Category Archives: Buyers Credit

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 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.

Calling the RBI move a ‘knee jerk’ reaction, businesses said they are perplexed by the central bank’s sudden decision, which came in the wake of the nearly Rs 13,600 crore scam in state-owned Punjab National Bank (PNB), which involves jewellers Nirav Modi and Mehul Choksi, who owns Gitanjali Gems. The central bank’s move is expected to hit sectors like gems, precious metals, plastics, oil and gas, electronic goods, solar panels and metals, as they constitute the major basket of items that are imported.

Traders in gold and precious metals seemed nonchalant about the RBI’s decision. They contend that their industry is not using LoUs or letters of comfort (LoC). “It won’t impact trade at all. No one was using it besides Nirav Modi and Mehul Choski,” said Colin Shah, the vice chairman of the diamond panel at industry lobby Gems and Jewellery Export Promotion Council (GJEPC). Buyer’s credit was being availed of by only a couple of large jewellers, said K Srinivasan, Convener, GJEPC. “They can mobilise funds from elsewhere. However, expansion activities will be impacted. But again, those who are undertaking these plans with their own funds will not be affected,” Srinivas added.

The RBI’s decision to discontinue LoUs and LoCs for trade credit for imports into India will impact the jewellery trade and other businesses. But traders ask as to why their business should face the brunt of actions of some jewellers, who cocked a snook at the system. The RBI’s decision will change the course of trade finance for importers. Borrowing costs will also increase post the ban on LoCs/LoUs, as importers will have to explore alternatives that could be more expensive as compared to LoCs/LoUs, said Rachit Sharma, deputy general manager, corporate law, at

Entrepreneurs running small and midsize firms rue that the RBI is asking banks to view businessmen, seeking buyer’s credit, with a doubting eye. “Every individual looking for buyer’s credit cannot be viewed as a potential scammer. Banking is the backbone of business. What does the RBI want businesses to do to avail funds when they ban buyer’s credit overnight?” asked Brijesh Lohia, the managing director of logistics firm Global Ocean Group.

“There will be a sudden cash flow crisis and businesses who availed LOU/LOC (popularly known as buyer’s credit) against a presentation of import documents will face tremendous heat due to this sudden change.  Generally, banks provide non-fund based banking limits against collateral securities that can be used to settle import transactions. The funding can be made by issue of LOU/LOC, where import documents are placed before banks. The cost of finance is very low as it comprises of LIBOR plus one to two basis points. Due to the restriction on issue of LOU/LOC, the cost of funds will shoot up substantially at minimum bank lending rate (BLR), making it unviable to carry out trade  due to thin operating margins,” Nikunj Turakhia, President, Steel Users Federation of India (SUFI), told Firstpost.

Across India, firms prefer to use buyer’s credit instead of  letters of credit (LC) as getting the latter is a time-consuming process while the former was available in a couple of days. Also, the rate of interest paid on buyer’s credit was much lower than the existing rates, thus making it more appealing. Buyer’s credit refers to short-term credit available to an importer from an overseas lender, such as banks and other financial institution, for importing goods. The overseas bank usually lends money to the importer based on the letter of comfort, which is a bank guarantee issued by the importer’s bank. A letter of credit is a payment mode used in import-export trade to cover third-party risk. If the importer defaults, the bank that he has an account with and has issued the LC to him will pay on his behalf.

Prashant Agarwal, who runs Delhi-based Raj Polymers, said he is surprised by the short-sighed move by the RBI. “I have a buyer’s credit which is due this month. As it is, the domestic factors in the petro-chemical sector are affecting us. Couldn’t the RBI have given us a time-line of three months or more, so that we could then move to other avenues to seek business opportunities?”

The sudden decision by the RBI is causing panic in the trader community. Importers will be left with no option now, but to start applying for LCs, said Sanjay Mandavia, a Ahmedabad-based trade finance consultant. “The instrument [buyer’s credit] is blamed for taking away the focus from the systemic failure in PNB. Instead, as a solution, the industry is proposing that the RBI bring down the buyer’s credit limit from $20 million dollars per import transaction to $1 million.”


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

Article in Reuters printed with permission: 


The Reserve Bank of India announced late on Tuesday it was banning banks from issuing letters of undertaking, or LoUs, a form of credit guarantee often used between Indian banks and their offshore branches.

The central bank’s latest regulatory clampdown came weeks after Punjab National Bank (PNBK.NS) uncovered a more than $2 billion scam involving the alleged fraudulent issue of such LoUs without the bank’s knowledge.

Industry insiders warn the RBI’s move will raise the cost of borrowing especially for small importers, slow the pace of imports, and likely weaken the rupee over the next three to four months, and lead to higher loan delinquencies.

Importers, already hurt by a sharp hike in import duties in February on goods ranging from iPhones to Zippo lighters and Ray-Bans to Fitbits, now face an even bigger setback, they warn.

“This kills small traders who are pledging property to get LoUs,” said Kasim Sait, managing partner of Texim International, an importer of synthetic rubber, based in Chennai in southern India.

The RBI allowed banks to continue issuing letters of credit (LCs) – a more stringent, internationally recognized instrument, but one that comes with much higher fees.

While the gems and jewelry segment was the heaviest user of LoUs, every sector including metals, pharmaceuticals, and petroleum was likely to be hit, bankers said.

All these importers used to raise dollar funds against LoUs at 2.5 percent to 3 percent offshore, but this would go up to as much as 12 percent or more as companies would be forced to borrow from local banks in India, they said.

“It will definitely increase costs of funding,” said Nikunj Turakhia, President of the Steel Users Federation of India.


Others fear the RBI decision could make Indian exports less competitive and paralyze some companies that are already tapped out on their domestic borrowing limits.

And while using LoUs, commonly known as “buyer’s credit”, was straightforward, switching to letters of credit is more complex.

“The process for an importer has gone up drastically,” said Sanjay Mandavia, a trade finance consultant based in western Indian city of Ahmedabad. “In a buyer’s credit transaction, it would have been completed in 2-3 days, in this case it could take a month.”

As letters of credit require greater involvement from both the exporter and its banks, he said this also resulted in higher courier charges, document charges, processing and interest costs.

“The impact will be seen in credit markets, corporate funding cost rising, dollar funding being substituted by rupee loans and imports coming down over the next three-four months,” said Sajal Gupta, head of forex and rates at Edelweiss Securities, adding that every month $6 billion of LoUs were issued by Indian banks.

“There will be an additional $1 billion-$1.5 billion demand in the spot currency market every month as well as a sentiment impact which will keep the rupee exchange rate under pressure.”

The rupee INR=D2 weakened up to 65.06 to the dollar on Wednesday from its previous close of 64.89, bucking a regional appreciation trend.

Reporting by Suvashree Dey Choudhury and Devidutta Tripathy; Additional reporting by Aby Jose Koilparambil in Bengaluru; Editing by Alex Richardson

Indian Banks adds Additional Control to SWIFT System

As per Government of India revert in Rajya Sabha, PNB  has taken below steps to ensure that such unauthorised activities in SWIFT systems are not repeated (other banks may have changed accordingly):

  1. Establishment of an additional tier(off-site) as a third level of re-authorisation of SWIFT messages, wherein payment messages are re-authorised by a separate team of SWIFT Centre, Mumbai only after cross-checking the authenticity of messages in CBS (Core Banking System);
  2. Defined SWIFT-user-based limits for all SWIFT users, under close monitoring;
  3. Switching off of SWIFT server (LTE) by 10:00 p.m., and restricting SWIFT operations at branches to 6:30 p.m. and centralised back office for trade finance by 7:00 p.m.;
  4. Concurrent auditors at branches advised to ensure physical reconciliation of all SWIFT messages with CBS on daily basis;
  5. Placing of auditor at SWIFT Centre, Mumbai to carry out audit of SWIFT Operation at SWIFT Centre, Mumbai for anomaly, if any; and
  6. Monitoring of SWIFT user ID creation/resetting on the recommendation of senior level functionaries.


  1. Rajya Sabha : PNB scam
  2. PNB fraud effect: Punjab National Bank puts in place 3-tier SWIFT process post Rs 12,700 cr scam

RBI Stops Buyers Credit Transactions (LOU & LOC)

Latest RBI Circular : RBI stops Buyers Credit. As is circular copy given below. Please refer bold section. 

  • Short Term Debit – Trade Related Credit Outstanding as on Sept 2017 was $91.063 billion (Refer Page 14).  This includes both LC and Buyers Credit transaction. Was not able to find bifurcated amount. But one can be sure it would be substantial amount which above  decision going to impact.
  • The instrument is blamed taking the focus away from the system failure in PNB
  • PNB fraud case both LOU and LC transactions were involved. Action has been taken against LOU transaction but no changes has been made to LC transactions.
  • Importers are going to get effected severely because of this move, as this will dry up liquidity
  • Non Performing Assets (NPA) of banks will go up in coming quarters as this move leave importers short of liquidity.
  • Pure Speculation: RBI has come out with this move after 1 month of PNB Fraud case. During this period, it seems RBI has found other lapse which are yet to come to public domain. Can be related to PNB or other bank.

What Importer can do on immediate basis ?

Raw Material Import

  1. Take Adhoc limit from banks for immediate outstanding payments
  2. Incase of outstanding transactions (DA/DP/LC/ Usance LC), ask supplier for extension of credit period.
  3. Move existing non fund based limits from BC to LC usance limits.
  4. For future transactions ask suppliers to accept  Usance LC which can be discounted at Libor rates.
  5. Increase fund base limit by moving some portion of non fund limit to fund base limit

Capital Goods Import

  1. Take External Commercials Borrowing (ECB) against existing buyers credit. (Infrastructure Companies – Bridge Finance before availing ECB)
  2. For new import of capital goods ask suppliers for  usance LC for 3 years and get it discounted. For suppliers it will be sight payment.
  3. For new import use ECA (Export Credit Agency) finance (will add an article shortly on this)
  4. Convert into term loan


Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to paragraph 2 of A.P. (DIR Series) Circular No. 24 dated November 1, 2004 and paragraph No. 5.5 of Master Direction No.5 dated January 1, 2016 on ‘External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers’ (Master Direction), as amended from time to time, on the issuance of LoUs/ LoCs/ guarantees for Trade Credits for imports into India under delegated powers of AD banks.

2. On a review of the extant guidelines, it has been decided to discontinue the practice of issuance of LoUs/ LoCs for Trade Credits for imports into India by AD Category –I banks with immediate effect. Letters of Credit and Bank Guarantees for Trade Credits for imports into India may continue to be issued subject to compliance 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.

3. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

4. The aforesaid Master Direction No. 5 dated January 01, 2016 will be updated to reflect the changes. The changes will be applicable from the date of issuance of this circular.

5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.


  1. Discontinuance of Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits
  2. Implication on Buyers Credit because of PNB Fraud
  3. RBI 2016 Circular : Frauds Related to Trade Finance Transactions – Misuse of SWIFT
  4. Buyers Credit Secondary Market
  5. Bank Audit – Buyers Credit and Nostro Account
  6. India’s External debt as at End-September 2017

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.

Buyers Credit Audit Points

Following documents are required to be verified by the statutory auditors during review of Buyers’ Credit Transaction and its accounting treatment in the Indian Bank’s books.

  1. (Loan) Agreement, if any, entered between the Indian importer (borrower), overseas bank (lender), the Indian bank (facilitator);
  2. Underlying documents for import of capital goods or raw materials;
  3. Maximum tenure of buyer’s credit as per guidelines of RBI;
  4. SWIFT messages originated by overseas bank specifying the terms of Buyer’s Credit;
  5. The calculation of contingent liability towards LoC/ LoU is inclusive of interest accrued on the Buyer’s Credit as on financial statement date;
  6. Documentation / Agreement between overseas bank and Indian bank, and, any further confirmatory documents exchanged between overseas bank and Indian bank;
  7. Review of documents specifying right of recovery against borrower, in case if the borrower defaults in repayment of Buyer’s Credit;
  8. Balance confirmations obtained from the overseas bank;
  9. Charge created in records of Registrar of Companies (RoC) related to the security offered for Buyer’s Credit vis-à-vis disclosure of Buyer’s Credit in the financials of borrowers as secured / unsecured loan;
  10. Acknowledgement of debt, if any, obtained from the borrower;
  11. The calculation of drawing power for working capital finance availed by the borrower is net of the Buyer’s Credit;
  12. Form 15CA / Form 15CB compliance made by the borrower.

