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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)
IDPMS ( Import Data Processing and Monitoring System)
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IDPMS ( Import Data Processing and Monitoring System) 2530 IDPMS ( Import Data Processing and Monitoring System) Blog
Saurabh Jain Aug 28, 2017
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,D...
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Pre and Post Shipment Finance/Export Financing

As the name indicates, this finance option is available for all exporters who have confirmed work/export order from reputed company. The scheme of export financing was first introduced by RBI in 1967. The scheme was introduced with an intention to make short-term working capital finance accessible to exporters at internationally comparable interest rates.In banking parlance, Pre-shipment finance is working-capital finance that is provided to an exporter, with-recourse basis against confirmed export order or against a LC (Letter of Credit) up to 270 days from advance. Post shipment finance is a short-term loan provided to exporter to manage working capital cycle gap till the realization of Export proceeds .Pre Shipment Finance: An Exporter would require capital to purchase goods, raw materials or manufacturing of goods. Technically, pre-shipment finance duration starts from the receipt of export order till shipment of goodsTypes of Pre-Shipment Finance:- Export Packing Credit. Advance against cheque/drafts representing advance payment Post-Shipment Finance: Post-Shipment Finance is a short-term loan provided to an exporter or seller against a shipment. Normally, the duration of this loan is from shipment to bill realization date. This type of finance is provided on basis concerning evidence of shipping documents. Types of Post-Shipment Finance Export Bills Purchased /Discounted (DA/DP)Export Bills Negotiated (Under LC) Advance against bills sent on collection basis Advance against receivables from GOI Following types of Pre-shipment and Post-shipment financing options are allowedPre-shipment Credit and Post shipment Credit in rupee Pre-shipment Credit in foreign currency (PCFC) & Post Shipment in INR Pre-shipment and Post shipment in Foreign currencyPre and Post shipment finance in foreign currency gives exporter an advantage to avail loan at much cheaper cost linked to LIBOR/EURIBOR. Thus helping him to reduce overall cost.For More details please refer:- https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?Id=8132&Mode=0#b
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Pre and Post Shipment Finance/Export Financing

Pre and Post Shipment Finance/Export Financing

Saurabh Jain
As the name indicates, this finance option is available for all exporters who have confirmed work/export order from reputed company. The scheme of export financing was first introduced by RBI in 1967...
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RBI Circular on Trade Credits in INR

As per the circular issued by RBI on 10 Sep 2015, resident importers can avail trade credit (buyers & suppliers credit) in Rupees after entering into a loan agreement with the overseas lender.Trade credit can be availed by the importer for import of all goods as per the Foreign Trade policy barring gold.Trade credit period for non-capital goods can either be maximum of 1 year from date of shipment or as per the operating cycle of the company.Trade credit period for import of capital goods can be a maximum of 5 years from the shipment date.Rollover/extension is strictly prohibited over and above the permissible period.Trade credit per import transaction can’t exceed USD 20 million.Banks can issue LOU/LOC with respect to trade credits up to 3 years from the date of shipment.Overall costs associated with INR denominated trade credits should be in line with the market.All other guidelines for availing trade credits would be applicable for INR denominated trade credits.Process Flow:Importer can import goods in any freely convertible foreign currency.Importer requests either their bank or consultant for Buyer’s Credit/Supplier’s Credit quote on the payment due date. INR amount can be calculated based on the prevailing market rate of the respective currency pair.Importers Bank issues LOC/LOU in rupee to the Overseas Branch.Importers Bank Nostro account is funded in rupees by the Overseas Branch as the trade credit is being availed in INR.Importers Bank however, converts the amount received to respective currency in which the importer has imported the goods and makes the payment to the exporter.Importer pays the principal and interest on the due date.Overseas Bank is paid in INR by the importers bankOverseas lenders can hedge their exposure with a Bank in India as they have lent in INR, this would obviate any risks associated with currency movement and its volatility.For more information on buyer's credit please Click here
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RBI Circular on Trade Credits in INR

