What Is a Bankers Acceptance Note

Banker’s acceptance (BA) is a negotiable piece of paper that functions like a post-dated check. A bank, rather than an account holder, guarantees the payment. Banker’s acceptances (also known as bills of exchange) are used by companies as a relatively safe form of payment for large transactions.

What is the purpose of bankers acceptance?

Banker’s acceptances are time drafts that a business can order from the bank if it wants additional security against counterparty risk. The financial institution promises to pay the exporting firm a specific amount on a specific date, at which time it recoups its money by debiting the importer’s account.

What is Banker Acceptance example?

A bankers acceptance (BA) is a money market instrument: a short-term discount instrument that usually arises in the course of international trade. … A simple example is a bank check—which is simply an order directing a bank to pay a third party. The three parties don’t have to be distinct.