Nostro Account Audit Points.

The auditor may consider the following aspects in respect of NOSTRO reconciliation:

  • Whether a system of periodical reconciliation is in place.
  • Whether the reconciliation process followed ensures matching of each item and not for overall matching of total amount
  • Whether logs are generated for any change made in entry and whether maker checker rule is implemented for authorising changes made in entry, if any, for reconciliation
  • Whether confirmations from the foreign banks are obtained on a periodic basis. This may be either through physical confirmations, swift messages, emails, etc.
  • Whether information to the controlling office is sent on a timely basis.
  • Whether long outstandings are taken up and reconciled.
  • Random check of the method of reconciliation.
  • Debits outstanding both in the mirror account and in the Nostro accounts are to be verified and recommend for provision wherever necessary.
  • Set off the credit against debits only at the permission of the head office for long outstanding entries

Nostro Account of Overseas Branches

Obtain a list of all NOSTRO Accounts maintained/ operated by the Branch from the branch Management.

  1. The auditor should obtain a list of all NOSTRO Accounts for the purpose of verification from the Branch Management.
    • (a) Are the NOSTRO Accounts regularly operated?
  2. The auditor should verify whether the NOSTRO Accounts are being regularly operated. If not give the list of NOSTRO Accounts with balances outstanding, which are not operated regularly, the date of last transaction, etc. The auditor should specifically comment on overdrafts in NOSTRO accounts, if any.
    • (b) Are periodic balance confirmations obtained from all concerned overseas branches/ correspondents?
  3. The auditor should verify whether the balance confirmation from all concerned overseas branches/ correspondents have been obtained on a periodic basis. He should report the names of the bank and the period wise outstanding balances, which remain unconfirmed.
    • (c) Are these accounts duly reconciled periodically? Your observations on the reconciliation may be reported.
  4. While examining the transaction in foreign exchange, the auditor should also pay attention to reconciliation of NOSTRO Accounts with the respective mirror account. The amount in the NOSTRO account is stock of foreign currency in the form of bank accounts with the overseas branches and correspondents. Unreconciled NOSTRO Accounts, on an examination, may reveal unauthorised payments from the foreign currency account, unauthorised withdrawals, and unauthorised debit to mirror account. The auditor should also evaluate the internal control with regard to inward/outward messages. The inward/outward messages should be properly authenticated and discrepancies noticed should be properly dealt with in the books of accounts. In case balance confirmation certificate have been received but the same have not been reconciled, the auditor should report, in respect of each bank, the balances as per books maintained by the branch and the balance as per the relevant balances confirmation certificate, stating in either case whether the balance is debit or credit.
    • (d) Whether the branch is following Head Office guidelines for reporting requirements under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS).
  5. Does the Branch follow the prescribed procedures in relation to maintenance of Vostro Accounts?

The auditor should verify whether prescribed procedure in relation to inter-bank confirmation in the Vostro account is followed or not. In case balance confirmation certificate have been received but the same have not been reconciled, or where confirmation has not been received the same should be reported, in respect of each Vostro Account. The RBI has also issued the Master Directions FED Master Direction No.2 /2015-16 dated January 01, 2016 (updated on April 28, 2016) on “Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses”


  1. Concurrent Audit System in Commercial Banks – Revision of RBI’s Guidelines
  2. Guidance Note on Audit of Banks (2017 Edition)
  3. Guidance Note on Audit of Banks- 2018 Edition
  4. Long Form Audit Report (LFAR) and Tax Audit in Respect of Bank Branches
  5. Long Form Audit Report (LFAR) Format
  6. Why auditors in India must keep up with technology

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.

What is Buyers Credit Secondary Market

Secondary market is a market between banks where assets are exchanged based on consideration. In case of buyers credit, overseas branches enters into agreement with various bank / branches and asset exchanged is buyers credit outstanding.

In layman’s term, Bank A sells buyers credit outstanding to Bank B for X amount over and above principal  plus interest of buyers credit.

Structure of Buyers Credit Secondary Market.

  1. Bank A’s overseas branch enters into a master agreement with Bank B’s overseas branch. Master agreement has details like products which can be purchased and sold, terms like: with recourse or without recourse, jurisdiction etc.. Bank A’s Overseas branch enters into such agreement with multiple banks to create secondary market.
  2. Bank A’s overseas branches generates buyers credit business (other product can be Letter of Credit, syndication loans etc) against LOU issued by Indian banks.  For example Bank A generates buyers credit of $1 Million at 6 Month Libor + 40 basis points (bps).
  3. Bank B in order to build up it books wants assets where as Bank A has additional assets which it is ready to part away with.  After adding margin it offers the asset to Bank B.
    • Cost of Buyers Credit to Bank A was : 6 Month L + 40 bps
    • Selling price : 6 Month L + 50 bps (10 bps margin added by Bank A. Margin varies from case to case)
    • Bank B accepts the offer of Bank A
  4. Referring master agreement, another agreement is entered into between Bank A and Bank B via SWIFT . MT799 is sent from Bank A to Bank B for transfer of assets and Bank B transfer funds.
  5. On maturity there can be two options:
    • Bank A on sale of assets send swift to LOU issuing bank informing about the sale of asset and assignment of maturity payment to Bank B directly. On maturity LOU issuing bank makes payment directly to Bank B with interest.
    • Incase where first option is not possible, Bank A collects the funds from LOU issuing bank and transfers the funds to Bank B.
  6. This assets can be with recourse and without recourse. Without recourse means Bank A has no liability in case LOU issuing bank does not make payment for the buyers credit on due date. With Recourse means if LOU issuing bank does not make payment, Bank B can claim funds from Bank A.

Why Secondary Market

  1. Income for Bank A overseas branch without deployment of capital.
  2. Free up capital for Bank A which can be deployed for new requirement.
  3. Bank B wants to increase Asset size in its books.


  1. In secondary market each buyers credit transactions is sold individually.
  2. Period and consideration of sale will be based on outstanding period.
    • Bank A Buyers Credit Period (Origination) :  180 days
    • Bank A offer Buyers Credit Outstanding after : 91st day
    • Bank B acquires buyers credit for remaining 90 days and pays accordingly.
  3. Such transaction is not done for small transactions. Normally amount involved in such secondary market is transactions around $1 million and above.


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.

Cyber Security Controls — frauds related to trade finance transactions — misuse of SWIFT

It has been reported that certain transactions involving fraudulent Letters of Credit / Comfort were transmitted using the SWIFT messaging system. In this connection, attention is invited to our circular DBS.CO/CSITE/BC.4/33.01.01/2016-17 dated August 3, 2016 on Cyber Security Controls — SWIFT, wherein indicative list of best practices to strengthen the security environment for SWIFT usage had been provided. Banks had also been advised to introduce additional checks, as required, for addressing specific issues inherent to their business environment. Banks may also refer to our letter DBS.CO.CFMC.No1379/23.08.003/2016-17 dated August 10, 2016 and accompanying Caution Advice No. 4094 on Fraud — Letter of Comfort — Buyers Credit — Misuse of SWIFT messaging system.

2.  With the objective of analysing certain operational procedures in respect of trade finance transactions, a questionnaire on practices followed by banks while using SWIFT infrastructure was forwarded to select banks. Based on the responses submitted by the banks, several common deficiencies were discernible, which are listed below:

(a) Several banks followed a decentralised setup for SWIFT operations, which entailed multiple SWIFT nodes at various branches and significantly high number of users (in some cases, number of users was in excess of one thousand). The existence of such high number of user IDs increased the probability of compromise of credentials, which in turn exposed the bank to heightened risk of fraudulent activities as well as potential malware attacks.

(b) Several banks did not have robust oversight on SWIFT operations, even under decentralised setup. There was no/little audit oversight on the SWIFT framework, despite significant financial ramifications. Although administration of SWIFT was
delegated to junior level officers and the financial powers exercised by such officials was much above those delegated to similar level officials at branches or in other operational areas, commensurate oversight was lacking.

(c) In several banks, excessive dependence on vendors for all matters related to SWIFT was observed. Reliance on the vendor was observed even for simple activities such as generation of list of authorised SWIFT users.

(d) Most of the banks did not have straight through processing from CBS for trade finance transactions such as Letters of  Credit/Comfort etc. This ability to initiate LC messages without reflection of transaction in the CBS posed serious inherent risk. Despite having a decentralised set-up for SWIFT operations, there was no mechanism to verify whether every outward trade finance related SWIFT message had a corresponding underlying LC and thereby identifying fraudulent LC related SWIFT messages, if any.

3. Banks had not attempted to reconcile SWIFT messages issued for trade finance with the outstanding for payment on due date, thus missing out any anomalies arising out of fraudulent transactions.

4. In view of the aforementioned concerns, banks are advised to initiate, with the approval of their respective Boards, the following steps as applicable to their respective business model:

(a) To verify all SWIFT messages pertaining to documentary credit/trade finance (particularly LCs), say from January 1, 2015 onwards, to ensure that all such transactions are captured in the books of accounts and are supported by genuine underlying transactions. Banks may complete this exercise by February 28, 2017 and report the results to CSITE Cell, DBS, CO by March 15, 2017.

(b) To institute appropriate control framework to ensure that SWIFT messages pertaining to documentary credit/ trade finance are transmitted only after accounting for the transactions in their books / CBS / accounting software.

(c) To strengthen the control framework in respect of all outward SWIFT messages pertaining to documentary credit/trade finance by introducing reconciliation of such messages through concurrent audit.

(d) Banks with decentralised setups could examine whether centralising the approval of SWIFT messages at HO could be a practical solution for creating anadditional layer of security as such a step would immediately create functional separation between maker and approver. Banks could also consider centralising all messages, which are created directly in SWIFT systems both for generation and approval.

(e) To explore Straight Through Processing between CBS and SWIFT messaging system so as to avoid potential fraudulent messages.

5. It may be added that the suggestions made above are illustrative only and further safeguards may need to be implemented  appropriately on the use of SWIFT framework, workflow design and business profile of the bank.


  1. Cyber Security Controls — frauds related to trade finance transactions — misuse of SWIFT
  2. Information Technology & Cyber Risk in Banking Sector – The Emerging Fault lines – S. S. Mundra
  3. Concurrent Audit System in Commercial Banks – Revision of RBI’s Guidelines
  4. Guidance Note on Audit of Banks (2017 Edition)

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.

Summary of Case:

Letter of Credit (LC) and Buyers Credit transactions were done without funded base or non fund based  limits and underlying security (Fixed Deposit or Assets ) in place. This was done by issuing LC and Letter of Undertaking (LOU) to overseas branches using SWIFT message without making entries in Core Banking System (CBS).  As per regulator requirement, even in case of 100% cash backed (FD) margin, bank has to create limits stating security as FD and then only any transaction is allowed.

Missed Internal Control 

  1. Swift systems not connected to Core Banking System (CBS). Branch staff was able to send LOU swift without routing transaction through CBS. 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.
  2. When LOU / LC is sent, bank charges LOU charges from importers account. Either this charges where not debited to importers account, which means loss in revenue for bank side or charges were debit from importers bank account then there was  trail of transactions which was missed during audit.
  3. Nostro reconciliation. All credit and debit entries goes to Nostro Mirror Account maintained in CBS. All funding for buyers credit would have reflected in Nostro and reconciled. Only in case where overseas branches funded directly to supplier (as per instruction in LOU), credit entry will not be reflected but still debit entry for repayment of principal and interest will always be there.
  4. Audit of swift messages.

