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Machinery Loan Rates For Better Equipped Machinery

It is almost impossible to imagine manufacturing sectors without machines. Machine installation has already given rise to a substantial change in the way a company operates. It is a sign of how well your company can perform major tasks in processing and production of products. It very vital to have an equipped reliable machinery for the success of your business.There are different ranges of machineries that provide your company a competitive edge in the market. Most of the small and medium companies opt machinery loans for huge equipments either to replace a faulty, broken machine or upgrade to an advanced machinery. It is preferable to take loans  to purchase rather than leasing a machinery.What are the benefits you derive from taking machinery loan?First and foremost, upgrading machines aids to improve the operational efficiency of the company.For some of the financial institutions, indemnity of any asset to acquire loan is not required. This reduces the chances of putting your business at stake and declines the  risk for the company.There are financial institutions who grant “line of credit”- a unique facility allowing to borrow at intervals with different frequencies to a specified credit limits and can also be converted into term loans when necessary. This facility is suitable for businesses that carry recurring needs of cash for the purchase of equipments and other supplies.Tenure for repayment is provided upto 7 years, which in turn helps in attaining smooth cash flows.90% of the machinery value is provided as loan amount aiding MSME sector to be updated with latest equipments.Post verification, disbursal of funds are made quicker compared to other loans.Very few financial institutions offer flexible prepayment facility, which allows you to prepay the first three EMI’s of your loan, which can relieve you from the burden.Machinery loans meet simple eligibility criteria, maintain better transparency.Machinery loans benefit companies to invest in required equipment without having to spend a huge amount at once.CHARGES APPLICABLEInterest rate would be applicable to customers on the basis of many factors such as client’s profile, credit score and tenure of loan etc.Extra Stamp duty charges shall also be as applicableAdditional Documentation Charges (allotted by financial institutions)Many banks at their sole discretion reserve the right to alter the processing fee and rate of interest from time to time.Eligibility-Any individualPartnership firmCurrent holder of construction equipmentCompany exceeding two years of businessSole discretionApplicant utilizing equipments for self objectiveMine ownersContractorsTHE DOCUMENTS REQUIRED FOR PEOPLE RECEIVING SALARYProof of Identity:- Passport/Driving Licence/Voters ID/PAN Card(any one).Proof of Residence:- Leave and License Agreement/Utility Bill(not more than 3 months old)/Passport(any one).Latest 3 months Bank Statement(where salary/income is credited).Salary slips for last 3 months.2 Passport Size Photographs.IT returns of last three yearsLast six months Individual, Partners and Directors Saving bank- bank statements LIST OF DOCUMENTS FOR SELF-EMPLOYEDKYC Documents:- Proof of Identity;Address proof;DOB proof.Proof of Residence:- Leave and License Agreement/Utility Bill(not more than 3 months old)/Passport(any one).Income proof(audited financials for the last two years).Latest 6 months Bank statement.Office address proof.Proof of residence or office ownership.Proof of continuity of business.
Machinery Loan Rates For Better Equipped Machinery
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Saurabh

Saurabh Jain

Blog Author

 

One of the Co-founders, Saurabh serves as an active advisor to several SaveDesk’s portfolio companies and also works closely with them to improve business performance, select key management personnel, ensuring statutory and financial oversight and compliance supported by various agreements.Prior to SaveDesk, Saurabh spent seven years with Standard Chartered Bank commercial banking team as an associate director, where he was responsible for client management,financial analysis, portfolio management and large ticket deal’s execution in South India. Saurabh holds an MBA in Marketing from the Institute of Technology Management, and graduated with Honors degree in Electrical and Electronics Engineering from RGPV, Madhya Pradesh

 

