Banking Exam Question - What is Credit Instruments? What are it's Types and Explain Advantages of Credit Instruments?

Introduction - Credit Instruments

The credit instrument is the promissory note. A promissory note is a written promise from a buyer or a borrower to pay a certain sum of money to the creditor or his order. 

The credit card with the pledge written for paying the loan within the prescribed period of loan or purchase of goods and services in the lending or lending room is called a letter. It acts as currency, it is called a clean currency.

Here are the types of credit cards in the world and also in Nepal

• Cheque
• Travellers Cheque
• Exchange Letter
• Treasury Bill
• Letter of Credit
• Debenture
• Promissory Note

Advantages of Credit

The accompanying advantages of credit might be specified: 

1. Credit instruments supplant metallic cash to some degree. This implies an awesome economy. Use is maintained a strategic distance from on valuable metals for financial purposes. 
2. Trade and industry are financed for the most part by the guide of credit. No mechanical or business advance would be conceivable if the business were to be led entirely on a money premise. Without credit, exchange would be on an extremely confined scale. 
3. Credit makes capital more beneficial. It is through credit that capital is exchanged from people who can't utilize it themselves to people who are in a situation to do as such. 
4. Credit empowers banks to loan a long ways past their money saves. In this manner they can make benefits for themselves other than helping exchange and industry. The banks can along these lines 'make cash'. 
5. Credit instruments like bills of trade encourage installments not just between individuals living in a similar nation, yet in addition between individuals having a place with various nations. This encourages and broadens global exchange.

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