Impact on Overseas Indian Bank Branches

  1. Overseas Indian Bank branches are verifying each and every buyers credit outstanding in their books with LOU issuing bank and asking for confirmations.
  2. Few banks have cancelled offer letter already issued against which funding is pending.
  3. Overseas branches are avoiding buyers credit transaction of Punjab National Bank.
  4. Few overseas branches, have temporary stopped doing buyers credit.
  5. Few overseas branches  have amended or in process of amending the LOU formats to include more details of underlying import transaction and adding additional clause to protect their interest.
  6. Increased documentation. Some banks are asking for copy of Invoice and BL copy with every transaction before funding. Some are asking invoice and BL even before issuing quote.
  7. Insisting on funding the transaction in Nostro account of LOU issuing bank only. Earlier there were banks which  had an option of funding nostro of Supplier’s Bank directly and providing a confirmation swift to LOU issuing bank.

Impact on Local Bank

  1. Updating or link system between SWIFT and CBS
  2. Centralizing SWIFT systems instead of branch based systems.
  3. Temporary local bank have or may stop issuing LOU.
  4. Few banks are insisting that whole leg of transaction is routed through them. Example: For importer enjoying limits with SBI branch, will have to approach only local SBI branch for quote. In turn, local SBI Branches will only take quote  from SBI Overseas branches.
  5. Before this incident, LOU issued for buyers credit transaction were consider under lesser risk  and thus required lesser provisioning under Basel III norms issued by RBI. There may be a change in this provision. RBI is yet to clarify on the same.

Impact on Importer

  1. As number to branches quoting have come down, fresh quote for overseas branches are hard to come by.
  2. Buyers Credit pricing have gone up and thus increasing overall costing of transaction.
  3. Operating time of getting a transaction through has gone up. Earlier which used to take 2 – 3 days to complete the whole transaction not taken 10 – 15 days.
  4. Few bank have cancelled all the existing offer letter for which funding is pending. For those importers where banks have cancelled existing offer letter, will have to get fresh offer letter from new bank; which is currently difficult to come by.
  5. Few banks are insisting that whole leg of transaction is routed through them. Example: For importer enjoying limits with SBI branch, will have to approach only SBI branch for quote. And SBI Branches will only take quote  from SBI Overseas branches.
    • Increase time of transaction processing time.
    • Branch staff is not equipped with process.
    • Branch staff overload and least priority thing for them.
    • Costing will go up as importer will not have option to negotiate on price.
  6. Importer whose import is under process and incase is not able to arrange buyers credit, will have to go to Cash Credit or Term loan depending on goods. Thus will increase overall cost.

RBI Statement on the case:

The fraud in PNB is a case of operational risk arising on account of delinquent behaviour by one or more employees of the bank and failure of internal controls. 

Regulatory Updates

  1. The Reserve Bank has set an April 30 deadline for all banks to link the Society for Worldwide Interbank Financial Telecommunications (SWIFT) with their core banking solution (CBS)
  2. RBI initiates special audit of PSBs with focus on trade finance
  3. Government: Public Sector Banks (PSBs) to consolidate 35 overseas operations without affecting international presence of PSBs in these countries; 69 ops identified for further examination. Move towards cost efficiencies and synergies in overseas market.
  4. ICAI Launches Investigation Into PNB Fraud
  5. Cabinet To Notify Audit Regulator NFRA, Approves Draft Rules 



  1. Will keep updating this article as and when further information is available.
  2. Information related to PNB case used are based on information available in public domain.


  1. RBI Statement
  2. RBI Appoints Expert Committee headed by Mr. Y M Malegam
  3. Cyber Security Controls — frauds related to trade finance transactions — misuse of SWIFT
  4. Information Technology & Cyber Risk in Banking Sector – The Emerging Fault lines – S. S. Mundra
  5. Concurrent Audit System in Commercial Banks – Revision of RBI’s Guidelines
  6. Guidance Note on Audit of Banks (2017 Edition)
  7. Guidance Note onAudit of Banks- 2018 Edition
  8. The Anatomy of the PNB fraud.
  9. PNB Fraud: Hong Kong regulator seeks status report from Indian banks 
  10. PNB fraud case: Axis Bank says ‘sold down’ LoU transactions
  11. PNB scam: Is RBI going back on its rules on letters of credits? 
  12. PNB fraud case: Officials of other banks under scanner
  13. How did everyone miss the PNB scam? An accountant explains what could have gone wrong 
  14. Nirav Modi case: Bank officials may have made close to Rs 823 crore in PNB fraud
  15. To counter PNB stand, banks likely to cite 180-day rule
  16. India Ratings Places Firestar International on RWN
  18. Banks relied on India Ratings’ A- outlook to lend to this Nirav Modi firm
  19. The gaping holes in Nostro account monitoring and the SWIFT messaging system:
  20. PNB scandal: Glossed over, auditors flagged loan default, forex violations
  21. Nimo fallout on imports
  22. Corporate banks in a world of pain 
  23. Why auditors in India must keep up with technology
  24. Loose ends and unanswered questions of the PNB scam

EU list of Non-Cooperative Jurisdictions : No Impact of 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

List of non-cooperative jurisdiction (17 Countries)

Screenshot from 2017-12-06 10-22-59

American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, and United Arab Emirates

There are other 43 countries which are currently not part of Non Co operative list. These countries are at various level of implementation.  Incase if they are not able to implement Transparency, Fair Taxation or Anti-BEPS Measures, EU Council can move them to Non Cooperative Jurisdiction List in future.

Defensive Measures Implemented for Non Co operative Jurisdictions

Conclusion : No Impact of Trade Finance or Buyers Credit

As seem in above article, none of the defense measure put in place are related to Trade Finance. Thus in the current form, above non cooperative country list will not impact Trade Finance products.

Overseas Banks (Including based in EU) will be able to provide Trade finance product and Buyers Credit for good with country of origin or shipment from above countries.


  1. Taxation: Council publishes an EU list of non-cooperative jurisdictions 
  2. European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund
  3. EU list of non-cooperative jurisdictions for tax purposes

Applicability of AS 11 in Buyers Credit on Capital Goods

As per Accounting Standard 11 – The effects of Changes in Foreign Exchange Rates on Import of Capital Goods / Fixed Assets are

  1. Fixed Assets are to be treated as non monetary item. It may be recorded at historical cost or net realisable value as per accounting method followed by the firm on the capitalisation date. However as on the Balance sheet date all fixed assets should be reported at closing rate (i.e. 31.03.2017)
  2. In case, the capital good procured is a Non Integral Foreign operation then unrealised foreign exchange gain / loss should be transferred to Foreign Currency Translation Reserve a/c. The same would be disclosed under Share holder’s fund (both opening and closing balance should be provided)
  3. In case, the capital good procured is an Integral Foreign operation then unrealised foreign exchange gain / loss should be transferred to Profit ans Loss a/c.
  4. In case where the importer has availed buyers credit on capital goods in foreign currency, the value of capital good / fixed asset is to be revised every time there is a forex gain/loss until the final payment is made to the funding bank.
  5. The value of the capital good  / fixed assets is also to be revised as on Balance Sheet date and reported at closing rate.

Importer Query

Can you guide us on accounting and tax treatment as on 31st March 2017 for the unrealized forex gain/loss due to exchange rate fluctuation ?

In our case, the Buyer’s Credit in Japanese Yen 10 Million is taken for acquiring capital assets (fixed assets) and was capitalized on 01 Feb 2017. The capitalization was done in INR at conversion rate  0.6105 (JPY INR) on Buyer’s Credit funding date 01 June 2016. On 31 March 2017 conversion rate was 0.58 resulting to forex gain.

Above Buyers Credit got due on 26 May 2017 and was rollover for further 1 year getting due date on 20 May 2018.

Particular Date Yen Rate
Buyers Credit Availed 1 Jun 2016 0.6105
Capitalized ** 1 Feb 2017 0.6105
Financial Year End 31 Mar 2017 0.58
Buyers Credit Expiry & Rollover 26 May 2017  
Rollover Expiry 20 May 2018  

** Capitalisation Date: The Date on which the fixed asset is capitalised in the books of accounts and put to use.

Questions ???

Do we have to capitalize our assets in INR based on forex as on 01 Feb 2017 or 01 June 2016?

Revert: Capital assets is to be capitalised on  01 Feb 2017.

Do we have to restate our fixed assets every time there is forex gain/loss until the final payment is made ?

Revert: Yes, the Fixed assets value is to be revised every time there is forex gain/loss until the final payment is made. (Also on all B/S dates)

Are we supposed to pass the accounting entry for the Forex gain/loss and give effect to P&L (although the Buyer’s Credit was for capital asset acquisition) ?

Revert: Capital goods was procured as non integral foreign operation, hence unrealised foreign exchange gain / loss should be transferred to Foreign Currency Translation Reserve a/c. No effect will come in Profit and Loss A/c.

We are finalizing Balance Sheet for 31 March 2017 and there is forex gain. What will be Income Tax treatment ?

Revert: For finalizing Balance Sheet for 31 March 2017 all Fixed Assets should be reported at closing rate (‘Closing rate’ as the exchange rate at the balance sheet date. i.e. 31 March 2017)

Note:  For companies for whom IND AS (16 & 21) is applicable, treatment will be different and will be answered in separate article.
  1. The Effects of Changes in Foreign Exchange Rates 
  2. Buyers Credit Accounting Entries

Interest Payment to Mauritius: 7.5% Withholding Tax

In earlier article “WHT (Withholding Tax) on Interest on Buyers Credit” we had discussed that if buyers 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.

The Protocol provides for a shifting of taxing rights to India on interest income earned by Mauritius-resident banks from debt-claims and loans made as from 1 April 2017. Currently, such interest income is exempted from tax in India. However, the withholding tax is limited to 7.5% of such interest income.

In addition, interest income of Mauritius-resident banks on debt claims or loans existing as at 31 March 2017 shall remain tax exempt in India, irrespective of the maturity date of such instruments.

In simple terms

  1. All buyers credit funded post 31 March 2017, 7.5% WHT will be applicable if funds are arranged from Mauritian Resident Bank.
  2. Provision is for Resident Bank. Thus, Indian Bank branches in Mauritius shall not be covered.

Which Banks will be Impacted

  1. All Mauritius based bank.
  2. Indian Bank Subsidiary
  • SBI (Mauritius) Ltd: 7.5% WHT applicable
  • BOB Mauritius (Branch): Not Applicable
  • Afraisia Bank: 7.5% WHT applicable
  • State Bank of Mauritius Ltd : 7.5% WHT applicable
  • HSBC Bank(Mauritius) Limited: 7.5% WHT applicable
  • The Hongkong and Shanghai Banking Corporation Limited:  ??? (need to check)
  • Standard Chartered Bank (Mauritius) Ltd : 7.5% WHT Applicable.


Henceforth if Buyers Credit is arranged from Mauritius based Bank, Importers will have to deduct Withholding Tax (WHT) as per above provision.


  1. India – Mauritius DDTA and Amendments.
  2. Updates on India’s Tax Treaties With Mauritius and Its Impact on the India-Singapore Tax Treaty
  3. India-Mauritius Tax Treaty: An end and a New Beginning
  4. Protocol to the India-Mauritius Double Tax Treaty

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.

Since 2011 when news of Libor scandal had appeared, there has been many changes in Libor. Taking this further on 27th July 2017 current FCA Chief Andrew Bairley announced further changes.

One of the major change was by End of 2021 FCA will stop regulating Libor. Thus there is a good possibility that  it may stop getting published after that. Above speech gives reason why this step was taken and how market should move on to alternative benchmark.

Alternative Benchmarks

Alternatives which may replace Libor are given below. Some of these them are new or proposed. Between now and 2021 regulators and banks will have to stream line these benchmarks.

