IDPMS ( Import Data Processing and Monitoring System)

This article is an extract of RBI circular relating to IDPMS. It carries important functionalities, steps involved and benefits . IDPMS refers to Import Data Processing and Monitoring System. RBI constituted a working group which included FED,DGFT,SEZ,FEDAI & selected authorized dealers, to frame a comprehensive IT system to facilitate efficient processing of all import transactions and effective monitoring thereof. The working group had recommended development of a robust and effective IT- based system “Import Data Processing and Monitoring System “(IDPMS) on the lines of “Export Data Processing and Monitoring System” (EDPMS) in consultation with the customs authorities and other stakeholders. Key functionalities of IDPMS: Paperless secure transmission of data relating to imports/exports through from customs, IDPMS to authorized dealers and vice versa Import Bill of entry(BoE) management by bank settlement, extension and adjust / closure Outward remittance management(ORM) by bank Outward Remittance Notification and adjust/closure Multiple ORMs against single BoE and vice versa Banks have direct access to download/upload BoE issued by customs or customers Steps involved: Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BOE) issued by EDI ports from “BOE Master” in IDPMS. For non-EDI ports, AD banks of the importer shall upload the BoE data in IDPMS as per message format “Manual BoE reporting” on daily basis on receipt of BoE from the customer/customs office. AD banks will enter BOE details  and mark off ORMs as per the message format “BOE Settlement” In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by the importer customer as per the message format “BOE Settlement” Multiple ORMs can be settled against single BoE and also multiple BoEs can be settled against one ORM. Benefits of the proposed System Ensure better import compliance Alternative to filing paper Easier tracking / generation of export transactions /data/ history Stop /minimize manual data entry work at AD banks Value addition in banking business For Buyers credit Services please Click here RBI Circulars on IDPMS: Report of the Working Group on Import Data Processing and Monitoring System Evidence of Import under Import Data Processing and Monitoring System (IDPMS)
Saurabh Jain
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IDPMS ( Import Data Processing and Monitoring System)

Saurabh Jain
Blog
28th Aug, 2017
IDPMS ( Import Data Processing and Monitoring System)

This article is an extract of RBI circular relating to IDPMS. It carries important functionalities, steps involved and benefits .

IDPMS refers to Import Data Processing and Monitoring System.

RBI constituted a working group which included FED,DGFT,SEZ,FEDAI & selected authorized dealers, to frame a comprehensive IT system to facilitate efficient processing of all import transactions and effective monitoring thereof. The working group had recommended development of a robust and effective IT- based system “Import Data Processing and Monitoring System “(IDPMS) on the lines of “Export Data Processing and Monitoring System” (EDPMS) in consultation with the customs authorities and other stakeholders.

Key functionalities of IDPMS:

  • Paperless secure transmission of data relating to imports/exports through from customs, IDPMS to authorized dealers and vice versa

  • Import Bill of entry(BoE) management by bank settlement, extension and adjust / closure

  • Outward remittance management(ORM) by bank Outward Remittance Notification and adjust/closure

  • Multiple ORMs against single BoE and vice versa

  • Banks have direct access to download/upload BoE issued by customs or customers

Steps involved:

  • Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BOE) issued by EDI ports from “BOE Master” in IDPMS. For non-EDI ports, AD banks of the importer shall upload the BoE data in IDPMS as per message format “Manual BoE reporting” on daily basis on receipt of BoE from the customer/customs office.

  • AD banks will enter BOE details  and mark off ORMs as per the message format “BOE Settlement”

  • In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by the importer customer as per the message format “BOE Settlement”

  • Multiple ORMs can be settled against single BoE and also multiple BoEs can be settled against one ORM.

Benefits of the proposed System

  • Ensure better import compliance

  • Alternative to filing paper

  • Easier tracking / generation of export transactions /data/ history

  • Stop /minimize manual data entry work at AD banks

  • Value addition in banking business

For Buyers credit Services please Click here

RBI Circulars on IDPMS:

Report of the Working Group on Import Data Processing and Monitoring System

Evidence of Import under Import Data Processing and Monitoring System (IDPMS)

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

 

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How Suppliers Credit can put Importers business back to Track?

