All posts by Sanjay Mandavia

Buyers Credit & Suppliers Credit Consultant

What can be termed as Suppliers Credit?

Over the years Indian importers have used Suppliers Credit and Buyers Credit as two different modes of Import financing. RBI had defined them as Trade Credit under Master Direction for ECB and Trade Credit.

Suppliers Credit structure was understood as financing of import usance Letter of Credit (LC) by Overseas branches / Foreign banks  where as Buyers Credit was considered as financing against LOU/LOC till it was stopped by RBI.

Under new RBI Circular “Trade Credit : New Regulatory Guidelines” a confusion arose on what structure can be called  Suppliers Credit ?

In this article we will compare the trade credit circular, what is the confusion, what has changed in relation to suppliers credit, Impact on Local Bank and Overseas Branches and Impact on Importers.

Definition

Old Circular New Circular
Master Direction: ECB and Trade Credit updated on 22 Nov 2018 Trade Credit – New Regulatory Framework
Definition of Trade Credit Trade Credits refer to the credits extended by the overseas supplier, bank and financial institution for maturity up to five years for imports into India. Depending on the source of finance, such trade credits include Suppliers’ Credit or Buyers’ Credit. Trade Credits (TC) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognised lenders for maturity, as prescribed in this framework, for imports of capital/non-capital goods permissible under the Foreign Trade Policy of the Government of India.
Definition of Suppliers Credit Suppliers’ credit relates to the credit for imports into India extended by the overseas supplier Depending on the source of finance, such Trade Credit include suppliers’ credit and buyers’ credit from recognised lenders.
Definition of Buyers Credit Buyers’ credit refers to loans for payment of imports into India arranged by the importer from overseas bank or financial institution Depending on the source of finance, such Trade Credits include suppliers’ credit and buyers’ credit from recognised lenders.
Recognised Lender for Suppliers Credit Overseas supplier, bank and financial institution For suppliers’ credit: Supplier of goods located outside India.
Recognised Lender for Buyers Credit Overseas supplier, bank and financial institution Banks, financial institutions, foreign equity holder(s) located outside India and financial institutions in International Financial Services Centres located in India.

What has changed ?

  1. Source of finance defines whether it is suppliers credit or buyers credit.
    • If an importer arranges finance against import usance LC from overseas branch, it will be classified as buyers credit.
    • Supplier gives credit of 180 days on DA/usance LC etc., it will be considered as suppliers credit.
  2. New circular now also defines recognised lender
    • Suppliers Credit: Supplier of goods is the recognized lender.
    • Buyers Credit: Banks, financial institutions, foreign equity holder(s) located outside India and financial institutions in International Financial Services Centres located in India.

What is the confusion ?

Importers, Bank, and Overseas Branches over period of time started using terms Suppliers Credit for financing of import usance LC.

With Trade Credit : New Regulatory Framework, RBI defined recognised lender for suppliers credit as supplier. This created a confusion

  • Whether RBI has stopped suppliers credit as market new it (import usance LC finance).
  • What is suppliers credit ?
  • What will import usance LC financing product  be called now?
  • Whether the current structures of financing import usance LC will still remain ?

Clarifications

  1. No. RBI has not stopped import usance LC finance. Now it would be know by another name.
  2. Suppliers Credit means financing provided by supplier. If supplier gives 180 days credit for import under DA/usance LC, it will be consider as suppliers credit. Importer will have no roles as  supplier is giving finance directly or arranging for finance and also bearing the cost of it.
  3. Some of the alternative terminology for import usance LC can be
      • Usance Payable at Sight (UPAS)
      • LC Discounting LC Backed
      • LC Backed Reimbursement Finance etc.
  4. Below two structure will not be affected by above changes which are currently active:

Impact on Local Bank and Indian Bank’s Overseas Branches

  • Overseas Branches will have to change the name of the product under which they are currently sourcing the business
  • Local Banks will have to change classification for reporting to RBI.

Impact on Importer

From the perspective  of importer there will be no change in process which they used to follow for arranging financing against import usance LC. Only thing they will have to get acquainted with new terminology which banks will use to give financing against it.

Conclusion

In William Shakespeare’s words : “What’s in a name? That which we call a rose by any other word would smell as sweet”.

Terminology used for Suppliers Credit will change but underlying structure will remain the same.