RBI Circular on Trade Credits in INR

Kranthi Tilak Reddy
As per the circular issued by RBI on 10 Sep 2015, resident importers can avail trade credit (buyers & suppliers credit) in Rupees after entering into a loan agreement with the overseas lender.Trade...
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RBI’s Guidelines on Merchant’s Trade Transactions

Merchanting trade Trade can qualify as merchant’s trade transactions if goods imported by the merchant trader do not enter the Domestic Tariff area and aren’t altered in any manner. Goods that are parts of the merchant trade should comply with the current Foreign Trade Policy & other relevant regulations applicable to both exports & imports to India. Period & Funding Entire cycle of merchant trade has to be completed within 9 months. In case of an advance payment, there can’t be any pending foreign exchange to be paid or received for the final settlement beyond 4 months of making the first payment. The start date for the merchant trade would be either when the trader receives exports leg advance or pays in advance for the import leg. In cases where the advance payment isn’t made, the date of shipment would be considered. The transaction can be considered to have ended on the date of payment of import settlement, or on the date of export settlement, whichever comes later. In cases where payments are received or paid in advance, the shipment date would be considered as completion date of the transaction. Credit can be availed either by way of buyer’s credit or supplier’s credit for import leg of the merchant trade transactions. Merchant trader can’t avail buyer’s/supplier’s credit for the amount received as advance payment from the overseas buyer. Merchant trader can avail discounting facility for the export leg of the transaction. Role of an AD Bank 1.Compliance of KYC, AML and other relevant guidelines while handling merchant’s trade transactions lies with the AD bank.2. Both export and import leg of the transaction should be routed through the same AD bank.3. Documents like invoice, packing list, transport documents & insurance copies should be verified by the AD bank to ensure the authenticity of the transaction.4. If the merchant trader receives an advance payment against the export, AD bank should tag the same for making the payment under import leg of the transaction. However, funds received as advance payment can be deposited in interest bearing account for short term.5. Merchant trader can issue LC (letter of credit) to the supplier against definite export order.6. Merchant trader can use his EEFC (exchange earners foreign currency) balances to make payment to the overseas seller. Reporting AD bank has to ensure matching of export/import legs of all merchant’s trade transactions and report any anomalies to the RBI on half yearly basis, not beyond 15 days of half yearly closing. Merchant traders would be caution listed if their out standings reach 5% of their yearly export earnings.
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RBI’s Guidelines on Merchant’s Trade Transactions

RBI’s Guidelines on Merchant’s Trade Transactions

Kranthi Tilak Reddy
Merchanting trade Trade can qualify as merchant’s trade transactions if goods imported by the merchant trader do not enter the Domestic Tariff area and aren’t altered in any manner. Goods that are...
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Foreign Trade Policy to Boost Exports

The Commerce Ministry is looking forward at the measures to be announced as a segment of review of Foreign Trade Policy to boost exports, said  Commerce Secretary Rita Teaotia.The review of the policy is almost at its logical closure and the exercise will be finalised by September, she said.The Trade Promotion Council of India (TPCI) along with the Commerce Ministry  is organising this show. Although most of the Indian exporters are persistently participating in international events, arrangement of such big events would provide a substantial platform to most domestic players to reach out to global buyers. "We are looking to see what are those measures by which we can actively support the exporting community," she said here.She also mentioned about the curtain raiser event “Indus Food” which is a mega international food and beverage trade show, to be held at Greater Noida in the coming January. The show is set to start off by the 18th of January next year expecting as good as 400 participants from 35 countries to take part in the two-day show."The show will give an opportunity to Indian exporters to showcase their wide range of products in the food sector," she added.Food and Beverages business draws USD 33 billion per year globally. This show is initiated to make a marketplace for domestic products to showcase to global markets. When questioned about the rising non-trade barriers in the sector, she replied that this is reality in the global market place today but the government is aiding exporters to tackle with such complications.As we know, India is the chief producer of rice, sesame, wheat, milk, mango, banana and other marine products. There are also plans of organising a three-day World Food India 2017 in November by the Food processing ministry. Mohit Singla, Chairman, TPCI, stating on the occasion said- “In spite of such a huge potential, India lacked a platform of its own, which highlights the food production capacities of the country.”"We are organising this show on the lines of globally established food trade shows like SIAL, Anuga and Gulfood. We are sure that Indus food will immensely help the buyers to establish the required network and expand their businesses internationally," he exclaimed.
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Foreign Trade Policy to Boost Exports