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One Stop Portal For All Your Buyers Credit Needs

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Example of Interest Rate Calculation Process for Buyers Credit availed with Libor as the base price: Bank mentions Interest rate on Offer letter usually under below heading 3M L + 20 BPS  (Volume along with Specific Tenure will be mentioned) 6M L + 20 BPS  (Volume along with Specific Tenure will be mentioned) For instance, if the customer avails Buyers Credit of $100K from FI for 90 days, below interest will be applicable in above two scenarios 1 USD = INR 65 BPS ( Basis Point ) = 0.2% 3 Month Libor = 1.2% 6 Month Libor= 1.4% Case 1 :- a.  3M LIBOR + 60 BPS = 1.8% =  100000*65*1.8*90/360*1/100= 29250 Case 2 :- b.  6M LIBOR + 60 BPS = 2% =100000*65*2/100*90/360= 32500 Thus under same situations customer will pay an additional INR 3250 to avail BC for the same tenure. LIBOR Rate Graph    FORMAT OF AUTHENTICATED SWIFT MESSAGE LETTER OF UNDERTAKING (LOU) MT 799 1. LC No.         : 2. Name and full address of the Importer / End User : 3. Importer is a Public Sector entity (state Yes or No): 4. Name and full address of the Exporter : 5. Description of Goods Imported: 6. Capital Goods (state Yes or No): 7. Country of Origin of Goods : 8. Shipment from (Port & Country): 9. Shipment to (Port & Country): 10. Name of Shipping Company / Airline: 11. Charter Party BL (state Yes or No): 12. Name of the vessel & IMO No. (if by sea) 13. Date of BL/AWB: 14. Amount of Loan : 15. Date of funding: 16. Tenor required (as per quote) 17. Interest Rate (as per quote) 18. Rollover transaction (state Yes or No): 19. Branch contact person Name, Tel. No. and Email : 20. PAN No. of Applicant 21. CIF No. of Applicant 22. Date of Incorporation of Applicant company 23. External Rating Agency Name 24. External Rating and Date 25. Internal Rating and Date 26. Account Status :  Standard / SMA/ NPA / Restructured 27. Whether 10pct of security available for the buyers credit amount: Yes/No Advantages / Benefits of Buyers Credit: Buyers credit foreign funding is based on LIBOR rates which range from 0.3-2% Payments are made on time to the exporter (required due date) Importer gets extended credit time for his import repayments Quick transactions are executed through SWIFT (recognized channel for banking communications) Negotiation of a better deal on account of immediate payments Eases the process of conducting (import) international business Choice of funding currency is proffered to the importer (USD, GBP, EURO, JPY) Payments are transacted as per LC payment terms and conditions Buyers credit can be financed through LC, open account transactions or collections(DP/DA) Buyers credit tenure can be extended through BC rollover facility Some of the checkpoints to consider for before availing Buyers Credit facility: The maximum duration of Buyers Credit Facility for Capital Goods is 3 Yrs The maximum duration of Buyers Credit for Non-Capital Goods is 1 Yr. 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Letter of undertaking/letter of credit: It is charged by the existing bank or local bank for the issuance of LOU. It is charged as high as 1.5%. Arrangement fee: The fee paid to the broker/ agent for the service rendered by him in arranging BC quotes. 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. Process Flow / steps involved in Buyers Credit: X Pvt Ltd imports the goods either under Letter of credit(LC) / Documentary credit (DC) , Collections ( DA/DP ) or open account. X Pvt Ltd approaches SaveDesk two days before the due date of the bill to avail buyers credit financing. SaveDesk provides instant cheap quotes to X Pvt LTD from by a foreign lender which generally is (1M/2M/3M Libor + X bps ) Post acceptance of quote ,SaveDesk provides offer letter to X Pvt Ltd. X Pvt Ltd's existing banker marks his import limits and issues LOU (Letter of undertaking) /LOC (letter of comfort ) for certain fee to the foreign lender. The foreign lender credits the importer's bank i.e. ABC Pvt Ltd's existing bankers Nostro account through SWIFT payments. Importer's banks credits the same to the exporters account on the required due date. Importers bank recovers the principal along with the interest amount and remits it to the funding bank/ foreign lender as per the agreements.   Buyers Credit Rollover: If the borrowed importer is unable to make payment settlement on the required due date to the bank, the tenure of the buyers credit contract can be extended which is referred as Buyers credit rollover. What are the key factors to consider for the Buyers Credit Rollover? Here, the importer is opting for a fresh buyers credit and hence it includes the issuance of a fresh quote by the arranging bank. The buyer(importer) can make choice of his tenure which is again restricted to his maximum working 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. On the required date, the overseas buyer’s credit will approve the rollover of existing buyer’s credit and confirm the local importer’s bank with MT799, which includes the new due date with interest along with the fresh maturity. 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. They were fortunate enough to take advantages of 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 scam), importers are finding it hard to leverage business without buyers credit facility. Few other common problems faced by the importers are: Cost of funds/ interest rates offered by the banks and other financial institutions are higher Banks restricting importers in availing BC from consultants TAT (Turn Around Time)  for the offer letter Banks are usually restricted in confirming offer letter only by their concerned overseas  branches. There is a standard delay in the process of funding confirmation and the credit being funded to the importer’s nostro account. 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. This is also an import financing facility to simplify the payment and collection process in the import business. This is essentially funded under the Letter of credit (LC) where payments are made immediately after the goods are dispatched. Other funding arrangements are also available such as Bank guarantee and documentary LC payments. Disadvantages of Suppliers Credit: There is an additional cost applicable for LC Payment terms is restricted and can only be extended till the LC validity Suppliers credit is slightly expensive in comparison to the Buyers credit Suppliers credit has no extended tenure for repayment Payments are done on sight basis, hence there is no scope for bridging working capital gap. Benefits of taking SC through SaveDesk: Instant availability of quotes Low-cost borrowing rates Convenient, as the process is executed by SaveDesk Regular updates on the funding process Buyer’s Credit quotes from multiple arrangers across different time zones Avail the other options available and execute your import transactions under forex exposures at minimal cost. Get your import funding process effectively monitored and mitigate risks with SaveDesk. Abbreviations: LIBOR - LONDON INTERBANK OFFERED RATE LC - Letter Of Credit LOU - Letter Of Undertaking BPS - Basis points FI - Financial Institutions DC - Documentary Credit SWIFT - Society for Worldwide Interbank Financial Telecommunication TAT - Turn Around Time
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One Stop Portal For All Your Buyers Credit Needs