  1. UK: SONIA. Latest Rates
  2. USA: Treasury Repo Rate (Yet to be published).
  3. Europe: EONIA
  4. Swiss: SARON
  5. Japan: TONAR

Impact of Buyers Credit Market

  1. New benchmark: In current scenario, buyers credit arranged from bank based in any country but quote is linked to Libor rates and thus easier to compare. In future, if so happens instead of Libor every country financial institutions starts using another benchmark, then importer will have to keep track of each benchmark to figure out which quote is cheaper.
  2. Financing Currency may also differ based on country from which financing is been taken.
  3. The market will need guidance as to what a replacement could be and this will lead to increased volatility and possibly reduced liquidity in the near term.


There are still if’s and buts on Libor existence post end of 2021. In the same speech door has been kept open.

An obvious question is what happens to LIBOR after end-2021.

The answer to the question would be up to the benchmark’s administrator – IBA – and the panel banks. They could of course continue to produce LIBOR on its current basis if they wanted to, and were able to do so. But, under this plan, the benchmark would no longer be sustained through the mechanism of the FCA persuading or obliging panel banks to stay. The survival of LIBOR on the current basis, as a dynamic benchmark based on daily submissions and updates, could not and would not be guaranteed.

One will have to keep a track on how overall market and buyers credit market adjust to this new possibility. My view is market will move to new benchmarks and it may be sooner than 2021

There are few articles listed below which would  help in throwing some more light into the subject as it is still a developing story.


  1. Future of Libor : Speech by Andrew Bailey, Chief Executive of the FCA, at Bloomberg London : Dated: 27 July 2017
  2. The Death of Libor – A Bank Loan Perspective
  3. Libor Funeral Set for 2021 as FCA Abandons Scandal – Tarred Rate
  4. Monkeying with Libor
  5. New Treasuries ‘repo’ rate to replace Libor
  6. Alternative Reference Rate Committee: FAQ
  7. Reforming Major Interest Rate Benchmarks: Progress report on implementation of July 2014 FSB recommendations
  8. The Wheathley Review of Libor : Final Report : Dated 28-09-2012
  9. HM Treasury : The Wheatley Review
  10. Speech by Martin Wheatley – Managing Director, FSA, and CEO Designate, FCA at the Wheatley Review of LIBORDated 28-09-2012
  11. A Post Libor World: Impact and Analysis

Earlier Article of Libor:

Replacing Import Documents after Buyers Credit Funding

Recently a query from importer came in after buyers credit transaction was funded for replacing the underlying import document  with another document.


  • Delay in receipt of goods as ship got stuck at overseas port.

Incase of Documents under LC

Importer / LC issuing bank has to make payment in stipulated time period if documents are in order.  In such cases where buyers credit is already taken, importer will not be able to replace documents.

Incase of DA / DP / Direct Document

As buyers credit transaction is already funded, importer has three options

  1. Let the existing buyers credit continue without change. LOU Issuing bank charges are already paid and interest on buyers credit has started but importer is yet to receive goods thus his cycle has got stuck.
  2. Prepayment of existing buyers credit and taking fresh buyers credit for new document. Though possible but it will be costly for importer as lou charges are already paid and many funding bank will ask for full tenure interest in case of prepayment.
  3. Amendment in existing buyers credit

Importer should choose either first or third options. First option where delay period is short or importer does not have any other fresh import document to replace. And third option incase of longer delay period.

For amending the existing buyers credit, below process will have to be followed by importer, LOU issuing bank and buyers credit funding bank.

Value of New Import Document

New import documents value will have below three scenario

  • Same value as existing buyers credit transaction.
  • Higher value then existing buyers credit transaction: In this case difference amount is to be adjusted from cash credit (cc) account.
  • Lower Value: Not workable as this would require LOU issuing bank to refund part of the amount back to funding bank.


  • Importer informs LOU issuing bank reason for replacing the documents.
  • LOU issuing bank informs funding bank by way of amendment with new import document details and reason for replacing the existing document.
  • Funding Bank updates their records and provides a confirmation swift that the same is acceptable to them.

Audit Respective

From audit perspective, both LOU issuing bank and funding bank has to keep record of documents against which buyers credit is taken. Thus it has to be brought on record by following the above process.

Stronger Rupee Impact on Buyers Credit

Currency fluctuation is one of the factor effecting  Buyers Credit.


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.

10000000 68.5 145985
10000000 64.5 155039

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

Nostro Account and Buyers Credit

What is Nostro Account ?nostro-account

  1. In simple terms, Nostro Account is an account of Indian Bank with an another bank in foreign country.
  2. These account are opened in foreign country with foreign bank and in the currency of that country.
    • For Example: HDFC Bank having a Nostro Account with J P Morgan Chase Bank in US and in USD currency. Source: HDFC Bank
  3. Bank can more then one Nostro account for a particular currency based on its requirement.
    • For Example: HDFC Bank for USD has nostro account with JPMorgan Chase Bank, Bank of New York, Bank of America, Wells Fargo Bank N.A, and Standard Chartered Bank. Source: HDFC Bank
  4. Currency to currency, there will different account either with same bank or different Bank.
    • For Example: HDFC Bank for Eur has Nostro Account with JPMorgan Chase Bank, Barclays Bank PLC, Societe Generale, and Standard Chartered Bank. Source: HDFC Bank
  5. Nostro accounts are commonly used for currency settlement and Foreign Trades.

Nostro Account Relevance in Buyers Credit

Funding bank will transfer fund to Nostro account of LOU issuing bank on receipt of LOU.

What details are provided by LOU issuing bank to Funding Bank for Buyers Credit.

  1. Foreign Bank Name and Swift Address: For Example: J P Morgan & Chases Bank
  2. Local Bank Name and Swift Address : For Example : HDFC Bank
  3. Local Bank Account number with Foreign Bank (IBAN Number in case of EUR Nostro)
  4. Reference Number which Funding bank will have to quote at time of transferring fund to LOU issuing Bank
  5. Currency and Amount
  6. Value Date

Funding Bank Queries in relation to Nosto Account to LOU issuing Bank

  1. Nostro account details not mentioned
  2. Incomplete Nostro Account details provided
  3. Nostro account details provide of USD whereas transaction to be funded is in EUR/GBP etc.
  4. Nostro Account details of supplier provided whereas funding bank provides funding only to LOU issuing Bank

LOU Issuing Bank Queries in relation to Nosto Account during Buyers Credit Transaction.

  1. Funds not reflecting in Nostro
  2. Funds reflecting short in Nostro


  1. Nostro reconciliation: how it works in a bank

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

  • What is moratorium period ?
  • What types of situation may arise for importer at the time of sanctioning term loan which may impact buyers credit transaction?

What is Moratorium Period ?

moratorium-periodRepayment of a loan begins once loan is disbursed or post moratorium period. A moratorium period is a time during the loan period when the borrower is not required to make any repayment.

Borrower is provided with this cushion period so that project can be commissioned and the repayment begins only after project  starts generating cash flows.

Bank decides moratorium period based on the project and which is acceptable to importer.

  • Bank prefers shorter moratorium stating
    • Once project is commissioned, project would start generating cash flow, which can be used for repayment.
    • Also shorter period avoid diversion of funds.
  • Importer prefers longer moratorium period stating
    • It would give much need liquidity to get project going.
    • Importer can use funding structure like buyers credit or suppliers credit which would help him to bring his cost down.

scenario-newBelow are the few scenarios which may arise for importers during sanction process:

Situation 1: Bank Agrees for 3 years Moratorium Period.

Importer takes buyers credit for 3 years and post which convert it into Term Loan.

Cash outflow (Assuming Term loan is for 6 years)

  • First 3 years: Interest and LOU charges
  • Next 3 years: EMI of Rs. 200 for 3 years
  • Incase of no moratorium period : EMI of Rs. 100 for 6 years

Situation 2: Bank Agrees for 3 years Moratorium Period with condition of placing Fixed Deposit.

In this structure, importer will have to place a FD (under lien) every month for amount equal to monthly EMI. Thus importer will be able to enjoy buyers credit for whole tenure and after 3 years FD amount will be used to make repayment of buyers credit and rest amount will be converted to Term Loan.

Cash outflow

  • First 3 years: Interest and LOU charges
  • First 3 years: Month EMI amount of Rs. 100 kept as FD in Bank under lien.
  • After 3 years: EMI of Rs. 100 every month.

Banks may allow placing of FD after say 1 or 2 year depending on how it has been structured.

Situation 3: Bank Agrees for Moratorium period less than 3 years (Say  for example : 1 year) 

A. Import as a percentage of Total Project Cost : Less than 100%

After completion of 1 year of moratorium period, bank can start repayment  of term loan adjusting it towards locally procured machinery. Thus importer will still be able to take buyers credit for 3 years for imported machinery.

For example: Total Project cost is Rs. 1 Cr, out of which imported machinery is of Rs. 50 lakhs and locally procured machinery / land / building cost is of Rs. 50 lakhs. After one year of moratorium period, EMI amount is adjusted toward the locally procured capital asset and thus importer will be able to take buyers credit on imported amount.

Cash outflow

  • First 3 years: Interest and LOU charges
  • After 1 year: Monthly EMI amount of Rs. 100
  • After 3 years: EMI of Rs. 100 every month.

B. Import as a percentage of Total Project Cost : 100%

After completion of 1 year of moratorium period, equivalent of 6 months EMI is reduced and fresh buyers credit is taken for remaining amount.

For Example: Say initially buyers credit was taken for $100000 and next month EMI amount works out to $10000 equivalent, fresh buyers credit  is availed for balance $90000.

Cash outflow

  • First 3 years: Interest and LOU charges
  • After 1 years: Month EMI amount of Rs. 100
  • After 3 years: EMI of Rs. 100 every month.


Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers: Dated: 19-09-2016

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.

  • First shows last 6 years trend
  • Second shows trend since 1990.

3 Month Libor Trends

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  • Lowest rate in Last 10 Years was on 28 Apr 2015: 0.22%
  • Highest rate in Last 10 Years was on 10 Sep 2007: 5.65%
  • Latest rate: 09 Feb 2018: 1.79989%

6 Month Libor Trends

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  • Lowest rate  in last 10 years was on 13 Oct 2015: 0.32 %
  • Highest rate in last 10 years was on 03 Jul 2006 : 5.63%
  • Latest rate on 09 Feb 2018: 2.00438%

Reason for Increase in Libor Rates

US Federal Reserve Bank started increasing rate of interest in US beginning 2016 because of which USD Libor rates started going up.

US Fed is expected to further increase the rates and below chart shows forecast of rates over the years. It is expected to reach 3% by 2018 from 0.25% at the beginning of 2016.Fed Rate Increase

Source: Financial Times 

Impact on Buyers Credit and Indian Importers

  • Between 2015 and 2018, assuming margin (Libor + Margin) remaining same, overall costing of buyers credit has gone up by 1.60% as Libor for respective tenure has gone up.
  • Forward premium during this period have come down from 8.5% to about 4.5%.

What Should an Importer Do ?

  • Continuous evaluate Libor rates for funding tenure and overall costing of Buyers Credit.
  • Lock long term buyers credit transaction (Capital Goods import) with 12 Month Libor reset instead of 6 Month Reset.
  • If workable, look at EUR or JPY currency for underlying import transaction instead of USD. Libor for both these currency are currently in Negative or in Zero territory. Before doing the same one need to consider currency risk coming along with it.
  • Comparing overall Libor based funding cost with Indian Financing Rates.


Link Between Libor Periods & Buyers Credit Tenure

Interest-rateTrigger for this topic is a question that a reader asked:

Can I take buyer credit quote of 12M+LIBOR for capital goods import. Is there any specified guidelines that we have to take 6M+LIBOR / 3M+LIBOR only.

