Importers banking with Co operative Bank’s both AD Category and Non AD Category, face issues with arranging buyers credit because
- In case of AD Category Co operative Bank: Limited Lines in International Market or No Lines
- Non AD Category Co operative Bank: They cannot deal directly in Import or Export transaction but have to route the transaction through tie up bank.
This article is to address the above queries:
Most of Co Operative Banks have banking arrangement with Nationalized and Private Sector Banks through whom they handle Export Import Transactions for their customers. Importer customer of these banks can also avail benefit of buyers credit. Before entering into any transactions importer will have to check below important points:
1. Limits of Co Operative Bank
It is an internal matter between Co Operative Bank and Nationalized Bank / Private Bank on where they have limits and what process they follow. But just for understanding, Co operative bank places FD with various bank on regular basis. Whenever there is a requirement, they can be marked lien and limits can used for buyers credit, LC Issuance, Bank Guarantee etc.
2. Process Flow for Buyers Credit through Co operative Banks
For Below discussion: Co Operative Bank: XYZ Co Operative Bank, Private Bank: HDFC Bank, Customer: ABC Ltd
A. Documents Routed Through HDFC Bank
- Overseas Supplier will submit document to his bank.
- Suppliers Bank will send documents to HDFC Bank with forwarding letter : ABC Ltd A/c XYZ Co Operative Bank.
- HDFC Bank will Lodge the Bill post receipt and will intimate XYZ Co Operative Bank of the same.
- ABC Ltd will approach Buyers Credit Consultant for arranging quote.
- ABC Ltd to submit documents in the format provided by HDFC Bank to XYZ Co operative Bank. Documents will include ECB Form, A1 Form, A2 Form, other documents of the bank along with offer letter and lou format provided.
- XYZ Co Operative will have to counter sign all the documents of ABC Ltd. Make a forwarding letter giving details of reference number and authorising HDFC Bank to debit the charges and lien their existing fixed deposit. Post which they will forward the documents to HDFC Bank.
- HDFC Bank based on the given documents and authorization, will block the limit of XYZ Co operative Bank and send lou SWIFT to overseas bank from where Buyers Credit is arranged.
- Overseas Bank will Fund the amount to nostro account of HDFC Bank on the value date.
- HDFC Bank will debit their nostro and pay to supplier. HDFC Bank will provide payment advice and original documents to XYZ Co Operative Bank of the same.
- XYZ Co Operative Bank handovers import documents to ABC Ltd.
B. Incase of Direct Documents received by ABC Ltd from Supplier
- Overseas Supplier sends documents directly to ABC Ltd
- Once the shipment reaches, release the goods by filling Bill of Entry for Home Consumption.
- ABC Ltd arranges quote though Buyers Credit Consultant.
- ABC Ltd to submit copy of import documents along with Bill of Entry Copy, Others documents in format provided by HDFC Bank ECB form, A1 form, A2 form along with offer letter and lou format.
- Rest of the process remains same as above.
- Bill Lodgment Charges of HDFC Bank
- Swift Charges
- LOU Issuing Charges of HDFC Bank (as this will be against 100% + FD margin, costing will be lower than limits customer.)
- LOU Issuing Charges of XYZ Co Operative Bank
* Plus Service Tax at applicable rate
- Buyers Credit Cost Calculation Sheet
- Transaction where Buyer’s Credit is Restricted