One Stop Portal For All Your Buyers Credit Needs

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Why Suppliers Credit Is Crucial For Importer Business?

The concept of imports and exports serves the purpose of fulfilling the domestic demands by mutually sharing the resources and commodities between two national borders. To facilitate easy trade finance to the importers of India the government had structured buyers credit funding process. After divulging the PNB biggest buyers credit scam, there has been a surge of prices and stringent practices followed by the RBI which has significantly disrupted the Indian importers. Nevertheless, another similar option is available to the importers to avail trade finance, which is popularly known as Suppliers credit. What is Suppliers Credit? Suppliers credit is a trade credit funded to the importer on basis of Letter Of Credit (LC). Under the LC method of payment, the overseas suppliers or financial institutions preferably from the seller’s country finances the importers at cheaper rates than the local source of funding, which are close to Libor rates. It is beneficial to the seller as he receives payments immediately after the shipment of goods, which in turn helps the importer to negotiate for better prices. Since the issuance of LOU(letter of undertaking) has been banned, the importers are switching  to avail suppliers credit facility which also aids in availing cheap interest rates like buyers credit. Why suppliers credit?/Advantages of suppliers credit: The exporter/suppliers are dealt on sight basis Importers can negotiate for better commercial terms. Low-cost source of funds As only imports under LC qualifies for suppliers credit the risk in the process is mitigated. The letter of credit is an assurance issued which includes detailed information of the transaction and is generally restricted to overseas FI counters. Suppliers credit can be availed by the importers on both capital/non capital goods up to USD 20 million per transaction. The payments here are processed through international payment networks known as SWIFT(Society for Worldwide Interbank Financial Telecommunication code). Differences between Buyers Credit and Suppliers Credit: Buyers Credit Suppliers Credit Swift payments through MT799 Swift payments through MT760 Credit is funded to the importers nostro account Portion of the transaction is paid at sight, the rest of it is paid in accordance with the terms and conditions agreed with the seller (drafts, promissory notes etc). Additional clauses or Amendments are not required in LC Negotiation Clause, Reimbursement Clause and Confirmation Clause are covered under this. LC Clauses might need to be included/amended as requested by suppliers credit offering bank   Payments were allowed to be made on the due date to the exporters Supplier/exporters are paid at sight With the non-availability of the buyers credit trade facility, the importers were put under inconvenience. Now, the importers are availing suppliers credit which has evolved to be a new revolution in the importers trade finance facility.  
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Why Suppliers Credit Is Crucial For Importer Business?