Machinery Loan Rates For Better Equipped Machinery

It is almost impossible to imagine manufacturing sectors without machines. Machine installation has already given rise to a substantial change in the way a company operates. It is a sign of how well your company can perform major tasks in processing and production of products. It very vital to have an equipped reliable machinery for the success of your business.There are different ranges of machineries that provide your company a competitive edge in the market. Most of the small and medium companies opt machinery loans for huge equipments either to replace a faulty, broken machine or upgrade to an advanced machinery. It is preferable to take loans  to purchase rather than leasing a machinery.What are the benefits you derive from taking machinery loan?First and foremost, upgrading machines aids to improve the operational efficiency of the company.For some of the financial institutions, indemnity of any asset to acquire loan is not required. This reduces the chances of putting your business at stake and declines the  risk for the company.There are financial institutions who grant “line of credit”- a unique facility allowing to borrow at intervals with different frequencies to a specified credit limits and can also be converted into term loans when necessary. This facility is suitable for businesses that carry recurring needs of cash for the purchase of equipments and other supplies.Tenure for repayment is provided upto 7 years, which in turn helps in attaining smooth cash flows.90% of the machinery value is provided as loan amount aiding MSME sector to be updated with latest equipments.Post verification, disbursal of funds are made quicker compared to other loans.Very few financial institutions offer flexible prepayment facility, which allows you to prepay the first three EMI’s of your loan, which can relieve you from the burden.Machinery loans meet simple eligibility criteria, maintain better transparency.Machinery loans benefit companies to invest in required equipment without having to spend a huge amount at once.CHARGES APPLICABLEInterest rate would be applicable to customers on the basis of many factors such as client’s profile, credit score and tenure of loan etc.Extra Stamp duty charges shall also be as applicableAdditional Documentation Charges (allotted by financial institutions)Many banks at their sole discretion reserve the right to alter the processing fee and rate of interest from time to time.Eligibility-Any individualPartnership firmCurrent holder of construction equipmentCompany exceeding two years of businessSole discretionApplicant utilizing equipments for self objectiveMine ownersContractorsTHE DOCUMENTS REQUIRED FOR PEOPLE RECEIVING SALARYProof of Identity:- Passport/Driving Licence/Voters ID/PAN Card(any one).Proof of Residence:- Leave and License Agreement/Utility Bill(not more than 3 months old)/Passport(any one).Latest 3 months Bank Statement(where salary/income is credited).Salary slips for last 3 months.2 Passport Size Photographs.IT returns of last three yearsLast six months Individual, Partners and Directors Saving bank- bank statements LIST OF DOCUMENTS FOR SELF-EMPLOYEDKYC Documents:- Proof of Identity;Address proof;DOB proof.Proof of Residence:- Leave and License Agreement/Utility Bill(not more than 3 months old)/Passport(any one).Income proof(audited financials for the last two years).Latest 6 months Bank statement.Office address proof.Proof of residence or office ownership.Proof of continuity of business.
Rated /5 based on 20 customer reviews
Machinery Loan Rates For Better Equipped Machinery

Machinery Loan Rates For Better Equipped Machinery

Saurabh Jain
It is almost impossible to imagine manufacturing sectors without machines. Machine installation has already given rise to a substantial change in the way a company operates. It is a sign of how well y...
Continue reading