Foreign Trade Policy to Boost Exports

Piuesh Daga
The Commerce Ministry is looking forward at the measures to be announced as a segment of review of Foreign Trade Policy to boost exports, said  Commerce Secretary Rita Teaotia.The review of the polic...
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Buyers Credit Process Flow, Tax Agreements and Benefits

Buyer’s credit is a loan facility by a bank or financial institution to purchase raw materials and capital goods or services. It is extended to the importer by an overseas bank generally for large export orders. Overseas  bank credits the Nostro account of the importer based on the letter of undertaking. The funds are in turn used to make payments against import bill to the supplier’s bank . Buyer’s credit is a short term credit . It aids the local importer  to gain easy access to cheap foreign funds. The funds may be close to Libor rates , which are comparatively less costly than local source of funds. The funds duration may vary as per local regulations and requirements. PROCESS FLOW OF BUYER’S CREDITThe customer should be an existing current account holder in a bank to avail buyer’s credit. Some banks offer buyer’s credit even without current account. Buyer’s credit is availed through transaction basis. RBI, in its circular to external commercial borrowing and trade credit, has issued guidelines on the process flow for importers to access buyer’s credit . Steps involved in the process are:Importer  requests the consultant to arrange the buyer’s credit before the date date of the bill.Consultant approaches overseas financial institutions for buyer’s credit.Best rate of interest is quoted to the importer.After acceptance of the importer, financial institutions are requested to provide a buyer’s credit offer letter in the name of the importer  arranged by the consultant. Overseas financial institutions funds the existing bank’s Nostro account with the required amount as per the instructions in the LOU/LOC.Payments are made against the import bill by the existing bank by utilizing the funds credited.(cross currency contract is also permitted by RBI)The importer’s bank will recover the required amount from the importer on  the due date and remit the same to overseas bank.(Principal+interest is paid based on the pricing quoted in letter of credit)This aids the importer in working capital management.In reference to the above, general guidelines policies and procedures may vary from each bank.Banks are permitted to provide buyer’s credit up to US $20 million per transaction with maturity period of 1 year from the date of shipment. In case of capital goods, maturity period can be extended upto three years. Banks will however restrict the tenure of buyer’s credit to the working capital cycle of the client. Rollover beyond the mentioned period requires approval from RBI. The following chart  explains the process flow of funds from overseas bank:WITHHOLDING TAX ON BUYER’S CREDITWHAT IS WITHHOLDING TAX?Under section 195 of the income tax act 1961 the tax has to be deducted by the Indian importer on the interest amount paid for the loans borrowed. On the interest amount for the funds arranged from foreign bank, the importer has to pay tax known as withholding tax (WHT). Rates charged by the overseas  lenders are net of taxes; thus it has to be grossed up at the time of calculation of interest and the borrower bears tax payment as his additional  cost.                                    Withholding tax may vary from each country as per DTAA( Double Taxation Avoidance Agreement). There are about 83 countries where India has DTAA. For this to be applicable, the lending institution should have an Indian Pan card . If no pan card is provided, it  may entail the following calculations- 1) At the rate specified in the relevant provisions of this act 2) Rates in force 3) At the  rate of 20%. WHT will not be applicable  if the loans raised are from overseas branch of Indian  bank. Indian bank is considered as a resident of India as per section 9 of the Income Tax Act. Application of “tax treaty” may limit the WHT tax rates. In such cases, the surcharge and education cess will not be applicable. Interest payments on funds arranged from banks based at Mauritius will not carry any WHT  as per “India Mauritius Double Taxation Avoidance Treaty” (article 113(c)) In respect of a taxpayer to whom DTAA applies, provisions of Indian Income Tax Act or the provisions of DTAA, whichever is more beneficial can be applicable.  Taxpayer can take advantage of that provision in DTAA  for deductions of tax.BENEFITS OF BUYER’S CREDITAccess to foreign funds at cheaper costs as the rate of interest is linked with LIBOR rates.The exporter is paid on the due date of the bill, whereas the importer gets extended date for making import payments.The funding currency depends on the choice of the customer it can be in any FCY(USD, GBP, EURO,JPY).Open account, collections or LC’s can be used by the importer to finance any form of trade.The funding currency can be different from the currency of imports which enables importer to take a favourable view of a particular currency.Payments on goods are received by the supplier as per the LC payment terms.Further rollover of buyer’s credit can also be requested by the buyer.                                               Buyer’s credit avails number of advantages  to the parties involved in the process and helps Indian importer access Global markets .
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Buyers Credit Process Flow, Tax Agreements and Benefits

