Suppliers Credit Process Flow

Supplier’s Credit is a structure of financing Import into India. In this structure, overseas suppliers or financial institutions outside India provide financing to importer on Libor linked rates against Usance letter of credit (LC). Importer and Overseas Bank will have to follow below process

  1. Importer enter into contract with supplier for import.
  2. With transaction details importer approaches arranger to get suppliers credit for the transaction
  3. Arranger get an indicative pricing from overseas bank, which importer confirms.
  4. Importer approach his bank and get LC issued, restricted to overseas bank counters with other required clauses
  5. Overseas Bank confirms the LC and advise LC to Supplier’s Bank. Suppliers Bank provides the copy of the LC to Supplier.
  6. Supplier ships the goods and submits documents at his bank counter.
  7. Supplier’s Bank sends the documents to Overseas Bank.
  8. Overseas Bank post checking documents for discrepancies (As per UCP 600) sends the document to importer’s bank for acceptance:
    • If documents are as per order, the same is discounted and transferred to supplier’s bank.
    • Incase of discrepant documents, documents are sent on acceptance basis. On receipt of Importer bank acceptance, the same is discounted and transferred to supplier’s bank.
  9. Supplier receives the payment for the LC. Depending on who is bearing the interest cost:
    • If importer is bearing interest cost, supplier receives full payment.
    • If Suppliers is bearing interest cost, supplier will receive LC amount – Interest.
  10. Importer’s Bank receives the documents. Importer’s bank and Importer accept documents. Importer’s Bank provides acceptance to Overseas Bank, guaranteeing payment on due date.
  11.  Overseas Bank (Negotiating Bank) advices the Interest and maturity amount to LC issuing Bank to be paid on Due date.
  12. On maturity, Importer makes the payment to his bank and Importer’s bank makes payment to Supplier’s Credit Bank


  • Some overseas bank insist on LC to be advised through their counter and some are ok with LC been advised directly to supplier’s bank.
  • Reason for not insisting lc advising through their own counter can be
    1. No Relationship Management Application (RMA) between suppliers bank and overseas bank.
    2. Reduce one leg to transaction to smoothen the process.

One thought on “Suppliers Credit Process Flow”

  1. is this the same as reimbursement financing wherein CBA Sydney and few others are doing txn. and post rbi ban can indian bank suggest Reimb financing aka Suppliers credit txn. to clients as per point no. 10 importer bank is giving acceptance . whether its allowed as of today.

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