Foreign Letter of Credit Discounting

Letter of Credit (LC) Discounting is a short-term credit facility provided by the bank to Exporter. Seller/Exporter bank purchases the invoice and discounts 85-90% of amount upon due diligence & limits availability with applicant bank. This product offering comes with minimal cost which has to be borne by exporter/importer depending upon the terms and condition agreed upon in LC. Letter of Credit Discounting:- Letter of Credit Discounting is a product offered to the exporter for Usance LCs .In trade usually Buyer wants to have credit period and sellers want to have quick payment, to address this issue, bank supports exporter with LC discounting.  Below are the advantages of LC Discounting:  Exporter gets immediate payment; Importer obtains the goods along with the credit period to pay  LC Discounting Charges : Fees paid by exporter to the bank to avail service of Foreign Bill Discounting is known as LC discounting charges. These charges are usually  mentioned in LIBOR+ BPs . Typically this interest cost will vary between 6-10% Per annum. The cost may even go up to 14% Pa if LC Confirmation is  added.  LC Confirmation:- Exporter bank attempts to protect interest of exporter for which they will insist on adding confirmation to LC, which typically means  that, in the event of default of applicant or bank, Confirming bank will take responsibility of honoring LC. Confirmation is usually added if in case  credibility of the applicant or applicant’s country is less. This again adds to overall LC discounting cost. This cost can again run up to few percentage  points.  LC Discounting cost typically depends on  1. Applicants Bank credibility  2.  Applicants country’s market risk  3.  Amount of  LC discounting Basic Documents Required for LC Discounting Bills, drawn under irrevocable LC. (Revocable LCs are not discounted)Beneficiary Bank to submit all the docs as per LC clause.The bills of exchange documents certifying bonafide trade transactions. Letter of Credit Discounting Process Upon the receipt of LC exporter, necessary documents are submitted to beneficiary bank.  This LC acts as a guarantee to the seller/exporter. Sellers Bank sends these documents to the issuing/applicant bank or confirming bank. Applicants bank/Buyers or confirming bank checks the authenticity of the document. Upon successful inspection of documents, applicant bank communicates back to beneficiary on acceptance of bill. On the Post Acceptance of bill by the buyer, beneficiary bank discounts LC upto 85-90% of total bill. Process involved in LC Discounting Step 1 - Buyer to apply for LC. Step 2 - Seller bank to issue LC. Step 3 - Bank to advise the LC. Step 4 - Exporter/Seller to dispatch goods to Importer Step 5 - Exporter/Seller to submit transportation documents to Issuing Bank. Step 6 - Importer to accept documents and notification to be sent to sellers bank by Importers bank. Step 7 - LC to be discounted and funds credited upon acceptance. Advantages of LC Discounting 1. Ease of working capital cycle / Liquidity for Exporter 2. Beneficiary receives payment much before the due date, thus help him to have better cash flows 3. Risk gets transferred to Confirming bank , thus making it safe and secure mode of getting funds 4. Gives Beneficiary better bargaining power to negotiate, on basis of longer credit payment terms 5. FLC rates are usually offered at Libor Rates, which makes it a cheaper loan.  Disadvantages of LC Discounting 1. Bank Charges a fee for discounting LC. This reduces business margins to the Exporter. 2. Physical Verification of goods are not done, only documents are verified 3. Discounting rates vary from bank to bank as lines available may vary from each bank. 4. FEMA and other regulatory compliance related activities to be adhered to  5. FLC is associated with forex fluctuation risk which could lead to huge forex losses. In case, seller wish to hedge forex exposure it adds to additional cost.    
Rated /5 based on 20 customer reviews
Foreign Letter of Credit Discounting

Foreign Letter of Credit Discounting

Saurabh Jain
Letter of Credit (LC) Discounting is a short-term credit facility provided by the bank to Exporter. Seller/Exporter bank purchases the invoice and discounts 85-90% of amount upon due diligence & lim...
Continue reading

