Topics
- Buyers Credit (55)
- Buyers Credit Accounting (1)
- Buyers Credit on Precious Metals (6)
- Currency Hedging (3)
- Form 15CA and Form 15CB (5)
- Income Tax (6)
- Letter of Comfort (LOC) / Letter of Undertaking (LOU) (5)
- Letter of Credit (LC) (2)
- LIBOR (6)
- Others (5)
- RBI Regulation & Circulars (18)
- Suppliers Credit (32)
- Withholding Tax (8)
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Articles
- Swift Code & Messages Used in Buyers Credit Transaction
- Tax Residency Certificate Not Required in Prescribed Format
- Surcharge and Education Cess on Withholding Tax
- Transfer of Limits from One Bank to Another : Buyers Credit Rollover Process
- Buyers Credit on Import of Precious and Semi Precious Stone
- Myanmar Economic Sanctions – Background, Recent Relaxation & Trade Finance
- Buyers Credit on High Sea Sales Transaction
- Withholding Tax (WHT) is applicable on Suppliers Credit Transactions
- How to Calculate Total Cost of Buyers Credit
- Bank Finance for Purchase of Gold
- Buyers Credit with 6 Month Libor Reset
- Review of Trade Credit All-In-Cost Ceiling
- Impact of Libor Review on Trade Finance in India
- Pushing the reset button on LIBOR – Speech by Martin Wheatley
- Certificate of Tax Residency under DDTA (Withholding Tax)
- Buyers Credit on Jewellery
- Overdue Interest and Late Payment Charges on Buyers Credit
- Prepayment of Buyers Credit
- Trade Credit Extended Upto 5 Years for Infrastructure Firms
- Difference Between EURIBOR & EUR Libor
- Banks Insisting of Forward Booking for Buyers Credit Exposure
- 5% WHT as per Sec 194LC not applicable to Buyers Credit
- Form 15CA & 15CB Not Applicable on Interest payment to Indian Bank Branches
- Basel III – Future Impact of Trade Finance
- Suppliers’ Credit or Buyers’ Credit is not available for Merchanting Trade
- IMO Number and Its importance in case of Buyers Credit
- Country-wise Double Taxation Summary Chart on Interest
- Consequence of Non Deduction of Withholding Tax (WHT / TDS)
- Form 15CA and 15CB under Section 195 of Income Tax
- OFAC Countries & Implication on Buyers Credit
- Review of all-in-cost ceiling – Trade Credit
- Buyers Credit All-In-Cost Ceiling may move back to L+200bps from 01/04/2012
- Buyers Credit for Imports Under Direct Documents
- Difference between Buyers Credit and Letter of Credit (LC)
- Comprehensive Guidelines on Foreign Exchange Derivatives
- Recent Changes to India’s Currency Forward Contract Norms for Hedging
- RBI Increase Buyers Credit All-in-Cost Ceiling
- Buyers Credit Accounting Entries
- Infrastructure Companies – Bridge Finance before availing ECB
- Buyers Credit on Capital Goods
- Buyers Credit Interest Rate (LIBOR + Margins)
- Bankwise Letter of Comfort / Undertaking Charges
- Buyers Credit on Gold Import
- LIBOR Rates: Brief, History, Currencies, Maturities
- Transaction where Buyer’s Credit is Restricted
- Sample format of Letter of Undertaking / Comfort (LOU / LOC)
- Import of Platinum, Palladium, Rhodium, Silver
- Buyer’s / Supplier’s Credit on Rough, Cut and Polished Diamonds
- Buyer’s Credit Rollover
- Buyer’s Credit from Mauritius Based Foreign Bank
Old Article
- Procedure for Buyers Credit in India
- RBI Trade Credit (Buyers/Suppliers Credit) Circular Extract
- WHT (Withholding Tax) on interest on Buyers Credit
- Letter of Comfort / Undertaking (LOC/LOU) Charges
- Buyer’s Credit in Cross Currency
- Supplier’s Credit India – Meaning & Process
- Difference between Buyer’s Credit and Supplier’s Credit
- Buyer’s / Supplier’s Credit Consultants
About the Author
Tag Archives: Import Finance
Swift Code & Messages Used in Buyers Credit Transaction
SWIFT code (ISO 9362, SWIFT-BIC, BIC code, SWIFT ID) is a standard format of Business Identifier Codes approved by the ISO. These codes are used when transferring money between banks, particularly for international wire transfers, and also for the exchange of other messages between banks. Swift Message type used in buyers credit are MT202, MT799 & MT999 Continue reading
Posted in Buyers Credit, Others, Suppliers Credit
Tagged BIC, Finance, Import Finance, International trade, ISO 9362, MT202, MT799, SWIFT, Trade Credit, Wire transfer
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Tax Residency Certificate Not Required in Prescribed Format
In September 2012, CBDT had prescribe a format in which Tax Residence Certificate (TRC) was required from April 2013. In the Amendments to Finance Bill 2013, requirement of prescribed format has been done away with. Continue reading
Surcharge and Education Cess on Withholding Tax
Withholding Tax rates may be limited by application of a tax treaty. The surcharge and education cess will not apply where the withholding tax is limited by a tax treaty. Continue reading
Posted in Buyers Credit, Suppliers Credit, Withholding Tax
Tagged Buyers Credit, Double taxation, DTAA, Finance, Import Finance, SME Finance, Tax treaty, Withholding Tax
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Transfer of Limits from One Bank to Another : Buyers Credit Rollover Process
