How do exchange banks help in financing foreign trade?

Exchange banks are a type of commercial bank whose main function is financing of foreign trade. They provide the following services:

1. Discounting of foreign bills of exchange — They pay the amount of foreign bills of exchange before their maturity date after deducting discount, providing immediate funds to exporters.

2. Financing foreign trade — They provide finance to importers and exporters for purchase of goods, working capital and other trade-related needs.

3. Facilitating foreign remittances — They handle the transfer of funds from one country to another on behalf of customers engaged in foreign trade.

4. Buying and selling of gold and silver — They deal in foreign exchange, gold and silver, helping to settle international payments.

In India, exchange banks work under the direction and control of the Reserve Bank of India. The Export Import Bank (EXIM Bank) has been set up for the promotion and development of foreign trade.