Salam means advance purchase. It is a mode of business under which the buyer pays the price of the goods in advance on the condition that the goods would be supplied / delivered at a particular future time. The seller supplies the goods within the fixed time.
This is a forward purchase mode of financing and can be used by the modern Banks and financial institutions especially to finance the agricultural sector. In Salam, the seller undertakes to supply specific goods to the buyer at a future date in exchange of an advanced price fully paid at spot. The price is in cash but the supply of purchased goods is deferred
Salient Features:
- This is a mode of investment is usually used for working capital finance requirement of the client.
- The seller have to clearly specify the name, specification, brand, quality, quantity, size etc. of the goods without any ambiguity.
- In the agreement the unit price and total price of the goods will be fixed and mentioned
- Exact time and place of delivery will be specified.