Intellectual Property Rights Continue To Be The Top Bilateral Issue

Rising from the tenth largest, India has stood as the ninth single country trading partner for the US since 2016. India and US are not supposed to let their economic differences obstruct the Indo-US ties that bound the growth of the bilateral strategic partnership. As per an official US report, the Intellectual Property Rights (IPR) remains to be one of prime bilateral trade issues between these two countries. This is due to the  inadequacy of measures for the improvement of IPR regime, reported “The Year in Trade 2016”  published by the US International Trade Commission (USITC). "IPR protection remained one of the top bilateral trade issues between the two countries," mentioned the annual report. India remained on the priority watch list in 2016 due to a lack of measurable improvement to its IPR regime, it noted. From there, economic growth of India has deteriorated to 6.8 percent in 2016 from almost 7.9 percent in 2015, said he annual report of USITC. India does not have many notable linkages to the global economy compared to China, but has made constant efforts for a drastic growth rate. It has hit a record of highest growth rate in the world in 2016. The service sectors and small manufacturing sectors form a vital part of its growth. In 2016, it has derived per capita income of USD 6,590. As a result, India's economy does not spur strong demand for imports," USITC said. In 2015, there was a rise in US merchandise trade from 1.8 to 1.9 percent. Added to this, US two-way merchandise trade with India went up by 2.2%, resulting in 67.7 billion in 2016. Even though there was a slight increase in US exports in 2016, the imports surpassed the exports. The trade deficit rose by 4.2 percent to USD 24.3 billion in 2016. India stood as the seventh largest services trading partner on the basis of two-way trade, although it remained to be the only top trading partner with US, despite having a services trade deficit, the report stated. While trade deficits have scaled down since 2014, there was again a slight rise in exports which caused US services to decline by 1.6 percent to USD 6.8 billion. Total US services trade with India grew to USD 46.7 billion approximately to 10.3 percent  in 2016, it said. There were many active WTO dispute settlement proceedings which involved India and US in 2016. India has sent requests regarding measures on non-immigrant temporary work visas during March. In July, US requested arbitration concerning importation of few agricultural products on the grounds that India fell short to implement measures into compliance within set frame of time.  In September, India sought for consultations with the US concerning alleged domestic -content elements in the renewable energy sector furnished by several US states. Finally the Dispute Settlement Body approved  the Appellate Body report and the panel report, altered by the Appellate Body report, concerning India’s purchase power agreements upon solar firms and domestic content requirements. India and the US have constantly imparted measures to improve bilateral trade and investments encompassing IPR protection. 
Rated /5 based on 20 customer reviews
Intellectual Property Rights Continue To Be The Top Bilateral Issue

Intellectual Property Rights Continue To Be The Top Bilateral Issue

Saurabh Jain
Rising from the tenth largest, India has stood as the ninth single country trading partner for the US since 2016. India and US are not supposed to let their economic differences obstruct the Indo-US...
Continue reading

Israel Anticipating To Boost Exports to India

India and Israel are two nations maintaining extensive military, economic and strategic relations. India imports massive military equipments from Israel and is currently the largest buyer of Israeli military equipment. To boost exports, Israel is eyeing the strong middle class base in India. The visit of Prime Minister Narendra Modi has been a “historic” moment, as none of preceding Prime Minister had attempted a visit to Israel. Dubiety persists here due to discussions on a free trade agreement (FTA). The negotiations have worked on from past seven years. Despite that, FTA between the two nations has remained elusive. On May 26, 2010, the first rounds of negotiations were held. On a question concerning the long-pending pact, Israeli foreign ministry officials said that India was “re-evaluating” it, but giving little weight to its significance, said that there are newer developments that will help enhance the potential of the economic relationship between the two countries. “India is a key export market for Israel. Tightening relations with India and this historic visit of the Indian Prime Minister will lead, beyond increasing security exports, to growth in trade in goods and services,” Israeli minister of economy and industry Eli Cohen said. “The Indian economy is becoming a prime destination for Israeli exports, with its 1.3 billion consumers led by 300 million citizens in the middle and upper-middle class, with purchasing power equal to the middle class of Western economies,” Cohen noted. In an interview, Modi mentioned that India was not looking forward to a traditional “import-export relationship” with the Jewish nation. “It is more than a buyer-seller relationship. We are more interested in a tech-based partnership with an emphasis on ‘Make in India.’” he added. According to the ministry of economy and industry of Israel, trade allying the countries has mounted up from $200 million in 1992 to $4.13 billion in 2016 (including diamonds). Exports had reached to $1.29 billion, but later it had a drop down, with exports totalling $1.15 billion(excluding diamonds). There was a dip by 13% in 2016.   Alliances on R&D creation of a joint fund and identifying key sectors like water, agriculture and space technologies have been taken into consideration. For this, two nations have to collaborate, extend support and deepen ties, majorly to increase economic cooperation between the nations.
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Israel Anticipating To Boost Exports to India

Israel Anticipating To Boost Exports to India

Saurabh Jain
India and Israel are two nations maintaining extensive military, economic and strategic relations. India imports massive military equipments from Israel and is currently the largest buyer of Israeli...
Continue reading