Buyers Credit is arranged against Letter of Undertaking (LOU) / Letter of Comfort (LOC) issued by Importer’s Bank. During this period if importer decides to shift his limits from X bank to Y bank, few complications arise. For a Raw material transaction, importer may decide not to rollover the transaction to avoid complications; but for Capital goods Importer has lesser options. If the buyers credit does not get rolled over, the same would get converted into term loan which would cost the importer higher rate of interest. This article provides details on process to be followed and what documents are need for smooth transition. Continue reading
Myanmar Economic Sanctions – Background, Recent Relaxation & Trade Finance
Myanmar has been under various international economic sanction for more than a decade, which has crippled its international trade. Below article gives a background of economic sanctions on Myanmar, recent relaxations in these sanctions and what will be its likely impact on trade finance from Indian importers perspective. Continue reading
Buyers Credit on High Sea Sales Transaction
What is High Sea Sales ? High Sea Sales (HSS) is a sale carried out by the carrier document consignee to another buyer while the goods are yet on high seas or after their dispatch from the port/airport of origin and before their arrival at the port/ airport of destination. Continue reading
Posted in Buyers Credit, Suppliers Credit
Tagged article, Buyers Credit, Finance, Import Finance, International trade, SME Finance, Suppliers Credit, Trade Credit
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Withholding Tax (WHT) is applicable on Suppliers Credit Transactions
Withholding Tax is applicable on Suppliers Credit Under Sec 195 of Income Tax Act 1961. Additionally DTAA treaty of the respective country has to be referred for the definition of interest to arrive at final conclusion. Continue reading
Posted in Suppliers Credit, Withholding Tax
Tagged article, Double taxation, Finance, Import Finance, International trade, SME Finance, Suppliers Credit, WHT, Withholding Tax
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Buyers Credit with 6 Month Libor Reset
Banks and Importers consider various factors before going for Buyers Credit transaction for more than 6 months tenure. One such factor is buyers credit with 6 Month Libor Reset option. The below article elaborates on these factors. Continue reading
Review of Trade Credit All-In-Cost Ceiling
After the expiry of deadline of 30-09-2012, there was a prolonged uncertainty for last 9 days on what is the all in cost ceiling for Trade Credit (Buyers Credit / Suppliers Credit). Reserve Bank of India (RBI) issued a clarification or revised circular today clarifying the same. Summary of the same is given below Continue reading
Impact of Libor Review on Trade Finance in India
Trade Credit (Buyers Credit, Suppliers Credit etc.) perspective, recommendation which are the most relevant are the number of currencies and tenors for which LIBOR is published to be reduced and market participants using LIBOR should be encouraged to consider and evaluate their use of LIBOR Continue reading
Certificate of Tax Residency under DDTA (Withholding Tax)
From April 2013 onwards when buyers credit is taken from foreign bank, importer will also need to collect Certificate of Tax Residency in specific format from these foreign banks to claim benefit of lesser Withholding Tax (WHT) rates under DDTA or else standard rate of 20% will be applicable. Continue reading
Overdue Interest and Late Payment Charges on Buyers Credit
Overdue Interest is applicable for the period after due date on which payment of principal and interest is payable to the buyers credit bank. Some banks have been clearly stating these charges in their offer letter or in letter of undertaking format. Continue reading
Posted in Buyers Credit
Tagged Buyers Credit, Finance, Import Finance, SME Finance, Trade Credit
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Prepayment of Buyers Credit
Prepayment of buyers credit from both Importers perspective and Banks perspective and related RBI regulation Continue reading
Posted in Buyers Credit
Tagged Buyers Credit, Finance, Import Finance, Reserve Bank of India, SME Finance, Suppliers Credit, Trade Credit
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Trade Credit Extended Upto 5 Years for Infrastructure Firms
Buyers Credit for import of capital goods has been extended from 3 years to 5 years for company classified as Infrastructure as defined in guidelines on External Commercial Borrowings (ECB). Trade Credit must be availed for Minimum fifteen months at one go and should not be in the nature of short-term roll overs. Continue reading
Difference Between EURIBOR & EUR Libor
EURO based buyers credit is currently funded by most of the banks using EURIBOR which is issued by European Banking Federation and ACI. A similar rate is issued by British Banking Association known as EUR Libor but is not often used by bankers for funding buyers credit transactions Continue reading
Banks Insisting of Forward Booking for Buyers Credit Exposure
Banks have started asking their clients to compulsorily book forwards against their buyers credit exposure (existing as well new transactions). This change is because of earlier and current directives given by Reserve Bank of India (RBI). Continue reading
