Buyer’s Credit
Buyer’s Credit refers to loans for
payment of imports into India
arranged on behalf of the importer through an overseas bank. The offshore
branch credits the nostro of the bank in India and the Indian bank uses the
funds and makes the payment to the exporter’ bank as an import bill payment on
due date.
Benefits of Buyer’s
Credit:
The benefits of
buyer’s credit for the importer are as follows:
·
The supplier is paid on due date; whereas
importer gets extended date for making an import payment.
·
The importer can use this financing for any
form of trade viz. open account, collections, or LCs.
Buyers Credit Process
flow:
1.
The Indian customer will import the goods
either under DC, Collections or open account.
2.
The Indian customer requests us before the due
date of the bill to avail buyers credit financing.
3.
We contact overseas bank branches to
provide a buyers credit offer letter in the name of the importer. Best rate is
quoted to the importer.
4.
Overseas Bank to fund your existing bank
nostro account for the required amount.
5.
Existing bank to make import bill payment
by utilizing the amount credited.
6.
On due date existing bank to recover the
principal and amount from the importer and remit the same to Overseas Bank on
due date.
Regulatory Framework:
A. Amount and Maturity
- Maximum Amount Per transaction : $20 Million
- Maximum Maturity in case of import of non capital goods:
upto 1 year from the date of shipment
- Maximum Maturity in case of import of capital goods :
upto 3 years from the date of shipment
B. All-in-cost
Ceilings - 6 Month Libor + 350 bps *
Supplier’s Credit
Supplier’s Credit
relates to credit for imports into India
extended by the overseas suppliers or financial institutions outside India . Usance
Bills under Letter of Credit (LC) issued locally on behalf of their importers
are discounted by overseas banks, paying your suppliers at sight against issuance bills under l/c’s.
Process Flow of
Transaction
1.
With transaction details importer
approaches us to get suppliers credit for the transaction
2.
We arrange an offer letter from overseas
bank on the transaction
3.
Importer confirms on pricing to overseas
bank and gets LC issued from his bank, restricted to overseas bank counters
with other required clauses
4.
Suppliers Bank sends the documents to
Supplier’s Credit Bank.
5.
Supplier’s Credit Bank based on acceptance,
discounts the bill and makes payment to Supplier.
6.
On maturity, Importer makes the payment to
his bank and Importer’s bank makes payment to Supplier’s Credit Bank
Requirement
·
Should be LC backed.
·
Arrangement has to be done before LC gets
opened. Incase of LC already opened, relevant amendment needs to be done.
·
LC to be restricted to suppliers credit
providing bank under 41D clause of LC
Regulatory
framework – same as buyer’s credit
For further details or requirements, send Enquiry