Institutions, and

(d) Export credit facilities.

Among the four sources stated above. Euro-Currency market is the most significant one. It was started with dollar dominated bank deposits and granted ions to Europe. Practically Euro-dollar deposits constitute primary sources from Euro-Currency market.

However, they are dollar dominated deposits which are available from U. S. Bank situated outside the country. These deposits are collected from various firms and indivi­duals and foreign Govts. as well Funds are supplied by way of loans through Floating Rate Note.

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