Reference

  1. RBI Circular : Trade Credit Policy – Revised framework: Dated 13 Mar 2019
  2. RBI Circular: New External Commercial Borrowings (ECB) framework : Dated 16 Jan 2019
  3. Old RBI Master Direction on ECB and Trade Credit: Updated till 22 Nov 2018

RBI FAQs on Trade Credit : Updated as on 26 Dec 2018

Below given are RBI FAQs on Trade Credit updated as on 26- Dec-2018. RBI has issued revised guidelines under” Trade Credit : New Regulatory Framework“. Will update this article as when RBI updates the FAQs with revised guidelines.

1. Does discontinuance of LoU/ LoC mean that Trade Credit has been discontinued as a means of trade finance?

No, Trade Credits, including Buyers’ Credit, can be availed as a form of clean credit apart from availing Bank Guarantee for Trade Credits, subject to extant Trade Credit guidelines and compliance with provisions contained in Department of Banking Regulation Master Circular No.DBR No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended from time to time. Letters of Credit/ Bank Guarantee arrangements continue as a form of trade finance, as hitherto.

2. Do LoUs/ LoCs, which have been issued prior to issuance of A.P. (DIR Series) Circular No.20 dated March 13, 2018, but whose tenor is not over need to be cancelled?

No, LoUs/ LoCs issued and accepted prior to the issuance of the said circular may continue till their original validity. However, no roll-over is permitted.

3. Whether SBLC can be issued by AD Category branches on behalf of their customers for availing short term trade finance from overseas lenders in Foreign currency?

AD banks can issue SBLC on behalf of their customers for availing short term trade credit from overseas lenders in foreign currency subject to such SBLCs complying with the provisions contained in Department of Banking Regulation Master Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended from time to time.

Reference

Trade Credit : Changes in All-in-Cost Ceiling

As discussed in the earlier article, RBI issued a circular related to Trade Credit – New Regulatory Framework which has provided clarity on many aspects of Trade credit  (Buyers Credit / Suppliers Credit). One of this aspect is All-in-Cost Ceiling.

This article is about All-in-Cost definition, relevant extracts of RBI circular, what has changed and what will be its impact on trade credit products offered by banks.

Continue reading Trade Credit : Changes in All-in-Cost Ceiling

Can SEZ, FTWZ and DTA units avail Buyers Credit ?

As discussed in earlier article, RBI issued a circular related to Trade Credit – New Regulatory Framework which has provided clarity on many aspects of Trade credit. One of the aspect is Trade Credit  (Buyers Credit / Suppliers Credit) availed by units based in SEZ/FTWZ/DTA.

In this article we have provided relevant extracts related to SEZ/FTWZ/DTA, definition, documentation and process to be followed by developers and units.

Continue reading Can SEZ, FTWZ and DTA units avail Buyers Credit ?

RBI Circular : Trade Credit – New Regulatory Framework

RBI has issued a new regulatory framework for Trade Credit (TC) on March 13, 2019 effective immediately. Details of the circular is given below. In next articles we will cover the major changes in the RBI circular.

Major highlights of the RBI circular are

  1. What be termed as Suppliers Credit ? As per the new circular Only those finance provided by Supplier of goods located outside India can be termed as suppliers credit. Some example finance provided by supplier can be DA Document or Usance LC for 180 days etc. Import Usance LC finance arrange by importer will hence forth  be called UPAS, LC backed Reimbursement Finance, or LC Discounting or any other term given by local / overseas branches.
  2. Banks can issue Bank Guarantee for availing trade credit. Few private sector banks earlier where insisting on giving SBLC to only their overseas branches for trade credit. But with this circular understanding should be that banks can now issue guarantee / SBLC to any overseas banks / branches, FI, Foreign Equity holder and IFSC Branches.
  3. The directions on issuance of guarantee mentioned under this provision shall come into force from the date of publication, in the Official Gazette, of the relative Regulations issued under FEMA.  As of 18-Dec-2019, above Gazette is yet to be issued.
  4. Changes in all-in-cost ceiling and definition.
  5. Foreign branches / subsidiaries of Indian banks are permitted as recognised lenders only for Foreign Currency Trade Credit.
  6. Non-banking financial companies (operating from IFSCs) will now be able provide trade credit.
  7. Another header created in amount for which Trade Credit can be availed by oil/gas refining & marketing, airline and shipping companies. Per Transaction Maximum Amount permissible will be USD 150 Million.
  8. Policy to avail trade credit for Shipyard and Shipbuilder.
  9. New Definition of all in costing pricing (It includes rate of interest, other fees, expenses, charges, guarantee fees whether paid in foreign currency or INR). Thus would it mean 6 Month + 250 bps would also included bank guarantee fee charged by local bank ?
  10. Hedging Provision.
  11. Change of Currency of borrowing.
  12. Policy and process of Trade Credit related to SEZ, FTWZ and DTA.
  13. Security which can been offered for Trade Credit, creation of charge and related process.
  14. Authorised Dealer (AD) Banks to decide on formats or manner in which Trade Credit arrangements / loan agreements are to be documented.
  15. Role of Local Banks in Trade Credit.
  16. Procedure in case of Invocation of Guarantee.
  17. Definition of Foreign Equity Holder as per New External Commercial Borrowings framework
  18. What importers will have to do henceforth to avail buyers credit / trade credit.
  19. What will be changes in accounting treatment for buyers credit against Bank Guarantee in importers books of account.

