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Time draft

Explain how does time draft become a banker’s acceptance?

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When goods are shipped by exporter through common carrier, exporter’s bank presents the shipping documents and the time draft to importer’s bank.  After taking title to goods through the bill of lading,  the importer’s bank accepts the time draft, creating at this point a banker’s acceptance (B/A).  B/A is a money market instrument for which a secondary market exists.

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