5% WHT as per Sec 194LC not applicable to Buyers Credit
Section 194 LC for Tax Deduction by Indian Specified Company on Interest paid to Non resident / Foreign Company is not applicable to Buyers Credit. Continue reading
Form 15CA & 15CB Not Applicable on Interest payment to Indian Bank Branches
As per Income Tax circular 04/2009 dated 29th June, 2009 (Circular Link provided below), Form 15CA and 15CB Certificate under Section 195 of Income Tax is required to be submitted in cases where payments are made to a non-resident. Continue reading
Basel III – Future Impact of Trade Finance
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 The Basel Committee on Banking Supervision (BCBS, or Basel Committee) is an institution created by the central bank Governors of 27 members from both developed and emerging economies. The most influential publications by the BCBS … Continue reading
Posted in Buyers Credit, Others, Suppliers Credit
Tagged Import Finance, International trade, SME Finance
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IMO Number and Its importance in case of Buyers Credit
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 What is IMO Number ? The IMO ship identification number is made of the three letters “IMO” followed by the seven-digit number assigned to all ships by IHS Fairplay when constructed. This is a unique seven … Continue reading
Posted in Buyers Credit, Others
Tagged IMO ship identification number, Import, Import Finance, India, Indian Bank, International trade
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Country-wise Double Taxation Summary Chart on Interest
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 Below Country-wise double taxation summary chart provides Tax rate and Article reference number applicable on interest payments to beneficiary outside India. Same will be useful at the time of filling up Form … Continue reading
Form 15CA and 15CB under Section 195 of Income Tax
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to … Continue reading
Posted in Buyers Credit, Form 15CA and Form 15CB, Income Tax, Suppliers Credit
Tagged Finance, Import Finance, International trade
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OFAC Countries & Implication on Buyers Credit
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 What is OFAC Sanctions ? The Office of Foreign Assets Control (OFAC) is an office of the Treasury Department of United States of America (US). OFAC administers and enforces economic and … Continue reading
Review of all-in-cost ceiling – Trade Credit
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 In its circular dated 30/03/2012, RBI has decided to continue with the enhanced all-in-cost ceiling for Trade Credit for further period of six months. Maximum Cap on Interest Rate for tenure … Continue reading
Buyers Credit All-In-Cost Ceiling may move back to L+200bps from 01/04/2012
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 In its Circular dated 15/11/2011, RBI had increased the all-in-cost ceiling for Buyers Credit from 6 Month L+ 200 bps to 6 Month L + 350 bps subject to condition that … Continue reading
Buyers Credit for Imports Under Direct Documents
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 RBI Circular of External Commercial Borrowing and Trade Credit gives information about buyers credit. But with specific type of transaction, inference has to taken from other related circulars. For example, for Buyers … Continue reading
Difference between Buyers Credit and Letter of Credit (LC)
LC is one of the payment mode used in the International Trade between importer and exporter to cover third-party credit risk. Meaning if the importer defaults, his bank will have to pay on his behalf. Whereas, Buyers credit is a funding mechanism used by importer to funds his transaction. Continue reading
Comprehensive Guidelines on Foreign Exchange Derivatives
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 RBI via circular dated 28/12/2010 revised the extant guidelines on OTC (Over the Counter) Foreign Exchange Derivatives and which became effective from 1st February 2011. Below is the extract of the guidelines related to importers and exporters. … Continue reading
RBI Increase Buyers Credit All-in-Cost Ceiling
To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186 RBI reviewing the developments in global finance markets and the fact that domestic importers are experiencing difficulties in raising Trade Credit (Buyers Credit / Suppliers Credit) within the existing all-in-cost ceiling, RBI has … Continue reading
Buyers Credit Accounting Entries
Buyers Credit Essential Accounting Treament, Entries and Disclosures in books of Accounts Continue reading
Posted in Buyers Credit, Buyers Credit Accounting
Tagged article, Business, Buyers Credit, Finance, Import Finance, Trade Credit
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Infrastructure Companies – Bridge Finance before availing ECB
RBI allowed Indian companies which are in infrastructure sector to import capital goods by availing of short-term credit (including buyer’s credit and supplier’s credit) in the nature of “Bridge Finance” under the approval route,subject to following conditions Continue reading