Buyers Credit Process Flow, Tax Agreements and Benefits

Kranthi Tilak Reddy
Buyer’s credit is a loan facility by a bank or financial institution to purchase raw materials and capital goods or services. It is extended to the importer by an overseas bank generally for large e...
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Export Data Processing and Monitoring System (EDPMS)

Export Data Processing & Monitoring System is an online system, launched by RBI, on March 1,2014 for monitoring all export activities in India. With this system all banks have come on single platform thus bringing uniformity in modus operandi on exports related transactions in India. Benefits of EDPMS system : Integration of banks with RBI system gives ease of Handling of shipping bills Unravelling delayed utilisation of advance received for exports Detect XOS/Caution ( Export Outstanding ) list Simplifying overall process as everything is online Inclusion in Caution/De-caution list To automate the process of regularisation of exporter, AD (Authorized Dealers) banks are given access to updated list of caution listed exporters through EDPMS. The list of all caution listed exporters would also be made accessible to AD banks through their registered e-mail. Criteria laid down for cautioning/de-cautioning of exporters in EDPMS are as under : Any shipping bill open for more than 2 years puts exporters in caution list. Date of shipment will be considered for the estimation of the realisation period. Once associated bills are realised, extension for realisation is granted, and Exporter will be put in caution list even before the termination of two years, based on AD bank process and recommendations. Any adverse notice of ED/CBI/DRI or any adverse media news can result in inclusion of name in caution list. Reserve Bank might caution/ de-caution the exporters under the guidance of AD banks. Handling of Shipping documents of Caution Listed Exporter AD Category informs  Exporter in caution list and by giving details of outstanding shipping bills. When caution listed exporter submits documents to AD bank for processing, bank may accept documents upon the following conditions. FIRC confirming advance payment or an irrevocable LC covering the full worth of the proposed exports; In the case of usance bills, Usance letter of credit should enclose full export value, maturity of which should be met as per LC terms Except otherwise mentioned, AD banks should not take charge of the shipping documents of caution listed exporters. Under no circumstance can AD banks, issue guarantees to cautioned exporters without RBI approval All the initial teething issues of EDPMS systems are done with effect  from June15,2016. All the inward telegraphic transfers(ITT) details along with outstandings bills are getting reported and are tracked continuously by AD banks. Banks are taking extreme measures such as putting soft hold on account to devoiding exporters to process any transaction unless past bills are regularised. All the message formats and documents relating to EDPMS enhancements are also available on the website (https://edpms.rbi.org.in). Master Direction No. 16/2015-16 dated January 1, 2016 and Master Direction No. 18/ 2015-16 dated January 1, 2016 .  
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Export Data Processing and Monitoring System (EDPMS)

Export Data Processing and Monitoring System (EDPMS)

Kranthi Tilak Reddy
Export Data Processing & Monitoring System is an online system, launched by RBI, on March 1,2014 for monitoring all export activities in India. With this system all banks have come on single platf...
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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.
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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