Gold Inventory Rises up Fourfold

India is the second largest consumer of gold in the world, next to China. In accordance with provisional data from consultancy, Gold Fields Mineral Services (GFMS) showed that Gold imports have increased four times from last year to 103 tons in May, as jewelers are constantly purchasing recharge inventories and raising stocks before GST. Purchases were made in advance, close to 126 metric tons in May from 31.5 tons the previous year. Gold attracts 3 percent goods and services tax, which is in effect from July1. Ketan Shroff, the joint secretary at the India Bullion and Jewellers Association Ltd, mentioned that the rate is lower than anticipated. GST plays a major role in uniting India and attempts at providing a common market, to the citizens. The duty will supplant more than a dozen domestic levies, including state tariffs and excise tax. Since independence in 1947, GST is hailed as the biggest tax reform.  The massive import numbers were because people were worried about the kind of taxation that would come in but now that the tax has been fixed at a lower rate, imports will moderate going forward,” said Kunal Shah, head of research at Nirmal Bang Securities Pvt. over phone from Mumbai. India’s monsoon is expected to be normal and that would further underpin a demand recovery, he added. Demand is reckoned to be elevated by 2020 from an estimated 650 tons to 750 tons to somewhere between 850 tons to 950 tons this year. These are he consequences of new tax regime, the World Gold Council said in a report Thursday. “The gold supply chain should become more transparent and efficient, and the tax reform could boost economic growth, which we see as supporting gold demand.” said the council. This implied that the impact on the gold industry is positive. According to the finance ministry, as the fiscal year ended on March 31, the country’s imports descended to 716.4 tons that is about 20 percent, according to the finance ministry. 
Rated /5 based on 20 customer reviews
Gold Inventory Rises up Fourfold

Gold Inventory Rises up Fourfold

Saurabh Jain
India is the second largest consumer of gold in the world, next to China. In accordance with provisional data from consultancy, Gold Fields Mineral Services (GFMS) showed that Gold imports have increa...
Continue reading

RBI Refused to Attend Meetings with Center

The MPC(Monetary Policy Committee) is a council of six members that sets benchmark interest rates. Predecessor Raghuram Rajan was given full authority of setting interest rates, but many had opposed and new arrangements were made to set up MPC which is less than a year old now. It is appreciable RBI stood firm in its decision. The committee was questioned on the grounds that Rajan left due to undesirable circumstances and out of the blue event of withdrawing currency from circulation. November onwards, a series of unpleasant situations are being faced by the government.Federal Ministry of Finance decided for a meet at New Delhi and the members of MPC refused for it. MPC anyway knew they were called to cut rates. India was already facing a trouble tackling private sector investments. Yet the MPC had turned a deaf ear to participate in the meeting and kept the rates stable. The resolution stood strong even after inflation rates had fallen down. This emerges from the agreement between central bank and government to shift targeting consumer price inflation. The government is in a baffled situation from then.RBI has not completely ignored, inflation period from 6 months (April-September) consumer price inflation has been revised. It has witnessed sharp decline from 4.5% to between 2% and 3.5% lying below the target rate of 4%.Why the rates are not cut?There are two prominent reasons. Firstly, after the cash shortage there has been significant decrease in inflation rate. Demonetisation has its effects on prices of agricultural  goods, especially on the food staples that dominate India’s CPI , and now facing crash. Secondly, it is government’s duty to revive investment and not the job of MPC.Without dissembling and rather than meeting setups, other ministers are to be questioned about the slow pace of reforms.
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RBI Refused to Attend Meetings with Center

RBI Refused to Attend Meetings with Center

Saurabh Jain
The MPC(Monetary Policy Committee) is a council of six members that sets benchmark interest rates. Predecessor Raghuram Rajan was given full authority of setting interest rates, but many had opposed a...
Continue reading

Trade Receivables Discounting System (TReDS)

