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One Stop Portal For All Your Buyers Credit Needs By Saurabh Jain India is an import-driven economy, where non-domestic commodities,goods and equipments etc are imported across national borders to make profits indigenously.

Meanwhile, liberalisation has paved way for the blue chip companies to access global funds for their working capital requirements. Simultaneously, the practice of availing short term import finance like buyers credit or suppliers credit has gained momentum in the recent times. In the wake of the cross-border trade and its recent developments, the RBI has taken jurisdiction to fill in the gaps of trade credit assessments.

What is Buyers Credit? Buyers credit is a short term import business funding facility offered to the Indian importers by the banks or financial institutions outside India. This service was introduced to encourage importers buyerswhich in turn aids them in procuring loans from overseas FI at low-cost borrowing rates which are coupled with Libor rates. Under this, credit is easily available for the import of capital and non-capital goods based on the LOU Letter Of Undertaking.

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Why Buyers Credit? Importers taking advantage of buyers credit leverage their business, as the cost of funding by the overseas FI are based on Libor or Euribor rates which are relatively economical than the domiciliary interest rates.

It is predominantly used as base price in calculating interest rates and acts as a measure of trust in the global financial system. LC No.

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Importer is a Public Sector entity state Yes or No : 4. Name and full address of the Exporter : 5.

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Description of Goods Imported: 6. Capital Goods state Yes or No : 7. Country of Origin of Goods : 8. Amount of Loan : Date of funding: Tenor required as per quote Interest Rate as per quote Rollover transaction state Yes or No : Branch contact person Name, Tel.

PAN No. CIF No. Date of Incorporation of Applicant company External Rating Agency Name External Rating and Date Internal Rating and Date Libor will differ with the tenure. It is optional for the importer to book for forwards and in a few banks, it is a mandatory process. Currency risk premium: Reckons on the risk perceived on the transactions.

Difference between a Futures Contract and a Forward Contract

It is charged as high as 1. Withholding tax WHT : This is an additional cost deducted as tax on the interest paid on the loans borrowed. Rates charged by the overseas lenders are net of taxes; thus it has to be grossed up at the time of calculation of interest. Export credit agency ECA guarantee charges: The sum paid to avail the facility of credit insurance or financial guarantee. Other additional charges: A2 payments on maturity, charges for documents 15CA and 15CB on maturity, intermediary bank charges, out-of-pocket charges etc come under this category which cost him additional money.


X Pvt Ltd approaches SaveDesk two days before the due date of the bill to avail buyers credit financing. Here, the importer is opting for a fresh buyers credit and hence it includes the issuance of a fresh quote by the arranging bank.

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The buyer importer can make choice of his tenure which is again restricted to his maximum the difference between a forward and an option capital. With the change in Libor the margins might change leading to increase in the overall cost.

RBI enables importers to extend credit up to 5 years on Capex transactions and up to 1 year for Non-capex transactions. Challenges faced by the Indian Importers: Importers often deal with multiple markets and often face agitation with the volatile currency fluctuations in the foreign markets.

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They were fortunate enough to take advantages what is btcon how to make money services such as buyers credit that was benefiting them in pooling short-term import finance at competitive interest rates.

With the recent fraudulent practices in buyers credit by Nirav Modi PNB scamimporters are finding it hard to leverage business without buyers credit facility.

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Way forward post-RBI ban and the other feasible approaches in availing cheap funds: Further, a similar arrangement by the RBI which is in aid currently to the importers is the Suppliers Credit.