Lowering Gold Import Tax a Strong Recommendation by Trade Ministry

India is the second largest consumer of gold in the world. Over the years the imports of gold metal has inclined to a great level irrespective of the gold rates. Gold, in our Indian history is viewed more than an investment material and has its own cultural significance.The trade ministry of India sees scope to lower the import tax on gold. Previously in 2013, tax has been raised three times to ten percent to keep a tight rein on imports. As of now, the current account deficit has grown to be the world’s second largest consumer of  gold metal. “There is a case for lowering import duty, as it is directly linked to the current-account deficit, which has been improving”, Manoj Dwivedi, joint secretary at the trade ministry, informed the reporters in Mumbai. “It will be one of the strong recommendations on the budgetary side from the ministry.”Most of the gold used by the nation is imported from other countries. The deficit has continued to stay at convenient level for the finance ministry to reduce the tax rates and support the gold industry, Dwivedi mentioned. “We have been saying that an ideal rate for the industry is 2 percent,” he said, referring to the import tax on gold. “It can be brought down in a phased manner or in one go.”Current deficits is an abundant measure of trade.  According to the Reserve Bank of India the deficits have tapered down from 1.1 percent in 2015-2016 to 0.7 percent of gross domestic product in 2016-2017. There, record of narrow current deficits have stopped the depreciation on rupees.According to the valuation from the World Gold Council, local consumption of gold is projected to increase from 650 metric tons to 750 metric tons to almost ranging between 850 metric tons to 950 tons by 2020. Indians who purchase gold during festive seasons, marriages and other special occasions as part of the wardrobe collection and as gifts are drafted with good news as a cut in import tax would in turn reduce the purchase price of the jewelry. It shall also act as an impediment for the smuggling of the precious gold metal.
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Lowering Gold Import Tax a Strong Recommendation by Trade Ministry

Lowering Gold Import Tax a Strong Recommendation by Trade Ministry

Piuesh Daga
India is the second largest consumer of gold in the world. Over the years the imports of gold metal has inclined to a great level irrespective of the gold rates. Gold, in our Indian history is viewed ...
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Savedesk for Supplier's Credit

What is Supplier’s Credit?Supplier’s credit is a trade credit facility for imports  into India, where a Buyer ( importer) is able to avail credit either from the Seller or from a financial institution preferably from Seller’s country. This is only made available under letter of credit and not accepted for any other import payment methods.Supplier’s credit is mostly used when the seller demands payment at sight. However, Buyer needs USANCE period for the same shipment. Typically, it is used for CAPEX imports where banks would restrict clients to use only fund based limits(Term Loans) which is far expensive than Supplier’s credit. By availing Supplier’s credit, Buyer gets access to cheaper source of funds(LIBOR Based).Supplier’s Credit allows the buyers to deal with seller on sight basis term which allows them to negotiate for better discounts to acquire goods at better prices. At the same time, it’s beneficial for the seller too, as they get the payment immediately after shipment of goods (Upon acceptance by Buyer’s Bank to make the payment).Regulation on Supplier’s Credit.Supplier’s credit is directed and regulated basis  RBI Master Circular on ECB & Trade Credits & RBI Master Direction - External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers.Few important points to be noted as follows.Authorized Dealers are allowed to approve trade credits for both capital/Non capital goods upto USD 20 million per transaction. Anything beyond this specific threshold  will have to be referred to RBI for their approvalSupplier’s credit for import of Non-capital goods can be upto 1year from the date of shipment. However, the same is restricted to working capital cycle when the facility is drawn from the bank.Supplier’s credit for import of capital goods can be availed upto 5 years. However, banks may restrict the tenure to 3 years from the date of shipment. LOU/LOC are generally issued to maximum of 3 years.Rollovers are not allowed beyond permissible tenure.Process Flow:Buyer (Importer) approaches SaveDesk (Arranger) with relevant transaction details pertaining to the import i.e., before LC issuanceSaveDesk gets an offer from overseas Financial Institutions.Buyer confirms on the pricing offered and gets the LC issued through his working capital banker. LC’s are generally restricted to overseas FI’s counters .Upon Shipment, Supplier submits the documents to their bank which in turn is sent to overseas FI from whom Supplier’s credit is being availed for scrutiny of documents.This is further forwarded to buyer’s bank by overseas FI for acceptance. Upon acceptance by Buyer, Buyer’s bank sends overseas FI guaranteeing payment on due date.Overseas FI discounts the bill and makes the payment to supplier through their bank.On due date, Importer makes the payment to his bank which in turn is paid to overseas FI to settle the transaction.Requirement to avail Supplier’s creditOnly Imports under LC qualify to avail supplier’s creditLC generally are restricted to overseas FI countersNecessary changes in LC to be done relating to USANCE period basis,  the offer received from overseas FI.Suppliers Credit is generally availed from an overseas FI where the seller is present, which avoids delay in documents sent on acceptance. However, with recent developments in Banking sector, its availed from other countries too keeping in mind significant savings on interest rates offered. To get lowest quote  on Supplier’s credit,Please write to advisor@savedesk.co
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Savedesk for Supplier's Credit