Buyers Credit on Capital Goods
Buyers Credit can be used both for Raw Material and Capital Goods. Below article gives complete detailed information about buyers credit on Capital Goods along with process and sample sanction letters. Continue reading
Bankwise Letter of Comfort / Undertaking Charges
Letter of Undertaking (LOU) / Letter of Comfort (LOC) charges as given in respective bank’s website. These rates may vary from customer to customer, based on their negotiation with bank. Continue reading
Transaction where Buyer’s Credit is Restricted
Type of transaction where buyer’s credit cannot be done are Local Trade, Advance Payment, Merchanting Trade, Intermediary Trade Transaction and Import of Services. Continue reading
Posted in Buyers Credit, Suppliers Credit
Tagged article, Business, Buyers Credit, Finance, Import Finance, India, International trade, Suppliers Credit, Trade Credit
4 Comments
Buyer’s Credit Rollover
Process to be followed for Buyers Credit Rollover from Existing Bank and Rollover from Other Banks and documentation required for each of this case. Article also provides details about regulation and other factors to be consider while doing rollover of buyers credit. Continue reading
Posted in Buyers Credit
Tagged Business, Buyers Credit, Capital good, Comfort letter, Finance, Import Finance, India, London Interbank Offered Rate, Updates, Working Capital
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Buyer’s / Supplier’s Credit Consultants
Person / Firm who co ordinates with Indian Overseas Branches or Foreign Bank and arranges best possible quote for transactions. They do not directly represent any of these bank. They are also known as Buyers Credit Brokers & Buyers Credit Agents. Scope of Activity, Technical Aspect, arranging quote and get funding done. Continue reading
Posted in Buyers Credit, Suppliers Credit
Tagged article, Business, Buyers Credit, Comfort letter, Finance, Import, Import Finance, India, Updates
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Difference between Buyer’s Credit and Supplier’s Credit
Difference between buyers credit and suppliers credit are based on criteria like, Mode of payment, LC clauses, arrangement process, and cost involved. Continue reading
Supplier’s Credit India – Meaning & Process
Supplier’s Credit relates to credit for imports into India extended by the overseas suppliers or financial institutions outside India.Usance Bills under Letter of Credit (LC) issued by Indian bank branches on behalf of their importers are discounted by Indian bank overseas branches or Foreign bank. Paying your suppliers at sight against Usance bills under letter of credits. Continue reading
Buyer’s Credit in Cross Currency
Note: Since the time this article was written, 6 Month Euribor has come down from 1.79% (July 2011) to 0.325%. Concept of cross currency still holds but the example would change. Please take below example as reference only. Continue reading
Posted in Buyers Credit, LIBOR
Tagged article, Business, Buyers Credit, Forward Premium, Import Finance, India, London Interbank Offered Rate, Updates
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Letter of Comfort / Undertaking (LOC/LOU) Charges
Normally importers would tend to look at Interest Cost provided by Foreign bank (Indian bank overseas branches or Foreign bank) on deciding which offer to accept. But this is a wrong approach. Importers should look at overall cost. Overall cost would be Foreign bank interest cost and LOU charges of your bank. Continue reading
Useful links in relation to Buyers Credit
Buyers Credit Calculation Sheet, Current Exchange Rate, Future / Forward Rates of USD, EURO, GBP, & JPY. Relevant RBI Circulars in Relation to Forward Contract. DTAA, Withholding Tax, Income Tax Notification in Relation to Form 15CA, Form 15CB, Challan 281, Form 27Q and Filling Links / Format. Relevant RBI Circulars in relation to Trade Credit Continue reading
RBI Trade Credit (Buyers/Suppliers Credit) Circular Extract
Trade Credits’ 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 Continue reading
Posted in Buyers Credit, RBI Regulation & Circulars, Suppliers Credit
Tagged article, Business, Buyers Credit, Finance, Import Finance, India, International trade, RBI, Trade Credit, Updates
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Procedure for Buyers Credit in India
Importers trying to take buyers credit for first time, should go through do initial checks likes whether non fund based limits is in place and for what tenure, is lou format is acceptable to their bank and other operational issues. Continue reading
Posted in Buyers Credit
Tagged article, Business, Buyers Credit, Comfort letter, Finance, Import Finance, Non Fund bases limit, Updates, Working Capital
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Buyer’s Credit – Definition & Meaning
Buyer’s Credit refers to loans for payment of imports into India arranged on behalf of the importer through an overseas bank. Article gives details about Benefits, Process Flow, Cost Involved and Regulatory Framework. Continue reading