Continue reading RBI Circular : Trade Credit – New Regulatory Framework

How to Endorse a Negotiable Bill of Lading ?

In the earlier articles we have discussed about documents required under letter of credit (LC) and how to prepare and submit compliant document.

In this article we will discuss about, what is Negotiable Bill of Lading, Why endorsement is required, who should endorse and what are the endorsements required.

Continue reading How to Endorse a Negotiable Bill of Lading ?

How to Check if Letter of Credit is Workable

In the earlier articles,  we have discussed about LC format MT700, and how to prepare and check documents under LC. This article provides a checklist for exporter after Letter of Credit (LC) is opened before shipment of goods. This will help exporter better understand the details in LC and whether exporter will be able to comply with its terms. If not, exporter should ask to get amendment in relevant clause.

Where ever possible exporter should ask for a draft copy of LC to check terms, so as to avoid amendments after LC is opened.

Exporter should look for below terms/clauses:

  1. Issuing Bank
    • Check name of issuing bank (swift code) and if its a trustworthy bank. How is the experience of others exporters in dealing with this issuing bank.
    • In case of financing requirement, check if exporter’s bank has lines of the issuing bank.
  2. Check all dates in LC
    1. Date of Issue (31C), Date of Expiry (31D) and Latest date of Shipment (44C):
    2. Check if  deadlines mentioned is acceptable. It is advisable to have margin in date of shipment and expiry to avoid requirement of amendment in LC.
    3. Verify the expiry location of the letter of credit. “Field 31D: Date and Place of Expiry” and “Field 41A: Available With … By …”. Both should be preferable in country of exporter.
  3. Presentation Period (48):
    • As per RBI Master Direction “Export of Goods and Services”, exporters are expected to present export documents within 21 days of shipment. Thus LC should preferably mention 21 days.
    • Incase of more than 21 days, banks may handle them  provided they are satisfied with the reasons for the delay. It is advisable to clarify the same with exporter’s bank.
  4. Name and Address of Beneficiary (59) and Applicant (50) are correctly stated.
  5. Description of Goods & Service (45A):
    • Complete description of goods
    • Units and Price
    • Mention of performa invoice or underlying contract should be avoided.
  6. Incoterms (45A):
    • Incoterms and shipment mode must match each other
    • If CIP or CIF incoterm is used, insurance document requirement to be mentioned in 46A.
  7. Insurance (46A)
    • Clause to be covered.
    • Where is the claim payable.
    • Insurance to cover from which point to which point.
  8. Currency and Amount (32B) in Letter of credit should match with sales contract
  9. Negotiation Clause (41A): Is LC restricted or available with any bank? Based on arrangement of exporter with existing bank or negotiating bank, it will help arrange pre shipment &/or post shipment finance.
  10. Payment Terms:
    • Is it available by sight payment, deferred payment, acceptance or negotiation. (41A)
    • Is the tenor stated correctly, number of days from sight or date of invoice, transport document etc. (42C)
  11. Documents Required (46A):
    • List of documents required
    • Number of original and copy required.
    • Type of transport documents required.
    • Type of Insurance documents required.
    • Clause requiring applicant documents : LC should avoid clauses requiring documents that are to be issued, signed or countersigned by the applicant.
    • Beneficiary Certificate: Such clause can be avoided.
  12. Non Documentary Conditions (47A).
    • All documents to require LC number can be avoided.
    • Check if any clause of UCP600 has been excluded or not. If excluded, understand its impact on exporter.
  13. Port of Loading (44E) and Port of Discharge (44F):
    • Advisable to mention Port of loading as Any Port in India (exporter country)
    • Port of discharge is consistent with sales contract.
  14. Letter of Credit Charges (71B):
    • Understand and determine which fees must be paid by the exporter according to the letter of credit conditions.
    • “Courier Fee / Postage Fee”, “Advising Fee”, “Discrepancy Fee”, “Handling Fee / Negotiation Fee”, “Amendment Commission”, “Confirmation Fee”, “Reimbursing Bank Charges”.
  15. Partial Shipments (43P): Whether it is allowed or not and whether the same is as per sales contract
  16. Transhipments (43T):  Preferable, it should be allowed.
  17. Reimbursement Instructions (53A)
  18. Confirmation Status (49): Is it confirmed LC or has an option for adding confirmation and who will bare the cost of the same. This field will have these three options: Confirmed, Without, May Add. If case where the LC is already confirmed where is confirming bank located.