TReDS is an institutional setup for flow of finance to small ,micro and medium (MSME) enterprises at competitive rates through multiple financiers. TReDS are subjected to supervision by RBI and envisages its operation both in primary and secondary market segments. It majorly addresses the gaps in MSME ecosystem as the micro, small and medium enterprises faces challenges in getting their payments on time and thereby create working capital gaps. MSME also faces constraints on obtaining adequate finance in market place. This is an hindrance to drive MSMe sector to the next phase of economy. The existing few legal bindings have been not much effective to ensure timely payments and fairness in trade. Cash availability issues have been caused to the small sector units by big corporates, which depends to source a part of their products from MSME’s.To overcome this issue, RBI has proposed Trade Receivables Discounting System(TReDS) in March 2014 which is a digital platform wherein MSMEs can get access to cash. This plan was published taking into account the consultation of few stakeholders and interest of few entities.To set up electronic bill factoring exchanges, guidelines had been issued by RBI on December 3, 2014  related to Trade Receivable e-Discounting System (TReDS) regulated under the Payment and Settlement System (PSS) Act, 2007. WHAT IS TReDS?TReDS is basically an online process that allows the auctioning of trade receivables, also known as discounting bills. It fills the working capital demands. TReDS facilitate the financing of trade receivables through multiple financiers. This scheme discounts bills of exchanges as well as their invoices. Here, the seller gets credit which is due, and discount is the interest paid to the financier. They include buyers such as government bodies and public sector units who will be direct participants in TReDS. HOW DOES TREDS OPERATE ELECTRONICALLY?Micro,small and medium scale enterprises can upload the invoice on the electronic platform. It goes upto 750 INR for registration. It then goes digitally to buyers like big companies, or retailers like Honda, Mahindra, Tata etc for acceptance within a specified time. The financiers offer discounting rates to the buyers. The seller or the buyer bearing the interest rate gets to accept the final bid. TReDS does the final settlement and the amount gets credited the next working day into the seller’s account through corporates or banks. Later,the amount is repaid to the financer. The invoices cannot be bidden below the marginal cost of funds based lending rate(MCLR) set by the RBI. To ensure there is no window dressing TReDS may initiate random audits and check the authenticity and genuineness of the transactions.During the on boarding process entities are required to submit KYC related documents along with resolutions or specific documents to the authorised personnel of the buyer corporate. ID’s and passwords would be provided to the MSME seller. One time agreement would be drawn upon amongst the participants in TReDS. This is a master agreement where the where the buyer is obligated to pay on the due date once the factoring unit is accepted. To those disputes with respect to quality of goods  there would be no recourse provided and no set offs to be allowed.IMPORTANT PARTIES INVOLVEDAs of now, NSE Strategic Investment Corporation (NSICL) and Small Industries Development Bank (SIDBI)  , Axis bank  and Mynd solutions which runs no1 exchange has been licensed by the RBI. Receivables Exchange Of India Ltd (RXIL) has been furnished under the guidelines of RBI, it is a joint venture between SIDBI and NSE set up to operate a TReDS platform for factoring  of invoices of MSME’s. RXIL is the first one to get authorisation to launch the platform and also the first one to go live on January 9, 2017. These are expected to get MSME corporate buyers and banks together on the TReDS platform to facilitate a smoother flow of the processes.MAJOR BENEFITSTReDS benefits MSME sector by eliminating paperworks as they transact online. The other advantages include competitive discount rates, seamless data flow, standardised practices, important of all easy access to funds and  they work transparently..ISSUES FACED BY TReDSThe registration charges can discourage MSME  sectors by using the TReDS platform. All the transactions has to be approved and registered Central Registry Of Securitisation and Asset Reconstruction and Security Interest Of India. They also require KYC documents. Recommendations have been provided to involve wealthy individuals to expand markets as  TReDS require more entities as financiers. The concept is still incipient and the above three players are trying to pick out corporates and financiers to make this scheme a successful one. TReDS can take off successfully, if supported with a strong debt-recovery mechanism framework.  RBI has also sought  views on the concept paper of trade receivables discounting system in the country . Actionable feedback can be of some use.
Rated /5 based on 20 customer reviews
Trade Receivables Discounting System (TReDS)

Trade Receivables Discounting System (TReDS)

Saurabh Jain
TReDS is an institutional setup for flow of finance to small ,micro and medium (MSME) enterprises at competitive rates through multiple financiers. TReDS are subjected to supervision by RBI and envisa...
Continue reading

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