With given information, question can be looked though below angels :-
  1. As tenure goes up Libor rates also goes up. As of today 3 Month USD Libor: 0.63060, 6 Month Libor: 0.89720 and 12 Month Libor: 1.21160. An importer would prefer using lower tenure Libor rates.
  2. Overseas Bank would prefer to link Libor tenure with respective transaction tenure. Say if buyers credit is taken for 180 days then 6 Month Libor is applicable and if buyers credit is taken for 1 year then 12 Month Libor. This allows bank to link funds with respective tenure of loans and thus reduce interest rate risk .
  3. There are few banks which give an option to link buyers credit transaction with different tenure Libor rates in case of large value deals. For example, if the importer is taking Buyers Credit for 1 year tenure but pricing is linked to 6 Month Libor reset. Importer has to two aspects in such scenario:
    • If Libor goes up after six month his costing will go up and same is true other way round.
    • Every 6 Month importer will have to make payment of interest, where as  if the transaction was taken with 12 Month Libor, he would have to make payment of interest only after 12 Months.
  4. Last Aspect is on regulation perspective:
    • Buyers Credit Upto 3 Years: Buyers credit can be taken for any tenure linked with any Libor tenure till the time it remains within maximum cap of 6 Month Libor + 350 bps.
    • Buyers Credit Upto 5 Years: Minimum tenure for buyers credit has to be 6 Month or above from the beginning. But here also there is no restriction on Libor. Thus for a 6 month tenure if a bank is ready to provide buyers credit with 3 Month Libor Reset, the same can be taken. Again here also interest rates should remain within the cap of 6 Month Libor + 350 bps.

Reference Article.

  1. Buyers Credit
  2. Libor Rates

Form 15CA and Form 15CB for Buyers Credit Repayments

imagesForm 15CA and Form 15CB Certificate may be applicable in few cases of Buyers Credit Repayment. Over the period of time there has been many changes to regulation and latest one issued on 16th December 2015 and got implemented from April 1, 2016.

At the time of Repayment of Buyers Credit Loan

A. Repayments made to Indian Bank Overseas Branches 

Form 15CA :  As per our interpretation Form 15CA is not applicable in case of Indian Bank Overseas Branches as its status is Resident

Further details of the same can be found in article ” Form 15CA & Form 15CB not applicable on Interest Payment to Indian Bank Branches

Incase the bank is still adamant on submission of Form 15CA, then the same can be submitted under Part D. But its has an issues of selecting Nature of Remittance, as there is no relevant head.

B. Repayments made to Foreign Bank or Indian Bank Subsidiaries

  1. Form 15CA: Part C
    • Nature of Remittance :  Income
    • Purpose Code: S1403: Remittance towards Interest on Loans from Non Residence (Short Term / Medium Term / Long Term Loans)
  2. Form 15CB (Issued by Chartered Accountant)


  1. CBDT Notification No. 93/2015: Dated 16-Dec-2015
  2. Revised Form 15CA
  3. Revised Form 15CB

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? ”

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

Central Government and State Government runs various subsidy schemes for Indian Manufacturer for setting up new plant or expanding the existing plant. One of these subsidy scheme is Credit Linked Capital Subsidy Scheme (CLCSS).  This scheme was launched in October-2000 and has been revised over the years.

Summary and Benefit of the Scheme

  1. Eligible for new as well as existing units
  2. Ceiling on the loan amount under the scheme is Rs. 1 Crore.
  3. 15% Capital subsidy on loan amount or Rs. 15 lacs whichever is minimum.
  4. Scheme is for purchase of plant and machinery
  5. Calculation of admissible subsidy will be done with reference to the purchase price of plant and machinery instead of term loan disbursed to the beneficiary unit
  6. Replacement of existing equipment/technology with the same equipment/technology will not qualify for subsidy under this scheme, nor would the scheme be applicable to units upgrading with second hand machinery.

In the case of imported machinery, the following shall be included while calculating the value of plant & machinery, namely :-

  1. Import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port);
  2. Shipping charges;
  3. Custom clearance charges; and
  4. Sales Tax.

Process to be Followed

  1. Bank sanctions term loan to SSI Unit
  2. Bank will enter into General Agreement (GA) with concerned SSI  unit on behalf of Government of India.
  3. SSI Unit submits application for assistance under the CLCSS as per required format.
  4. Bank (Nodal Agency) approves CLCSS subsidy for SSI unit as per CLCSS regulation.
  5. Bank release the subsidy amount with each installment of loan in a manner proportionate to the amount of term loan disbursed (on pro- rata basis), subject to the ceiling of the term loan/ subsidy amount as per applicable guidelines of the CLCSS.
  6. Subsidy amount once issued, is kept in Fixed Deposit for 3 years. The beneficiary unit shall remain in commercial production for at least three years after installation of eligible plant & machinery on which subsidy under CLCSS has been availed. If the unit fulfills the condition, the FD will be transferred to unit’s account after three years.

Documents Required

  1. Copy of SSI Registration Certificate
  2. Copy of Term Loan Sanction Letter
  3. Copy of Bank Term Loan Statement of account showing release dates.
  4. Copy of machinery invoice(s) with the bill of entry (imports).
  5. Audited Balance Sheet for the last 3 years prior to loan sanctions, or copy of project report submitted to bank
  6. Company letter head  – 6 Number
  7. Stamp Paper – Rs. 200/- in the name of the unit.
  8. Owner’s Details: Name of proprietor / partner / Directors of Company. Their age, father’s / spouse’s name, residential address. Date of installation of each machine and date of put to commercial use. Increase in Capacity after installation of Machinery – Monthly – Profit and Loss, Sales etc.

For further details CLCSS, please refer article in reference section.

Revert to Above Question: Whether Both Buyers Credit and CLCSS can be used by Importer

In CLCSS,  disbursal of Term Loan is one of the condition.  As seen in earlier articles Buyers Credit on Capital goods,  incase of buyers credit term loan is not immediately disbursed and depending on the requirement of importer, it can either disbursed at end of 3 years or before.

Incase of buyers credit, as term loan is not disbursed, Importer will not be able to claim subsidy under CLCSS.

Importer will have to choose between either one of them.


  1. Credit Link Capital Subsidy Scheme for Technology Upgradation
  2. List of Machines Covered in CLCSS
  3. SIDBI : Credit Linked Capital Subsidy Scheme
  4. FAQ on CLCSS
  5. Sample Agreement for Financial Assistance under Credit Linked Capital Subsidy Scheme for Technology Upgradation of the Small Scale Industries
  6. Application Form for CLCSS
  7. RBI Master Circular: Lending to Micro, Small & Medium Enterprise (MSME) Sector)

Buyers Credit & Suppliers Credit in Rupee (INR)

RupeeDollarRBI 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:

  1. Trade credit can be raised for import of all items (except gold) permissible under the extant Foreign Trade Policy.
  2. Trade credit period for import of non-capital goods can be upto one year from the date of shipment or upto the operating cycle whichever is lower
  3. Trade credit period for import of capital goods can be upto five years from the date of shipment
  4. No roll-over / extension can be permitted by bank beyond the permissible period
  5. Banks can permit trade credit upto USD 20 million equivalent per import transaction
  6. Banks are permitted to give guarantee, Letter of Undertaking or Letter of Comfort in respect of trade credit for a maximum period of three years from the date of shipment
  7. The all-in-cost of such Rupee (INR) denominated trade credit should be commensurate with prevailing market conditions
  8. All other guidelines for trade credit will be applicable for such Rupee (INR) denominated trade credits

Overseas lenders of Rupee (INR) denominated trade credits will be eligible to hedge their exposure in Rupees through permitted derivative products in the on-shore market with a bank in India. 

Modes Operandi for Importer, Importers Bank  and Indian Bank Overseas Branches (Probable)

  1. Importer imports goods in USD / EUR / Or any other freely convertible foreign currency
  2. Importer will ask Importers Bank to book conversion rate for making payment on due date of bill and provide equivalent INR details for arranging buyers credit quote.
  3. Importers arranges quote through buyers credit consultant in INR
  4. Indian Bank sends lou in INR to Indian Bank Overseas Branch
  5. Indian Bank Overseas Bank transfers INR to Importers Bank
  6. Importers Banks receives INR, converts the same in USD / Eur and makes payment to Supplier.
  7. On due date importer pay Principal + Interest in INR to Importers Banks
  8. Importers Bank makes payment in INR to Indian Bank Overseas Branch.

**As Indian Bank overseas bank borrows in USD / EUR in international market and if they lend in INR, they will have to do hedging.

Benefits to Importer

  1. As funding will be in INR, no hedging requirement.
  2. Margin requirement will be reduced / stabilize. Every time because of dollar movement, Importer had to bring in extra margin. If trade credit lending is in INR, once margin is given to bank, it will remain fixed. Thus importer will be able to better plan his fund requirement.
  3. Nullify expected interest hike by Federal Service System (FED) of USA, as lending will be in INR. Libor rates have already gone up by 20 basis points (bps) in last 6 months and are still expected to go up if FED increased rate of interest.

Few Question ???

  1. In current process of Trade Credit, there was no requirement of loan agreement, but above policy has used wording of Loan Agreement. Whether Letter of Undertaking (LOU / LOC) will be considered as loan agreement or not is a question which will get raised.  Clarification from RBI would be required on same.
  2. How many banks would be interested in taking up Trade Credit in INR ?
  3. What will be the lending rates in case of INR based funding ?


Impact of Negative Euribor on Buyers Credit

Eur INREuropean Central Bank (ECB) started Quantitative Easing (QE) program last year for European Banks which has resulted into

  • Weakening of Euro Currency
  • Negative Inter Bank Rates (EURIBOR)

Till September 2014 Euribor was in positive territory post which Euribor has turned negative for period of 1 Month, 2 Months and 3 Months (Refer below chart).

imagesIn earlier article “Buyers Credit Interest Rate (Libor +  Margin)” we have discussed on how overseas banks quote interest rate on buyers credit. One such example is given below;

For a 3 Month Transaction Quote:

3 Month Euribor + 75 bps pa

0.10 + 0.75 = 0.85% pa.

With EURIBOR in negative territory post September 2014, for same buyers credit in Euribor for 3 Months at the same pricing cost has come down.

For a 3 Month Transaction Quote:

3 Month Euribor + 75 bps.

– 0.143 + 0.75 = 0.607 bps.

Impact on Importer : Reduction in Buyers Credit Cost

Impact on Buyers Credit Banks: 

  1. Reduction in Margin.
  2. You might have noticed, many Indian bank overseas branches outside Euro Zone have stopped doing buyers credit transactions in Euro Currency.
  3. Recent Update: Buyers Credit Bank are charging Min 0.01% Euribor  or is charging 12M Euribor for all transaction as its still in positive territory. 12 Month Euribor : 0.048%

Latest EURIBOR Rate Chart

 Euribor maturity / rate 01-19-2016 01-18-2016 01-15-2016 01-14-2016
1 month -0.222 % -0.222 % -0.221 % -0.221 %
2 months -0.182 % -0.181 % -0.179 % -0.181 %
3 months -0.143 % -0.142 % -0.142 % -0.143 %
6 months -0.056 % -0.054 % -0.054 % -0.053 %
9 months -0.011 % -0.009 % -0.010 % -0.009 %
12 months 0.048 % 0.049 % 0.049 % 0.048 %


Form 15CA & Form 15CB applicable on All Payment

ConfusionPost 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.

Addition to exempted List

Purpose Code Nature of Payment
S0101 Advance Payment against Imports
S0102 Payment towards Imports – Settlement of Invoice
S0103 Imports by Diplomatic Missions
S0104 Intermediary Trade
S0190 Imports below  5,00,000 ­(For use by ECD offices)

Old Article

In earlier article “Revised Form (15CA, 15CB) and Rules for Payment to Non Resident“, we had discussed that Form 15CA and Form 15CB is applicable only on those payment which were chargeable to tax.