Why Suppliers Credit Is Crucial For Importer Business?

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Service Exports from India Scheme (SEIS) for Exporters

What is SEIS ? In order to promote Exports from India, the government of India has launched Service Exports from India Scheme (SEIS) which is rewarded in the form of duty scrip credit.  These Scrips are rewarded for all eligible exports from India, which can be traded against any custom fee-related activity. Why SEIS? As we all know, India is a trade deficit country i.e. our imports are greater than exports, this deficit leads to the artificial demand of dollars in India. Advantages of boost to Exports are as follows- Boost to SMEs and MSMEs Creation of Jobs Stable & strong currency Overall Economic and Infrastructure growth What are the Eligibility Criteria :- For an exporter in India to be eligible for SEIS scheme scrips apart from companies having IEC code, the following foreign exchange criteria should be met- S.No Incorporation Type Minimum Foreign Exchange In FY 1 Partnership Firm/LLP/Company USD 15000 2 Proprietorship Firm USD 10000   Net foreign exchange earnings for the SEIS scheme is calculated as: Net Foreign Exchange = Gross Earnings of Foreign Exchange – Total Expenses or payment or remittances of Foreign Exchange. Uses of Credit Scrip Duty credit scrips can be used for the settlement of Excise Duty Custom Duty Service Tax Settlement of Default of EPCG claims etc Benefits of SEIS Scrips Substantial Reward  ( Between 3-5% of Net Exports ) Freely Tradeable Easily Transferable Valid for 18 Months from date of Issue Exports qualified for SEIS Scheme: -   More details about export activities qualified for SEIS scrip claims can be found here http://dgft.gov.in/exim/2000/FTP-2017/ftp17-051217.pdf Ineligible Export service for SEIS: - Any Equity or debt participation, receipts of  loans, donations etc. not related to rendering of services will not qualify for SEIS Any service which is not mentioned in DFGT circular on SEIS For more details/clarity reach out to Saurabh @ savedesk.co
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Service Exports from India Scheme (SEIS) for Exporters

Service Exports from India Scheme (SEIS) for Exporters

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Divulging India Biggest Buyers Credit Scam

Buyers Credit is a short-term loan available to an importer from Foreign Lender’s at low interest rates. There has been breach committed in the issuance of Letter of Undertaking (LOU’s) in the process. This funding facility which has been used fraudulently is leading to problematic situations to the Indian importers.   What went wrong –PNB Scam? Two of the Punjab National Banks (Mumbai) employees were issuing Fake LOU details favoring Nirav Modi group of companies, there by giving birth to one of the biggest scam of $1.77Bn in Buyers Credit history in India. Since LOU’s are considered to be most authentic bank to bank communication, lending bank’s too did not bother to do additional due diligence on LOU’s issued by Punjab National Bank. Banks, which are affected? Union Bank Axis Bank Allahabad Bank. Do remember these are all Indian Banks housed in foreign locations, which funded PNB India basis LOU issued. How it was executed? It started with Modi’s diamond firms which approached Punjab National Bank for Buyers credit requirement for the import of diamonds . As per process companies availing buyers credit should have Buyers Credit limits with LOU Issuing bank, which in this was PNB. Limits should be lien marked for issuance of LOU to lending bank. Where as in this case employees of PNB issued fake LOU’s without performing necessary checks and banking formalities (Obviously to benefit Modi’s firm).  Basis these fake LOU’s foreign branches of Indian banks extend loans to PNB India Nostro account & from Nostro these funds were remitted to Exporter. Exporter’s in this case were either kith and kins or close business associated of Nirav Modi or his own companies in different countries. Thus resulting in one of the biggest scam of Buyers Credit history. PNB has reported this case to CBI (Central Bureau of Investigation) for further investigations, Meanwhile as a usual practice by all fraudster, Mr. Nirav Modi has also fled from India, Indian officials are still baffled how to ‘Find NiMo’ Impact of PNB Scam on Importers in India Importers in India are facing challenges to avail Buyers Credit post unraveling of Buyers Credit Scam.  In spite of multiple foreign lenders available in market, getting a quote and offer letter has become a task. Most of them are either not quoting or are offering rates which are way beyond regular standards. We have tried listing down current issues faced by Importers In India Total No of foreign lenders/Banks offering quotes are reduced Time taken to offer quotes is increased Few of the LOU’s are cancelled in spite of issuance of offer letter Importers negotiation has come down as less no of lenders are available. Most of the banks are asking for B/L & invoice from LOU issuing bank official ID. Cost of funds for client will go up as he will have to use OD facility to make payment Double Whammy for Importers as Currency prices has also shot up by approx. 1.5% in couple of days. PNB bank Customer facing maximum challenges to have their LOU’s funded. This scam has questioned many compliance practices followed by Indian banks  & has resulted in lot of discomfort to the Importers . Case is been investigated by CBI officials and will surely lead to redefining entire process of Buyers Credit business in India.
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Divulging India Biggest Buyers Credit Scam

