The Banks and Problems of Payment
Many of the risks in foreign trade are reduced by the work of the banks. They provide several services which give security to exporters and importers.
The risk of buyer default or is removed by the method of payment against shipping documents. Also exporters' banks provide s information about the financial reliability of their customers. They also help arrange buyer credit or finance for the sellers. Without this a lot of trade would not take place at all.
There is also a risk of financial loss because of a change in the exchange rate. If an Indian exporter agreed to sell goods for dollars and the value of the 10 dollar in terms of rupees went down, the exporter would get fewer rupees for the dollars. Conversely, if the price of the dollar went up, the importers would lose money. An Arabian importer would have to pay more rials to buy the dollars. This kind of loss can happen in any export-import situation where the national currencies go up and down in terms of the payment currency,