In Finance Bill 2015,  a new sub-section 6 has been added to Section 195

In section 195 of the Income-tax Act, for sub-section (6), the following sub-section shall be substituted with effect from the 1st day of June, 2015, namely:— “(6) The person responsible for paying to a non-resident, (not being a company), or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed.”.
* Details in relation to above Form is provided in rule 37BB and Form Nos. 15CA & 15CB
After section 271H of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2015, namely:— “271-I. If a person, who is required to furnish information under sub-section (6) of section 195, fails to furnish such information, or furnishes inaccurate information, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one lakh rupees.”.
Which means from June 1, 2015 on all payments made to non resident or foreign company Form 15CA and Form 15CB is applicable; except for payments under specified list (given below).
From Buyers Credit respective, as per our interpretation, Form 15CA and Form 15CB will still not be applicable to payments made to Indian Bank Overseas Branches as parent of the same is resident and above clarification hold true only for non-resident, (not being a company), or to a foreign company. Further details on the same can be found in article ” Form 15CA & Form 15CB not Applicable on Interest Payment to Indian Bank Overseas Branches
Specified List
Sl.No. Purpose code as per RBI Nature of payment
(1) (2) (3)
1 S0001 Indian investment abroad -in equity capital (shares)
2 S0002 Indian investment abroad -in debt securities
3 S0003 Indian investment abroad -in branches and wholly owned subsidiaries
4 S0004 Indian investment abroad -in subsidiaries and associates
5 S0005 Indian investment abroad -in real estate
6 S0011 Loans extended to Non-Residents
7 S0202 Payment- for operating expenses of Indian shipping companies operating abroad.
8 S0208 Operating expenses of Indian Airlines companies operating abroad
9 S0212 Booking of passages abroad -Airlines companies
10 S0301 Remittance towards business travel.
11 S0302 Travel under basic travel quota (BTQ)
12 S0303 Travel for pilgrimage
13 S0304 Travel for medical treatment
14 S0305 Travel for education (including fees, hostel expenses etc.)
15 S0401 Postal services
16 S0501 Construction of projects abroad by Indian companies including import of goods at project site
17 S0602 Freight insurance – relating to import and export of goods
18 S1011 Payments for maintenance of offices abroad
19 S1201 Maintenance of Indian embassies abroad
20 S1 202 Remittances by foreign embassies in India
21 S1301 Remittance by non-residents towards family maintenance and-savings
22 S1302 Remittance towards personal gifts and donations
23 S1303 Remittance towards donations to religious and charitable institutions abroad
24 S1304 Remittance towards grants and donations to other Governments and charitable institutions established by the Governments
25 S1305 Contributions or donations by the Government to international institutions
26 S1306 Remittance towards payment or refund of taxes.
27 S1501 Refunds or rebates or reduction in invoice value on account of exports
28 S1503 Payments by residents for international bidding


Steps followed by Overseas Branches during Buyers Credit

Loan ProcessIndian Bank Overseas Branches / Foreign Bank has to  carry out many processes pre and post disbursement of buyers credit. Below are the steps from end to end.

  1. Receipt of BC Request by  Buyers Credit Consultant / Indian bank  giving transaction details of import into India & offering Indicative pricing .
  2. On acceptance of quote, offer letter is issued by generating a reference number (for future tracking) or email sent by Overseas Bank is treated as offer letter.
  3. Maintaining Buyers credit Offer Letter reference number in excel, both company wise and source wise. This is done for funding planning and to avoid companies or consultants who take offer letters but do not use it.
  4. Receipt of MT 799 LOU from Indian bank. In most bank’s OFAC sanction check is done during this process on automated basis. Incase transaction is related to OFAC, transaction is moved to point number 6.
  5. Checking all details in LOU like Currency, Amount, Drawdown date, Rate of Interest, Name & Address of Importer & Exporter, Shipment details (BL number, BL date, vessel name, voyage number, port of loading, port of discharge), description & nature of underlying commodity, nostro details, terms and conditions of LOU etc.
  6. In case of any discrepancy  or OFAC query, send a swift message to Indian Bank for amendment / clarification. In case of no discrepancy move to point no. 7.
  7. Maintaining drawdown wise details of buyers credit transactions in excel for better control.
  8. On finding all information in place, all buyers credit loan request information are entered in various fields and Verification of account opening is done in Banking Software.
  9. Drawdown details of buyers credit loan amount in Banking Software & its verification.
  10. Effecting payment (MT202) of buyers credit.
  11. Relaying MT799 (with interest and maturity details) to LOU issuing banks.
  12. Taking print out of payment copy & MT 799 maturity schedule & enclosing with buyers credit loan document, filing of buyers credit  loan documents as per maturity.
  13. On maturity, reverse buyers credit loan by debiting respective currency nostro account. This process may also be automated.
  14. On due date Transaction Reconciliation is done with Nostro statement and reminders are sent for non-repaid buyers credit with overdue interest amount.
  15. Buyers credit loan account is closed using Banking Software.

Note: In general the above process is followed. However the sequence of steps followed might vary as per bank’s internal process.

Revised Mandatory Documents for Import & Export

Directorate General of Foreign Trade (DGFT) on March 12, 2015 reduced mandatory documents for Import and Export of goods to below 3 documents:

a) Mandatory documents required for export of goods from India:

  1. Bill of Lading/Airway Bill
  2. Commercial Invoice cum Packing List
  3. Shipping Bill/Bill of Export

(b) Mandatory documents required for import of goods into India

  1. Bill of Lading/Airway Bill
  2. Commercial Invoice cum Packing List*
  3. Bill of Entry

* Separate Commercial Invoice and Packing List would also be accepted

Further, RBI has removed below documents

  1. SDF Form (For Export)
  2. A 1 Forms (For Import)


  1. DGFT Circular: Specifying documents required for Export and Import
  2. Ministry of Commerce: Mandatory Documents Required For Export And Import Reduced To Three Each

Can Exporter Retain EEFC A/c Balance for Buyers Credit Repayment

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

“Can Exporter retain dollar in EEFC A/c for buyers credit repayment ?”

Below article gives basic details about EEFC account and revert to above query.

What is EEFC Account ?

Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with  a bank dealing in foreign exchange.

Features of EEFC Account

  • A person resident of India may open EEFC Account
  • Non-Interest bearing current account
  • No credit facilities, either fund based or non fund based is allowed against security of balance held in EEFC account
  • Foreign Exchange Earners (like exporters) are allowed to credit 100% of their foreign exchange in EEFC Account
  • All accrual in the account during a month should be converted into Rupees on or before the last day of the next month after adjusting for utilization of the balances for approved purposes or forward commitments. 

Note: Other features and details can be found in below reference circulars

Revert on the Query:

RBI made changes in EEFC Account Retention Policy on May 2012 and July 2012. As per revised guidelines, all amount in EEFC Account to be converted next month after adjusting balances for approved purposes or forward commitments. 

Circulars does not specify approved purposes and forward commitments. Thus it is left on interpretation.

Buyers credit is taken towards import payment for tenure upto 360 days for raw material import and 3 years for capital goods import. Repayment of buyers credit:

  • Does not becomes due in the same month in which export proceeds are received.
  • Multiple export proceeds are required for equivalent amount required for Buyers credit repayment and other such reason.

As per interpretation of circular, buyers credit repayment result in forward commitment and thus it should be permissible to maintain equivalent amount in EEFC for more than one month.

A clarification was sort from RBI on the above query, on which RBI gave the below  revert. Copy of RBI letter is attached in reference section for benefit of the readers.

We confirm that the remittance in EEFC account for repayment of the buyers’ credit at a future date may be retained provided the said buyers’ credit commitment is already in place.

Thus exporters / foreign currency earner who are also importers can retain balance in EEFC account for tenure more than 1 month towards future buyers credit payments.


  1. RBI Master Direction –  Import of Goods and Services: Dated: 31-03-2016
  2. Exchange Earner’s Foreign Currency (EEFC) Account: FAQ
  3. RBI Circular: Exchange Earner’s Foreign Currency (EEFC) Account, Diamond Dollar Account (DDA) & Resident Foreign Currency (RFC) Account – Review of Guidelines : Dated: 31 July 2012
  4. RBI Clarification Letter copy (Note: Company has been blanked out to keep customer confidentiality. Given clarification applies to all such cases)

A1 Form Not Required for Import Payment

old-newImporter has to submit a list of documents for making import payments. One such documents was A1 Form except for import payment less than $ 5000. RBI with its circular dated 12 February 2015, has removed this requirement.

Impact on Importer

Hence forth, for import payments, importer giving request on his letter head with complete details will be acceptable to Bank.

In practise each banks in order to maintain standardization will come up with its own format in which details will be required to be submitted by the importer. Thus, Importer will have to keep a track for this format for each bank where he is banking with.

Extract from RBI Circular

To further liberalise and simplify the procedure, it has been decided to dispense with the requirement of submitting request in Form A-1 to the AD Category –I Banks for making payments towards imports into India. AD Category –I may however, need to obtain all the requisite details from the importers and satisfy itself about the bonafides of the transactions before effecting the remittance.


RBI Circular: Foreign Exchange Management Act, 1999 – Import of Goods into India: Dated: 12 February 2015

Clubbing Import bills for Single Buyers Credit Transaction

Club DealsImporter regularly gets multiple bills from same supplier and from multiple suppliers. Clubbing these multiple import bills to a single Buyers Credit transaction will reduce overseas bank interest cost.

For Example

  • Two Buyers Credit transactions of $50K each for 180 days will cost at 6 Month Libor + 100 bps
  • Single Buyers Credit transaction of $ 1 lacs will cost at 6 Month Libor + 65 bps


  1. Importer receives multiple Import bills (same or multiple supplier)
  2. Importer takes single quote through Buyers Credit Consultant. by providing details of all bills.
  3. LOU issuing bank sends single lou with details of multiple bills.
  4. Overseas bank does single funding to LOU issuing Bank.
  5. On receipt of funds by LOU issuing bank, debits it’s Nostro Account equivalent to each bill amount and pay to suppliers respectively.

Prior Checks

  1. Whether LOU issuing bank will allow clubbing single suppliers transaction or multiple supplier transactions or both. Regulatory there are no issue but at times banker in willing to support such transactions because of lack of knowledge or system issues.
  2. Tenure of buyers credit will be based on earliest Bill of Lading (BL) date. Say BL 1 is dated : 10/01/2015 and BL 2 is dated: 20/01/2015, than first BL date is considered for purpose of calculating buyers credit tenure from date of shipment and as per operating cycle.
  3. Arriving at single funding date. Because transaction under different payment modes will have different due dates.


Even after doing all the above correctly, Incase LOU issuing bank sends separate LOU (because of any reason), overseas bank will hold the funding of transaction, as pricing was provided for single payment. This might result in delay in payment to suppliers, delay in release of documents etc.

Should Importer accept Buyers Credit Quote including LOU charges

In earlier article we have discussed about costing of buyers credit, list of which is given below.

Quote for buyers credit are arranged by consultants or LOU issuing banks for importers.

Off late few LOU issuing banks have started a practise of giving quote to importer including LOU Charges (L+Margin+LOU Charges). Example: L + 300 bps including LOU Charges

Question is “Should Importers prefer it ?”

Answer is NO

Of above two cost, LOU charges is fixed cost whereas Overseas Bank  interest is variable cost and both are charged by separate entity. By showing both these charges together, LOU issuing bank convert LOU charges to variable cost. And whenever Overseas Bank cost are down, instead of passing the benefit to importer, they would increase LOU charges.

Example:  Transaction Details: $50000, 90 Days, LOU: XYZ Bank

Buyers Credit Quote including LOU Charges: 3 Months Libor + 350 bps

Where both  cost are charged separately:

  • LOU Charges: 2.00% ,
  • Overseas Bank Quote: 3 Months Libor + 100 bps.
  • Total Cost: 3 Months Libor+300 bps

Thus instead of 2.00%, lou issuing bank increased lou charges to 2.50% because of non existing of break up. At times, instead of LOU charges it may also be adjusted towards arrangement fee.

What should importer do ?

