Page 292 - A Banker Down the Rabbit Hole

interest from the seller for the period for which funds are lent. Seller gets
cash immediately less interest charges and this way converts its credit
sales to cash that eases its working capital.

Once, some of our buyers in India did not pay the bills on due date. We
knew this fact and were talking to them to pay. The reason for delay was
that some of them received defective goods in part and they wanted a
discount for compensation. Our company was known for its policy of
compensating customers for major defects in goods, if any. This happened
not so frequently, so our company was liberal in trusting the old customers
with their claims and used to pay. This time the claims were excessive and
our sales team had been negotiating with them to reduce their claims. This
process was taking some time.

This lot of bills of exchange was handled by four banks. Citi bank was the
first to call us to inform that particular bills are not paid on due date and
we should get them paid in a week. The bills remain unpaid for another
couple of days after a week. The trade finance team of three officers of
Citi Bank rushed to have a meeting in our office. They wanted to know
the reasons why bills have not been paid so that if the reason is not
satisfactory, they would have to blacklist those buyers and in future bills
drawn on them will not be discounted by them. They also insisted that
we should pay the amount of the bills in a couple of days if not paid by
the drawees (buyers).

We disclosed to them the reason for delay and assured them that the
bills will be paid by the Indian customers in next ten days at the most
otherwise we would be paying the amount. The bills got paid within the
next week.

The second Bank of Singapore sent us an email reminder only once and
we assured them to settle the matter in two weeks' time. The third bank
staff called on us once as they were across the street. The fourth bank
staff did not call us at all.

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