Above is not a comprehensive list. Depending on type of goods exported and countries to which it is exported, requirement of clauses and document may differ.

If you do not understand or have any queries in any of the above clauses or terms, you can get in touch with us.

Reference

  1. RBI Master Direction: Export of Goods and Services

Buyers Credit Against Standby Letter of Credit (SBLC)

Post RBI disallowed LOU and LOC for buyers credit transactions, importers and banks are trying different structures which can assist in  Import finance. Some of these structures are

  1. Suppliers Credit
  2. Buyers Credit Against SBLC (Standby Letter of Credit)
  3. Reimbursement Finance (Usance LC Reimbursement at Sight)

This article is about Buyers Credit Against Standby Letter of Credit (SBLC), its meaning, process flow, documents required, costing, applicable rules, issues with the current structure and what should importer do to avail it.

Continue reading Buyers Credit Against Standby Letter of Credit (SBLC)

Revised Guidelines for Trade Credit

New Article: RBI Circular: Trade Credit : New Regulatory Framework

RBI revised Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 on December 17, 2018 (link in reference). Revision is made to ECB guidelines, Trade Credit, borrowing by banks outside India and others.

This articles covers changes made to Trade Credit guidelines.

Continue reading Revised Guidelines for Trade Credit

Reimbursement Finance (Usance LC Reimbursement at Sight)

Post RBI disallowed LOU and LOC for buyers credit transactions, importers and banks are trying different structures which can assist in  Import finance. Some of these structures are

  1. Suppliers Credit
  2. Buyers Credit Against SBLC (Standby Letter of Credit)
  3. Reimbursement Finance (Usance LC Reimbursement at Sight)

Continue reading Reimbursement Finance (Usance LC Reimbursement at Sight)

Guidelines on Early Delivery, Extension & Cancellation of Forward Contract

Forward contract being an agreement to exchange currencies at a future date, it is likely that sometimes the customer may be unable to adhere to the contracted delivery schedule or the underlying transaction may itself get modified or cancelled. The importer/exporter may, therefore, in these cases request for

  1. Early delivery
  2. Cancellation

Continue reading Guidelines on Early Delivery, Extension & Cancellation of Forward Contract

How to Prepare and Check Letter of Credit Documents

Purpose of Letter of credit (“LC”) is to give payment security to the beneficiary subject to documents presented under the LC complying with the requirements of the LC.

To check if documents are compliant, banks examine the required documents based on:

  • The terms and conditions of the documentary credit.
  • The applicable rules of UCP 600.
  • The applicable content of ISBP 745.

Continue reading How to Prepare and Check Letter of Credit Documents

Buyers Credit Outstanding Down by $25 Billion

Since RBI Stopped Buyers Credit Transactions against LOU and LOC, few questions kept on coming up regularly

  1. What was the outstanding amount of buyers credit in overseas branches of Indian Bank as RBI data did not provide bifurcation products wise ?
  2. What is the run down in books of these bank since 13 March 2018 RBI Circular ?
  3. What is its impact on Libor based finance available to Indian importers ?

In this article we have provided the data and analysis which will answer the first two questions.

Continue reading Buyers Credit Outstanding Down by $25 Billion

Why are Indian Banks Closing Overseas Branches ?

Indian Banks have closed 37 Overseas branches till date and another 60 – 70 branches are under review. This article gives an overall summary of Indian banks presence internationally, reason for reducing number of branches and bankwise update on branches closed or in process of closing.

Continue reading Why are Indian Banks Closing Overseas Branches ?