In order to avoid such instance,

  • Importer should negotiate LOU charges separately at the time of sanction of limits.
  • Case where quote is arranged by LOU issuing bank, importer should insist on getting copy of offer letter provided by overseas bank.

With above details, importer will be able arrive at actual transaction cost.

Note: This will hold true in most cases when such clubbing of charges are done by LOU issuing bank but there can be exceptions too.

Difference Between Letter of Comfort and Letter of Undertaking

Latest Article:

Letter of Undertaking in simple terms is bank guarantee issued by Indian bank against which overseas bank provide finance on Libor rates. Libor linked finance used by importers are Buyers Credit, Suppliers Credit, ECB etc. Libor linked finance used by exporters is PCFC (Packing Credit in foreign currency)

In earlier articles, terms Letter of Undertaking (LOU) and Letter of Comfort are used regularly. Below article gives difference between both these terms from perspective of buyers credit.

Difference between LOU and LOC

Particular Letter Of Comfort Letter Of Undertaking
Definition LoC in the banking parlance is referred to a document which is provided by a person, typically an affiliate (such as the holding / parent company) of the borrower (“LoC Provider”) assuring the financial soundness of the borrower to repay its debt(s). A contract to perform the promise, or discharge the liability, of a third person in case of his default
Use Between Branches or Partner Subsidiary Inter-Bank
Basel III Low Provisioning High Provisioning
Charges to Customer ** Low High


If SBI India’s client takes buyers credit from SBI’s overseas branches, SBI India will give Letter of Comfort, whereas if the funding  is arranged from say Bank of India overseas branches, SBI India will give LOU.

** On the point charges to customer. There are examples where if funds are arranged from overseas branches of same bank, Indian banks are charging  differential pricing.


Is Service Tax Applicable on Buyers Credit ?

The trigger for this topic is a question that a reader asked:

Difference between“I would like to know whether service tax is applicable under Section 66A of the erstwhile Act on availing Buyer’s credit? It is not only the interest which is paid but a number of other fees like the management fees, arrangement fees, hedging cost etc which is paid to banks by the importer”

Buyer’s Credit is a loan in foreign currency extended by Indian Banks Overseas branches or Subsidiaries or Foreign Banks, where in consideration is paid by way of interest.

To answer the above question one needs the understanding of Service  Tax Act applicability on various cost heads of buyers credit transaction and paid to whom.

Applicable Regulations of Service Tax Act to be kept in mind for deciding taxability (with effect from 01 July 2012)

(n) services by way of-

(i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;

Our Opinion

Service tax is not applicable on the Overseas Bank Interest Cost and Withholding Tax / TDS as the same is mentioned in the Negative list of Services.

Rest all other services will be liable to Service Tax as not mentioned either in Negative List or Mega Exemption Notification (25 / 2012 – ST 20.06.2012) (as amended).  Further, there is no specific exemption to the said services by issuance of any other notification.

All the other services / costs will be taxable under various heads of Services like “Banking & Financial Services“, “Management Consultant Services” or “Foreign Exchange Broker Service“, “Business Auxiliary Service” or “Business Support Service” depending upon the Nature of Service, Service Recipient and Service Provider.

Importers are advised to go through the above cited rules and sections for better clarity and refer to Service Tax Consultants as the taxability might vary on case to case basis.


Taxation of Services: An Education Guide

Buyers Credit on Import of Non Capital Goods

The trigger for this topic is a question that a reader asked:

We have a processing facility of granite. Can we use buyers credit for consumables (our banker refusing for consumables). As per them only raw material is allowed for buyer credit

To answer the above question one needs to understand both RBI Policy and Foreign Trade Policy.

As per RBI Master Circular: External Commercial Borrowing and Trade Credit 2015

AD banks are permitted to approve trade credits for imports into India up to USD 20 million per import transaction for imports permissible under the current Foreign Trade Policy of the DGFT with a maturity period up to one year (from the date of shipment).

AD banks are permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to one year for import of all non-capital goods permissible under Foreign Trade Policy (except gold, palladium, platinum, Rodium, silver etc.)

As its is clear from the above extract that RBI has allowed buyers credit on import of all non-capital goods permissible under Foreign Trade Policy upto 1 year. Non Capital goods are like Raw Material, Consumables, Accessories, Spares, Components, Parts etc.

Foreign Trade Policy (FTP)

Above circular also states ” imports permissible under the current Foreign Trade Policy of the DGFT”. Refer below extracts from FTP:

Chapter 2 of FTP

2.1 Exports and Imports shall be free, except where regulated by FTP or any other law in force. The item wise export and import policy shall be, as specified in ITC (HS) notified by DGFT, as amended from time to time

2.16 Capital goods, raw materials, intermediates, components, consumables, spares, parts, accessories, instruments and other goods, which are importable without any restriction, may be imported by any person.

Definition: “Consumables” means any item, which participates in or is required for a manufacturing process, but does not necessarily form part of end-product. Items, which are substantially or totally consumed during a manufacturing process, will be deemed to be consumables.

It is clear from above extracts that Consumables are permissible for import as per FTP.


RBI has classified imports into Capital goods and Non Capital goods for Trade Credit perspective. Buyers Credit can be taken against import of Consumable as it falls under Non Capital goods import and import of same is allowed as per FTP. This conclusion also stands true for all non capital goods import.


  1. Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers: Dated: 19-09-2016
  2. Definition of Consumable in Foreign Trade Policy
  3. FTP Chapter 2: General Provisions Regarding Imports and Exports

Credit Rating and Buyers Credit

What is Credit Rating ?

A credit rating represents the rating agency’s opinion on the likelihood of a rated debt obligation being repaid in full and on time. Usually alphanumeric symbols are used to convey a credit rating. Credit rating can be Internal Rating (Banks rate customers internally) or External Rating by external agencies like CRISIL, ICRA and others.

Relevance of Credit Rating in case of Buyers Credit Funding Bank

Buyers Credit Funding Banks ask for Internal and / or External Credit rating  in the Letter of Undertaking format (LOU).  Purpose for the same are

  1. As per country regulations in which Indian bank branches operating, they have agreed and informed regulator that they would funds only those transaction which are above an X rating. Recently came accross a transaction where LOU was issued by local branch but overseas bank branch refused funding of the transaction post checking the rating of the client in LOU. Thus importer will now also have to keep this criteria in mind. For academic perspective, credit rating should not matter to buyers credit funding bank till the time they are receiving LOU from Indian bank as per their format. Reason being, buyers credit are funded on bank lines (taking risk on banks) and not on customer lines.
  2.  Second purpose of taking rating details in LOU is to help classify the portfolio. In the region in which these branches are operating, there are regulatory compliances which these branches have to follow, based on which their loan policy and trade policy is formulated.
  3. Rating are also required to determine provisioning on buyers credit transaction as per Basel II / Basel III norms.

Relevance of Credit Rating in case of Importers Bank & Importer 

From buyers credit perspective, some  importers bank provide preferential pricing to importer for LOU charges based on their rating

For Example: Bank of Baroda (BOB)Letter of Comfort Charges for availing Buyer’s Credit, varies based on rating. Please refer below chart:

2.4 (d) Letter of Comfort issued for availing Buyer’s Credit
Rating Upto One year
Raw Material &Capital Goods
Above One Year
( Capital Goods)
AAA 1.00 p.a 1.50 p.a
AA 1.00 p.a 1.50 p.a
A 1.50 p.a 2.00 p.a
BBB 2.25 p.a 2.50 p.a
Below BBB & Unrated 2.50 p.a 3.00 p.a

* Source:

Relevance of Operating Cycle in Buyers Credit Transaction

Incase of raw material imports, RBI had delegated approving powers to Authorised Dealers (Banks) for Trade Credit (Buyers Credit / Suppliers Credit) for a tenure upto 1 year from the date of shipment. Bank’s based on internal policies decided customerwise tenure. Because of variation in policies between banks,  few importers used buyers credit for arbitrage.

RBI Master Direction – External Commercial Borrowing and Trade Credit

On 11th July 2013, RBI revised the policy by linking Trade Credit to Operating Cycle.

Maturity prescriptions for trade credit on the non-capital goods, the maturity period is up to one year from the date of shipment or the operating cycle whichever is less.

Operating CycleWhat is Operating Cycle ?

In simple terms operating cycle is period for which funds are blocked in business. Every business transaction passes through a Operating Cycle– from initial cash – to Credit Purchase of raw material – to Manufacturing Process – to Credit Sales to Customer – to Realisation of Book Debts – to payment to creditors- and again in Cash

Business owner fill this gap by using their own funds and banks funds by way of Fund Based and Non Fund based limits.

How to Calculate Operating Cycle (Net Operating Cycle)

Net Operating Cycle = Days Stock Held (1) + Days Sales Outstanding (2) – Days Payable Outstanding (3)

(1)  Days Stock Held = (Average Stock * 365) / Cost of Goods Sold

      A. Average Stock =  (Opening Stock + Closing Stock) / 2

     B. Cost of Goods Sold = Opening Stock + Purchases – Closing Stock

(2) Days Sales Outstanding = (Debtors * 365) / Sales

(3) Days Payables Outstanding = (Creditors * 365) / Cost of Goods Sold

How will Bank Implement

At the time of sanctioning of fresh limits or renewal of existing limits, banks will have to define Operating Cycle of every importer and based on sanction tenure, importer will be able to take buyers credit.

Impact of the Policy

  1. Buyers Credit beyond Operating Cycle has stopped.
  2. Rollover of Buyers Credit beyond Operating Cycle has stopped. This is having negative impact of genuine imports whose operating cycle has gone up because of economic downturn.
  3. Few importers who were using Buyers Credit for Arbitrage has stopped.


Difference Between Sec 195 and Sec 194LC

Difference between sec 195 and sec 194lcIn earlier article 5% WHT as per Sec 194LC not applicable to Buyers Credit we had discussed on Sec 194LC. This article gives difference Between Sec 195 & Sec 194LC


Particular Sec 195 Sec 194LC
From Since Inception of Act July 2012
Upto June 2015
Applicable on Any payment business Money borrowed under Loan Agreement; or By way of Issue of Long term Infrastructure bonds
Rate of TDS with availability of PAN Card As DTAA agreement. Incase of non DTAA 20%. Further details refer this link 5% and 3% Education Cess there on ( 2% Surcharge wherever applicable)
Who is responsible for tax deduction Resident or Non resident An Indian Company
Applicable If income is chargeable to tax in India in the hands of recipient If Interest is paid at approved rate

Revised Guidelines for Merchanting / Intermediary Trade

Further to article published below, RBI received suggestion from merchanting traders and trade bodies, based on which guidelines on merchanting trade transactions have been further reviewed on 28th March 2014 and with effect from 17th January 2014. Summary of the changes are given below.

