What Is Underwriting Of Shares, Issuing Letter Of Credit (L/C), Locker Services And Receiving Deposits?
Underwriting of Shares: Underwriting refers to purchasing the whole issue of shares or bonds from the principal company and reselling it to the public. By this underwriting the bank receives commission from the issuing company, which becomes free from this painstaking job of selling shares to the public.
The bank also takes the responsibility to sell the new issues with out underwriting them.
Issuing letter of Credit (L/C): Letter of credit is an open letter from a bank requesting the seller to send the goods to the buyer and promises to pay the sum by itself. A L/C is a reliable guarantee for the exporter or seller from the bank. This instrument is used in foreign trade and once it is issued the importer can receive the goods. Banks also issue traveler cheques being a kind of L/C to the tourists and travelers.Locker Services: - Banks offer lockers for the safe custody of jewelry, currency, documents and other precious items.
Receiving deposits: this is a function of formation of capital. Receiving deposits from the account holders forms capital. Small savers, traders, manufacturers and others deposit their money with the bank under the head of savings, current or fixed deposits accounts and earn interest income.
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