To Avail Buyers Credit….. Email: sanjaymandavia@gmail.com, M: +919825560186
Trade Credits’ (TC) refer to credits extended for imports directly by the overseas supplier, bank and financial institution for maturity of less than three years. Depending on the source of finance, such trade credits include suppliers’ credit or buyers’ credit. Suppliers’ credit relates to credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside India for maturity of less than three years. It may be noted that buyers’ credit and suppliers’ credit for three years and above come under the category of External Commercial Borrowings (ECB) which are governed by ECB guidelines.
A. Amount and Maturity
- Maximum Amount Per transaction : $20 Million
- Maximum Maturity in case of import of non capital goods: upto 1 year from the date of shipment
- Maximum Maturity in case of import of capital goods : upto 3 years from the date of shipment
- Maximum Maturity in case of import of capital goods for companies classified as Infrastructure sector: Upto 5 years from the date of shipment
B. All-in-cost Ceilings
- Upto 1 year : 6 Month Libor + 350 bps
- Upto 3 years : 6 Month Libor + 350 bps
- Upto 5 years: 6 Month Libor + 350 bps (applicable only for import of capital goods by companies classified as infrastructure as defined in external commercial borrowing)
C) Guarantee
AD banks are permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to one year for import of all non-capital goods permissible under Foreign Trade Policy (except gold, palladium, platinum, Rodium, silver etc.) and up to three years for import of capital goods, subject to prudential guidelines issued by Reserve Bank from time to time. The period of such Letters of credit / guarantees / LoU / LoC has to be co-terminus with the period of credit, reckoned from the date of shipment.
Reference
- RBI Latest Circular: Trade Credit for Imports into India – Review of all-in-cost ceiling:Dated 09-10-2012
- RBI Circular : Trade Credit for Imports into India – Review of All-in-cost ceiling:Dated: 30-03-2012
- RBI Master Circular : External Commercial Borrowing and Trade Credit – 01 July 2012
- Trade Credit for Import Into India: Dated 11-09-2012
- RBI Master Circular on Import of Goods and Services: Dated: 01-07-2012
i want to know the advance payment by TT for import of capital goods are eligible buyers credit
Clarification: Below given are cases were Buyers Credit cannot be done or amount is capped
1. In case on non import transaction
2. In case of Advance Payment for Import. Reason: As per RBI provision Buyers Credit is allowed for 360 days from Shipped on Board date of BL. Incase of Advance payment which is not possible
3. Incase of import transaction where document are directly received by importer (instead of banking channel), in that case cap is $300000.
My bank is not agreed on import transaction without banking channel.Where in RBI guidelines
is mentioned that cap is $300000 for import documents recieved directly.
You are correct in pointing out that under RBI Circular on Import of Goods and Services, RBI has allowed payment upto $300000 but it allowed with some terms and condition. Details of it is given below.
Import of documents directly by importers is bifurcated into two parts.
A. Receipt Regular Import documents by the importer directly from Overseas Suppliers
Import bills and documents should be received from the banker of the supplier by the banker of the importer in India. AD Category – I bank should not, therefore, make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases:
(i) Where the value of import bill does not exceed USD 300,000.
(ii)Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.
(iii)Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy, 100% Export Oriented Units / Units in Special Economic Zones,
Public Sector Undertakings and Limited Companies.
(iv) Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies.
B. Receipt of import documents by the importer directly from overseas suppliers in case of specified sectors
Receipt of import documents by the importer directly from overseas suppliers in case of specified sectors As a sector specific measure, AD Category – I banks are permitted to allow remittance for imports up to USD 300,000 where the importer of rough diamonds, rough precious and semi-precious stones has received the import bills / documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. AD Category – I banks may undertake such transactions subject to the following conditions:
(i) The import would be subject to the prevailing Foreign Trade Policy.
(ii)The transactions are based on their commercial judgment and they are satisfied about the bonafides of the transactions.
(iii)AD Category – I banks should do the KYC and due diligence exercise and should be fully satisfied about the financial standing / status and track record of
the importer customer. Before extending the facility, they should also obtain a report on each individual overseas supplier from the overseas banker or reputed
overseas credit rating agency.
Based on the above information, check with your bank, under which criteria they are classifying your transaction and whether you are full filling all the required conditions for the same. Also, If your case is falling under category B, please refer (ii) carefully. Even if you are satisfying the conditions, banks should get satisfied about the bonafides of the transaction. Thus bank have discretion under that point. In that given case, you provide as much information and documents to make them comfortable about the transaction.
Can one make 5 lac usd import payment against an invoice raised in 2008?
for import of rough diamond?
There is no specific guidelines which RBI prescribe for rough Diamond. Thus one needs to refer RBI guidelines on time limit for settlement for import payment given in Master Circular Import of Goods and Services. Please find extract of the same given below. For your case, if you wish to make such a payment, your bank has to approve such a payment and if you are paying an interest on such delayed payment maximum interest is as per trade credit circular is allowed and not more than 3 year interest. Your bank will approve based on below guidelines (and any additional guidelines given by RBI) and justification provided by you for your case. Incase with complication, RBI can be approached through your bank to seek such approval.
Extract from RBI Master Circular Import of Goods and Services
B.5.Time Limit for Settlement of Import Payments
B.5.1. Time limit for normal imports
(i)In terms of the extant regulations, remittances against imports should be completed not later than six months from the date of shipment, except in cases
where amounts are withheld towards guarantee of performance, etc.
(ii) AD Category – I banks may permit settlement of import dues delayed due to disputes, financial difficulties, etc. Interest in respect of delayed payments,
usance bills or overdue interest for a period of less than three years from the date of shipment may be permitted in rate prescribed for trade credit from time to time.
I want to know that if a company A has availed buyers credit for the goods being imported by them and before it reached India, the company A sold the goods to company B in High Sea. The bill of landing was initially in name of company A. What are the docs required for the aove transaction by bank ?
Please refer the article on buyers credit against high sea sales.
Although buyer’s credit maturity period for non-capital goods is 1 year, then why Banks doesn’t allow Importers to take Buyer’s credit more than 6 months?
You are right in quoting RBI provision. But it say AD (Banks) may approve upto to 360 days from the date of shipment. In order to decide on the maximum tenure for a client to avail buyers credit, banks looks at working capital cycle of the customer. Working capital cycle in simple term is the tenure between purchase of raw material till collection of funds post sales. If as per assessment of bank based on financial submitted by customer and industry trend, working capital cycle of client is for 90 days, bank would only allow buyers credit for that tenure and so on for other tenure. This done to make sure that buyers credit issued as funding mode and not for the purpose of just arbitrage.