LoU/ LoC should be restored with proper safeguards: Standing Committee Report

Department Related Parliamentary Standing Committee on Commerce Chaired by Shri Naresh Gujral, presented it report on 06 August 2018 on “Impact of Banking Misappropriation on Trade and Industry

The report extensively covers  RBI Ban on LOU / LOC and its impact on the Industry and committee’s recommendations. In summary,  Committee  has recommends that LoU/ LoC should be restored at the earliest albeit with proper safeguards.”

Continue reading LoU/ LoC should be restored with proper safeguards: Standing Committee Report

Letter of Credit Clauses Related to Suppliers Credit

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). Supplier’s credit internationally is also known as Usance Payable at Sight (UPAS) structure.

Continue reading Letter of Credit Clauses Related to Suppliers Credit

Letter of Credit – MT 700 Format

Earlier article “Types of Swift Message used in Letter of Credit and Suppliers Credit” discussed details related to Category 7 message. This article further explore MT700 used for Letter of Credit Issuance. This will help importers understand various fields in MT700, related UCP 600 reference etc.

Continue reading Letter of Credit – MT 700 Format

Types of SWIFT Message used in Letter of Credit and Suppliers Credit

SWIFT system is used for Bank to Bank communication and Bank to Corporate communication. There are different type of Swift messages format related to specific purpose. This article focuses on Category 7 message.

Continue reading Types of SWIFT Message used in Letter of Credit and Suppliers Credit

Legal Entity Identifier (LEI) Number

What is Legal Entity Identifier (LEI) ?

The LEI is a 20-digit, alpha-numeric code that identifies legal entities participating in financial transactions. Each LEI is unique and contains reference information that enables simple and quick identification of an entity. As an international standard (based on ISO 17442), all LEI information is openly published and accessible to all.

Continue reading Legal Entity Identifier (LEI) Number

Reserve Bank’s decision to ban LoUs will badly Impact SME

Reserve Bank’s decision to ban LoUs is a knee-jerk reaction; can backfire badly, warn traders

Article in firstpost.com printed with permission: 

An industry-wide practice that worked well until the end of business hours on Tuesday, which allowed D Dhanasekaran’s Tiruppur-based textiles firm — Abi Tex Mills — import machinery from Oman and boost production, has now gone haywire with the Reserve Bank of India’s (RBI) decision to bar banks from issuing guarantees in the form of letters of undertaking (LoUs) and letters of comfort. “My machinery took a year to be imported and has been installed in the factory for a few months now. But now with buyer’s credit cancelled, I am focused on how to make payments instead of my production,” Dhanasekaran said.

Continue reading Reserve Bank’s decision to ban LoUs will badly Impact SME

Reuters: Indian importers face funding crunch with clampdown on credit guarantees

Article in Reuters printed with permission: 

Continue reading Reuters: Indian importers face funding crunch with clampdown on credit guarantees

Bank Audit – Buyers Credit and Nostro Account

A bank branch goes through four kinds of audits and inspection

  • Internal audit (done by bank staff) on regular basis
  • Concurrent audit (done by a third party), on monthly or quarterly basis
  • Statutory audit (done by the statutory auditor) on quarterly basis
  • Inspection by RBI (annual basis).

In relation to buyers credit transaction, below are the few audit point which are covered by above audits.

Continue reading Bank Audit – Buyers Credit and Nostro Account

Buyers Credit Secondary Market

During the PNB Fraud case, one of the Banks made a statement that:

“It is an active participant in the secondary market for buyer’s credit transactions and it has sold “all the referred transactions’’.

This article tries to throw some light on what is buyers credit secondary market, how the structure works and why banks do transaction in secondary market.

Continue reading Buyers Credit Secondary Market

RBI 2016 Circular : Frauds Related to Trade Finance Transactions – Misuse of SWIFT

RBI in its 2016 Circular to banks had mentioned problem in relation to process followed for issue and reconciliation of SWIFT messages related to Trade finance products and corrective actions banks should take to prevent any fraud. Worth a read.

Continue reading RBI 2016 Circular : Frauds Related to Trade Finance Transactions – Misuse of SWIFT

Implication on Buyers Credit because of PNB Fraud

Latest Articles:

  1. RBI Stops Buyers Credit Transactions (LOU & LOC)
  2. Indian Banks adds Additional Control to SWIFT System
  3. Bank Audit – Buyers Credit and Nostro Account

This article gives layman summary of the PNB fraud case and its impact on buyers credit product and various stake holders like Indian Bank Overseas Branches, Local Banks in India and Importers.