Divulging India Biggest Buyers Credit Scam

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What are the current problems being faced by organizations in raising capital?

Raising capital refers to establishing capital from investors or venture capital sources by any firm. When any company wants to be more extensive, it can raise additional capital. Usually, extremely small or small company capitals come from three sources- friends and family, Business Angels and venture capitalists. Medium enterprises most of the times go with debt financing, equity financing and sometimes from the government too. There are many schemes provided by the government for such enterprises which lead to improvising in the economy of India. The methods and processes involved in raising capital for long term and medium term are listed below-       A. Issue of shares Equity shares Preference shares     B. Issues of debentures     C. Loan from Financial Institutions     D. Loans from commercial banks     E. Public deposits     F. Reinvestment of profits The methods and processes involved in raising capital for short term are as follows- Trade credit Factoring Discounting bills of exchange Bank overdraft and cash Above are the most common sources of startup capital for businesses. Every entrepreneur should know the game before being willing to invest their own money and proceed towards implementing business plan. “It’s often said, raising money is not actually a success, it’s not actually a milestone for a company and I think that’s true” - Marc Andreessen We shall now proceed to the discussion of some of the major concerns faced by organizations in raising capital- The current problems being faced by organizations in raising capital   One of the biggest challenges of funding is accepting rejection. Usually, the startup entrepreneurs do not end up with a good response. Investors are really not interested in startup or small-scale industries as they see very less potential. The main trouble that small businesses face while approaching for funds is the problem of uncertainty. Usually, small businesses do not have any past record that investors or lenders can analyse to decide whether or not to provide the small business with the required fund needed for expansion. Usually, small and medium firms have to pay a higher rate of interest in banks as compared to big and established firms. Banks and financial institutions ask for personal guarantees also. The stock marketers tend to lay or attach little value to it because they may not have confidence in small business offers. This will make the firm to issue more number of shares which dilute the firm’s earning. It becomes difficult for small businesses to find investors who are willing to invest. Investors are more likely to invest in bigger and more attractive firms. Strategies to resolve the current issues Grants by the government should be given to individuals for a specific project or purpose. There are some conditions which are to be followed for grants to be obtained. Funds from informal network of friends and family members is often ignored as a source of fund for small and medium-sized companies if well harnessed . Venture capitalists provide money to start-ups in the expectation of abnormally high return.
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What are the current problems being faced by organizations in raising capital?

What are the current problems being faced by organizations in raising capital?

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How Effective Is Hedging To The Importers And Exporters?