Savedesk for Supplier's Credit

Saravana Bhaskar
What is Supplier’s Credit?Supplier’s credit is a trade credit facility for imports  into India, where a Buyer ( importer) is able to avail credit either from the Seller or from a financial instit...
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Best Practices to Follow while Availing Buyer’s Credit and Understanding the Costs

Most of us are aware that, Buyer’s credit (BC) is a cheap source of funding available to facilitate imports into India barring advance payments. As an importer, we are happy to avail LIBOR or EURIBOR plus margins offered by overseas lenders . The rates quoted are comparatively cheaper than INR funds. We tend to ignore some of the best practices which could still reduce our overall cost. Now let’s understand the pricing structure of a sample buyer’s credit transaction.An importer is requesting buyer’s credit quote for an import of $200000 for 35 days.You may find  quotes as 3M L+ 30 Bppa (basis points) + $50 Overseas Lender Cost :LIBOR/EURIBOR + MarginsOut of pocket expenses if anyWorking Capital Banker Charges :Arrangement Fee, if quote is arranged by Bank . Typically ranges between 0.1 to 0.4 Bppa. If the quotes are arranged by consultant, Fixed fee is levied.LUT/LOC Issuance charges. This is charged predominantly on basis of  credit rating, collateral coverage, strength of balance sheet , cash flows etc. This can range typically between 0.3% to 2.5% P.a. Very rarely have we witnessed issuance at fixed fee by banks. Document handling charges(Fixed / Variable Fee).Import commission charges(Fixed/ Variable Fee).Swift charges(Fixed Fee)WithHolding Tax if any(Range bound )Hedging cost if opted for (~4.5% P.a)Best practices to follow while availing BC:In the above example, LIBOR quoted is for 3 months although we have 2M LIBOR available. This could have brought the pricing lesser by 5Bps.  Ensure to check the LIBOR quoted by the foreign lenders which has to be  as close as next available LIBOR comparing the tenure of Buyer’s credit. For your reference, LIBOR is generally quoted for tenures as Overnight,1 week,1M,2M,6M and 12 M.Understand if there are any out of pocket expenses levied by Foreign lender which could increase your cost drastically.  Especially for low value buyer’s credit it is preferable to choose a foreign lender without any out of pocket expenses.Agree on pricing in advance related to executing the transaction with your working capital bankers. Most preferably, understand the cost for each line  item separately as quoted above.Keep an eye on margins offered by foreign lenders and calculate your net outflow on BC ROI to take a judicious call.To understand if there is any scope of cost reduction relating to your current buyer’s credit, share your existing quote /offer letter to advisor@savedesk.co .
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Best Practices to Follow while Availing Buyer’s Credit and Understanding the Costs

Best Practices to Follow while Availing Buyer’s Credit and Understanding the Costs

Saravana Bhaskar
Most of us are aware that, Buyer’s credit (BC) is a cheap source of funding available to facilitate imports into India barring advance payments. As an importer, we are happy to avail LIBOR or EURIBO...
Continue reading

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