Continue reading Implication on Buyers Credit because of PNB Fraud

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

Continue reading Suppliers Credit Process Flow

EU list of Non-Cooperative Jurisdictions : No Impact on Buyers Credit

On 5 December 2017, European Union (EU) Council approved and published a list of non-cooperative jurisdictions. Criteria used were:

  • Tax Transparency
  • Fair Taxation
  • Implementation of Anti – BEPS (Base Erosion and Profit Shifting) standards

Continue reading EU list of Non-Cooperative Jurisdictions : No Impact on Buyers Credit

Interest Payment to Mauritius: 7.5% Withholding Tax

In earlier article “WHT (Withholding Tax) on Interest on Buyers Credit” and “Withholding Tax (WHT) on Suppliers Credit Transaction”, we had discussed that if buyers credit or suppliers credit is arranged from Mauritius based bank / branches, there was no withholding tax on interest payment as per Double Taxation Avoidance Agreements (DTAA).

India-Mauritius Tax Treaty was amended on 10 May 2016 and got effective from 01 April 2017. In this article, only amendment related to Interest Payment  (Article 11) is covered.

Continue reading Interest Payment to Mauritius: 7.5% Withholding Tax

Post Libor World – Impact on Buyers Credit

In earlier article we have discussed about various aspect of Libor and its Impact on buyers credit transaction.

In brief, Libor attempts to answer a fundamental question: What is the  cost of money? It does this for a range of currencies (dollars, euros,  pounds, etc.) and for a range of maturities.

Continue reading Post Libor World – Impact on Buyers Credit

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.

Continue reading Stronger Rupee Impact on Buyers Credit

Moratorium Period Impact on Buyers Credit

As per RBI Master Direction on External Commercial Borrowing and Trade Credit banks are allowed to sanction buyers credit on import of capital goods for  3 years with Letter of Undertaking.

In order to avail above buyers credit, Importer will have to get term loan sanctioned with buyers credit as sub-limit with his bank. As seen in earlier article “Buyers Credit on Capital Goods“, moratorium period is one of the factor which importer needs to take care at time of sanctioning of term loan. This article explains

Continue reading Moratorium Period Impact on Buyers Credit

Rising Libor Rates and Its Impact on Buyers Credit

Buyers Credit transactions are funded on Libor rates. Thus any change in Libor directly impact overall costing of the transaction.

Libor rates started rising in 2015 and pace of which got picked up since beginning of 2017. Below 3 Month Libor and 6 Month Libor charts shows the trend. There are two charts for two range.

Continue reading Rising Libor Rates and Its Impact on Buyers Credit

Form 15CA and Form 15CB not Required for Import Payment

As seen in earlier article “Form 15CA & Form 15CB applicable on all payment“, except the exempted list, Form 15CA and Form 15CB was required for all type of payment. This resulted into lot of paper work for importers during regular import transactions.

Continue reading Form 15CA and Form 15CB not Required for Import Payment

Subsidy under CLCSS Cannot be Claimed Where Buyers Credit is Availed

Trigger for this topic is a question that a reader asked:

“MSME manufacturing  unit doing expansion of machinery by purchasing machinery from abroad   get credit linked capital subsidy scheme (CLCSS) from Central Government.

MSME unit avails buyers credit for payment to overseas buyer and sanctioned term loan is not utilised . Can the unit be eligible for subsidy? ”

Below article gives basic details about Credit Linked Capital Subsidy Scheme and revert to above query.

Continue reading Subsidy under CLCSS Cannot be Claimed Where Buyers Credit is Availed

Buyers Credit & Suppliers Credit in Rupee (INR)

RBI issued a circular on 10 Sep 2015, revising the policy on Trade Credit (Buyers Credit & Suppliers Credit). Summary of the same is given below:

As per revised guidelines, RBI has allowed resident importer to raise trade credit in Rupees (INR) within below framework after entering into a loan agreement with the overseas lender:

Continue reading Buyers Credit & Suppliers Credit in Rupee (INR)

Form 15CA & Form 15CB applicable on All Payment

Post below article CBDT has revised rules for form 15CA and Form 15CB effective from April 01, 2016. Refer article: Form 15CA and Form 15CB not Required for Import Payments

In revised notification issued by CDBT on 16th December 2015, effective 01’st April 2016, import payment has been made part of exempted list. Hence forth Form 15CA and Form 15CB will not required for the same during import transactions.

Continue reading Form 15CA & Form 15CB applicable on All Payment