A smart importer or the exporter opts for hedging to make a sharp-witted move against the currency fluctuations. Basically, it is a cautious initiative to cover yourself from encountering the fear of ‘probability of loss’. Whether an importer or exporter business is always initiated with a motive- “PROFIT”. There are a few strategies that can aid you to limit your risks to a certain extent and realize profits, ‘hedging’ is one of them. What is Hedging in Finance? Hedging is one of the proposed actions to mitigate risks and secure businesses from future uncertainties. The price movements of the currencies are unpredictable as the market forces have varied volatility in the global financial stability. When you want to avoid such exposures, “hedging” comes into the picture. Hedging Meaning: It is a strategy with an objective to save the potential profits by freezing the exchange prices for a fixed future date. It is similar to an insurance. Here, basically, the hedger is fixing the price at a certain level to cover the risk of upward and downward movement of prices. There are various types of hedging namely financial instruments like options, currency future contracts, exchange- traded funds, derivatives, etc. Example of Hedging: An Indian importer imports 10,000 apple products from China for 10,00,000 lakhs, the exchange is performed in international currencies absolutely based on the currency movements.The importer hedges at 64.00 USD in the future contracts to protect his payments from appreciation and depreciations of the dollar values. The tenure of the contract is agreed at 6 months from the date of imports. On the completion of the tenure, the exchange rate of dollar lies at 66.00 USD. Here the importer has hedged himself and paid 6,40,00,000 against 6,60,00,000 and retained the loss of extra pay of 20,00,000 lakhs. How hedging improves your business: Overall protection: Hedging itself acts as a shield against currency fluctuations. Using this strategy you can hedge regardless of the upward or the downward movements. The “hedger” is on a safer side and is risk-free until the payments are settled. Better informed decisions: Drafting strategies such as taking long positions in the forward markets and eliminating risks and uncertainties for the transactions settled in foreign currencies is very much important. It helps you understand the expenses, and in turn aids in increasing your business value. Exact value price for import/export: In the case of importers and exporters, the international transaction predominantly depend on the dollar values. Hence, hedging is pivotal for them to cover from the risk of changing currency values. Otherwise, there are chances of losing profits with the adverse currency movements. Through hedging, the importer/exporter is locking the current value for a particular transaction through currency options or future contracts from London International Financial Future Exchange or Chicago Mercantile Exchange etc.(they also allow final exchange rates than a fixed point). Protect you against currency fluctuations: Currency hedging, in essence, is protecting against volatility of the currency either be with the weakening or strengthening of the dollar rates. Hedging example: Say the contract made on a particular date is US $2,00,000, and the dollar rate on the same day is INR 62.00. The payments are agreed to be made after two months. Assume that on the due date, the dollar rate is INR 60.00. The exporter is receiving INR 12000000 instead of INR 12400000, resulting in a loss of 4,00,000. Currency hedging against the contract is preferable here. Bottomline is saved: This practice is better than the traditional ways, here we can usefully freeze the prices which are mutually decided beforehand. The fear of losing money is minimized. If this strategy is understood and executed properly, it will be of great importance in saving business bottomlines. Better business opportunities: Hedging techniques aid in expanding business opportunities as the actions are planned formerly. With a minimal risk of loss, there are diversified choices for suited scenarios.You are ensured to be protected from the market upswings once you enter the contract. The financial markets are uncontrollable, however, it is always better to hedge your business to narrow down faulty losses. Make a smart choice by opting hedging and anticipate profits against unfavourable financial climates.
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How Effective Is Hedging To The Importers And Exporters?

How Effective Is Hedging To The Importers And Exporters?

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Significance of LIBOR on Borrowing Cost for Buyers Credit

As we all know, all importers can borrow cheap funds coupled with LIBOR, but ever wondered, how LIBOR affects the cost of borrowing and what happens to capex  transactions LIBOR rates? All the above queries will be answered in this blog. All the foreign currency loans are borrowed either in LIBOR/EBOR; hence any movement in their rates will yield to expensive cost of borrowing in India. Impact of LIBOR on Importers Scenario 1: - If an Indian Importer had availed Buyers Credit of  $100K for 180 Days in the Month of September’17, Client will pay 6ML @ 1.51% , This event is before FED meeting held in Dec’17. Scenario 2: - If an Indian Importer wish to avail Buyers Credit of $ 100K for 180days in the Month of Feb’18, Client will pay 6ML @ 2.03% BC availed in month of September’17 is cheaper by 0.53%, for same tenure and same amount Reason for LIBOR rate increase LIBOR is on move since 2016 due to continued rate hikes from US Federal Reserve. In fact, commentary for this year from US FED Chairperson - Janet Yellen is hawkish too and we can expect 3 rate hikes for FY18-19. Fed still continues to attain a balance between responding to positive news on growth and unemployment that fostered a gradual tightening, while at the same time, signalling caution due to the continually weak inflation readings that have confused policy makers. 25 Bps were hiked on 14th Dec’17, following which LIBOR rates were increased Lowest & Highest LIBOR rates reported in Past 30 Yrs. were respectively on- Oct’15 – 0.32% Mar’89 – 11.06%   Please find the attached historical LIBOR movement for the past 30 years. How to protect businesses from LIBOR movement If exposed to EUR/CHF currency, move invoicing/dealing in those currencies. For Capex transactions, hedge LIBOR rates on the date of borrowing for entire tenure. Evaluate overall cost of funding with Indian lending rate , i.e. net cost post adding forward premiums. You can always reach out to us for more clarity on above @ www.savedesk.co
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Significance of LIBOR on Borrowing Cost for Buyers Credit

Significance of LIBOR on Borrowing Cost for Buyers Credit

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