Stronger Rupee Impact on Buyers Credit

Currency fluctuation is one of the factor effecting  Buyers Credit.

Chart: www.xe.com

From 62 Level starting 2015, USD INR moved to 68 levels and since then has come back to 64 levels in 2017. This article explores impact of stronger rupee on importers who have availed buyers credit.

Impact on Existing Buyers Credit Transaction

  1. Where Buyers Credit position is already Hedged: No Impact
  2. Where Buyers Credit position is Un-hedged and falling due : Positive Impact. Instead of making payment of 68 level now payment will happen at 64 levels.
  3. Prepayment of Buyers Credit: Incase of availability of funds, importer can choose to go ahead and make prepayment of buyers credit. Thus resulting in cost saving.
  4. Hedge open Buyers Credit position with  reduced forward rates.

Impact on Fresh Buyers Credit Transaction

1. Increase in buyers credit transaction value. As given in below example, importer can avail buyers credit for an additional amount of $10000 using existing limit.

INR Limit USD INR USD
10000000 68.5 145985
10000000 64.5 155039

2. Less margin money requirement for same value of transaction.

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