  1. For atradeto be classified as merchanting trade followingconditionsshould be satisfied.
    1. Goods acquired should not enter the Domestic Tariff Area and
    2. The state of the goods should not undergo any transformation
  2. Goods involved in the merchanting trade transactions would be the ones that are permitted for exports / imports under the prevailing Foreign Trade Policy (FTP) of India, as on the date of shipment and all the rules, regulations and directions applicable to exports (except Export Declaration Form) and imports (except Bill of Entry), are complied with for the export leg and import leg respectively ;
  3. AD bank should be satisfied with the bonafides of the transactions. Further, KYC and AML guidelines should be observed by the AD bank while handling such transactions ;
  4. Both the legs of a merchanting trade transaction are routed through the same AD bank. The bank should verify the documents like invoice, packing list, transport documents and insurance documents (if originals are not available, Non-negotiable copies duly authenticated by the bank handling documents may be taken) and satisfy itself about the genuineness of the trade ;
  5. The entire merchanting trade transactions should be completed within an overall period of nine months and there should not be any outlay of foreign exchange beyond four months ;
  6. The commencement of merchanting trade would be the date of shipment / export leg receipt or import leg payment, whichever is first. The completion date would be the date of shipment / export leg receipt or import leg payment, whichever is the last ;
  7. Short-term credit either by way of suppliers’ credit or buyers’ credit will be available for merchanting trade transactions, to the extent not backed by advance remittance for the export lag, including the discounting of export leg LC by an AD bank, as in the case of import transactions ;
  8. In case advance against the export leg is received by the merchanting trader, AD bank should ensure that the same is earmarked for making payment for the respective import leg. However, AD bank may allow short-term deployment of such funds for the intervening period in an interest bearing account ;
  9. Merchanting traders may be allowed to make advance payment for the import leg on demand made by the overseas seller. In case where inward remittance from the overseas buyer is not received before the outward remittance to the overseas supplier, AD bank may handle such transactions by providing facility based on commercial judgement. It may, however, be ensured that any such advance payment for the import leg beyond USD 200,000/- per transaction, the same should be paid against bank guarantee / LC from an international bank of repute except in cases and to the extent where payment for export leg has been received in advance ;
  10. Letter of credit to the supplier is permitted against confirmed export order keeping in view the outlay and completion of the transaction within nine months ;
  11. Payment for import leg may also be allowed to be made out of the balances in Exchange Earners Foreign Currency Account (EEFC) of the merchant trader ;
  12. AD bank should ensure one-to-one matching in case of each merchanting trade transaction and report defaults in any leg by the traders to the concerned Regional Office of RBI, on half yearly basis in the format as annexed, within 15 days from the close of each half year, i.e. June and December ;
  13. The names of defaulting merchanting traders, where outstandings reach 5% of their annual export earnings, would be caution-listed.
  14. The merchanting traders have to be genuine traders of goods and not mere financial intermediaries. Confirmed orders have to be received by them from the overseas buyers. AD banks should satisfy themselves about the capabilities of the merchanting trader to perform the obligations under the order. The overall merchanting trade should result in reasonable profits to the merchanting trader.
  15. It is clarified that the contents of this circular would come into effect in respect of merchanting trade transactions initiated after January 17, 2014.


As per RBI Circular Dated 17th January 2013

In earlier article “Suppliers’ Credit or Buyers’ Credit is not available for Merchanting Trade” we had discussed the guidelines for Merchanting Trade. RBI had set a committee under the Chairmanship of G Padmanabhan to examine the gaps / inadequacies / lacunae in the financial system / procedure. Based on the recommendations of the committee, RBI has revised the guidelines for Merchanting Trade and Intermediary Trade.

Take aways from revised guidelines

  1. Merchant tradeTrade Credit product like Buyers Credit, Suppliers Credit and LC discounting for export leg is now allowed.
  2. Overall tenure increased from 6 months to 9 months. Foreign exchange outlay from 3 months to 4 months
  3. Both Legs of the transaction to be routed through same AD bank.
  4. Commencement Date (whichever is first of the below) and Completion Date (whichever is last of the below) for calculating tenure of 9 months.
    1. Date of Shipment
    2. Export Leg Receipt
    3. Import Leg Payment
  5. One to One Matching of transaction to be done by bank and incase of default to be reported to RBI. Incase of repeated defaults (3 or more cases in a year), Bank should restrain trader from entering into any further transaction.
  6. The inward remittance from the overseas buyer should preferably be received first and the outward remittance to the overseas supplier will be made subsequently. Alternatively, an irrevocable Letter of Credit (LC) should be opened by the buyer in favour of the merchant. On the strength of such LC the merchant in turn may open a LC in favour of the overseas supplier. The terms of payment under both the LCs should be such that payment for import LC is required to be made after receipt of payment under export LC. The export LC should be issued in the name of original merchanting trader in India and import LC should be favouring the original supplier. In case export leg payment is received in advance, AD banks need not insist on opening of export LC.
  7. In case advance against the export leg is received by the merchanting trader, the advance payment may be held in a separate deposit / current account in foreign currency or Indian Rupees. The amount required for import leg should be earmarked till the payment of import and should not be made available to the merchanting trader for use, other than for import payment or short-term deployment of fund limited to the import payable, with the same AD for the intervening period.
  8. Advance for import leg should be paid against bank guarantee from an international bank of repute.
  9. Trade instrument like Back to Back LC and Transferable LC will be used more actively by Merchant Traders.

Gray Area / Open to Interpretation

  1. Transaction should result in reasonable profit.
  2. Defining words like Genuine Trader, Financial Intermediaries, Reasonable Profit & Original Suppliers.
  3. Capability of Merchanting Trader to perform the obligation under the order.


  1. RBI Circular: Merchanting Trade Transactions – Revised GuidelinesDated : 28-03-2014
  2. RBI Circular: Merchanting Trade Transactions: Dated : 17-01-2014
  3. RBI Master Direction –  Import of Goods and Services: Dated: 31-03-2016
  4. Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers: Dated: 19-09-2016
  5. Report of the Technical Committee on Services / Facilities to Exporters: Refer Chapter 4:  Dated: 29-04-2013
  6. Old Article: Suppliers’ Credit or Buyers’ Credit is not available for Merchanting Trade
  7. RBI Circular : Merchanting Trade to Nepal and Bhutan: Dated: 30-042015

Permitted Methods of Import Payment

Payment_methodsThe trigger for this topic is a question that a reader asked:

Since Foreign Trade Policy allows imports in INR (Indian Rupees) also, what are the regulations related to buyer’s credit in respect of an import invoice which is in INR ?

Above question is more of an academic question as INR denominated import transaction are very limited but it will help in throwing light on concept of permitted methods of import payment.


RBI Circular on Import of Goods and Services talks about permitted methods of payment of import, which is further defined in Notification No.FEMA14/2000-RB dated 3rd May 2000. They are:

Group Permitted methods
(i) All countries other than those listed under (ii) below (a) Payment in rupees to the account of a resident of any country in this Group
(b) Payment in any permitted currency*
(ii) Member countries in the Asian Clearing Union (expect Nepal) (a) Payment for all eligible current transactions by debit to the ACU (Asian Clearing Union) dollar account in India of a bank of the participating country in which is resident or by credit to the ACU dollar account of the authorised dealer maintained with the correspondent bank in the other participating country.
(b) Payment in any permitted currency in other cases

* The expression ‘permitted currency’ is used in the Manual to indicate a foreign currency which is freely convertible i.e. a currency which is permitted by the rules and regulations of the country concerned to be converted into major reserve currencies like U.S. Dollar, Pound Sterling and for which a fairly active market exists for dealings against the major currencies.

Answer to Question

RBI has allowed making import payment in INR but Buyers Credit as a concept is to raise funds from overseas market in the currency of payment resulting in interest arbitrage and hence cost saving.


  • Transaction Value of $ 100000: Approx 10% (including overseas bank interest cost, lou charges, forward booking and arrangement fee)
  • Transaction Value of INR 6200000 (Approx INR equivalent) : INR Cash Credit Interest: Approx 13.50%
  • Resulting cost saving of 3.5% (approx)

If the import is in INR, funding arranged in INR will be at same cost and thus no cost saving. One more question which arise is, whether buyers credit in cross currency  is allowed for such transaction. According to me it is a gray area.


  1. Notification No.FEMA14/2000-RB dated 3rd May 2000
  2. Exchange Control Manual: Permitted Currencies and Method of payment
  3. Buyers Credit Cost Calculation Sheet

Buyers Credit Tenure Extended to 5 years for Import of Capital Goods

Trade Credit for Import into India

5 YearsIn earlier article “Trade Credit Extended Upto 5 Years for Infrastructure Firms” we had seen that RBI had allowed buyers credit to infrastructure firms till 5 years subject to conditions.

RBI has reviewed the policy as below

  • Tenure of Trade Credit (buyers credit / suppliers credit) for import of capital goods has been extended from 3 years to 5 years for companies in  all sectors.
  • Minimum tenure of buyers credit has been relaxed from 15 months to 6 Months. Which means trade credit can be taken and rollover in multiple of 6 months or more
  • But banks cannot issue Letter of Credit / Letter of Undertaking /Comfort beyond 3 years (from the date of shipment) 
  • Amended Trade Credit Policy will come to force with immediate effect
  • Policy cover both existing buyers credit as well as fresh buyers credit against capital goods. (As per RBI Master Circular : External Commercial Borrowing (ECB) and Trade Credit.


  1. Further clarity is required from RBI on “Banks cannot issue lou for period beyond 3 years“. As it seems that only large corporates will be able to take benefit of this extended tenure as overseas bank will not be keen on providing funds to SME without LOU / LOC issued by Indian Banks.
  2. Overseas Branches of Indian Bank and Foreign Banks will have to come out with a structure to take benefit of the extended tenure without LC /Letter of Undertaking / Letter of Comfort.


  1. RBI Circular :  Trade Credit for Import India: Dated: 24 September 2013
  2. Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers: Dated: 19-09-2016
  3. Revised Guidelines: Trade Credit for Import into IndiaDated: 11-09-2012
  4. Buyers Credit Cost Calculation Sheet

Buyers Credit on Import of Second Hand Machinery

The trigger for this topic is a question that a reader asked:

Question : What are the RBI guidelines for availing Letter of credit facility and/or buyers credit facility for the import of second hand capital goods? Is it possible for a company to avail these facilities for second hand machinery?

RBI Master Direction: “Import of Goods and Services” & “External Commercial Borrowing and Trade Credit” are silent on the above subject.

Reference is found in Exchange Control Manual in relation to second hand machinery, extract of the same is given below:

In terms of Export-Import Policy presently in force, second hand capital goods are allowed to be imported freely subject to certain conditions. Such imports sometimes involve payment against delivery of second hand plant and machinery abroad on ‘as is where is basis’. In the absence of shipping documents, it will not be possible for authorised dealers to open letters of credit or make remittances against such imports. Applications for opening of Letters of Credit or for making remittances in regard to imports with such payment conditions should, therefore, be referred to Reserve Bank for prior approval with full details

Based on the understanding of above, buyers credit can be taken on the second hand goods without RBI Approval subject

  1. Machine delivery is not taken abroad on ‘as is where is basis’
  2. Import of the given category of second hand machinery is allowed in current Foreign Trade Policy.


Relationship Management Application (RMA) and Buyers Credit

Using Swift Codes Banks and Financial Institutions send and receive swift messages. But there must have been times where you might have come across your bankers coming back to you stating that they do not have swift key arrangement with buyers credit bank. Thus they will not be able to send Letter of Undertaking (LOU) / Letter of Comfort (LOC) authenticated swift message (MT799) to buyers credit bank. Below article gives a brief about why situation arise.

Relationship Management Application (RMA)

RMA  is a system, where a sender bank and receiver bank has to authorize each other to send swift messages and also what type of swift message they can send each other. Thus making the communication system more secure.

So, in cases where banks do not have an RMA with another bank, LOU issuing bank either has to set up an RMA with Buyers Credit Bank or has to route the swift message through a bank / branch with whom both banks have an RMA. Also note, there is an additional cost which correspondent bank will charges for Relaying or Forwarding the swift message. Normally this would cost between $50 – $100 and also result in consumption of additional time to complete transaction.

RMA Example

LOU Issuing Bank ———MT799 (LOU) ———Buyers Credit Bank

Non RMA Example

LOU Issuing Bank—–MT799 (LOU) —– XYZ Bank (Relay / Forward)——–Buyers Credit Bank


RMA between institutions from Importers Perspective

  1. As a customer there is nothing much one can do than requesting his bank to get RMA setup with another bank where they do not have one.
  2. Bank would be interested in getting RMA done with another bank based on expected volume and other business which it can do.
  3. Both Banks should agree to get RMA done.
  4. Depending upon the backend process of both banks, it might take from one day to few weeks in getting the RMA setup between banks.

Revised Forms (15CA, 15CB) and Rules for payment to Non Resident

taxRefer Revised Article:

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

Post below article CBDT has revised rules for form 15CA and Form 15CB. Please refer above article for further detail.

In earlier article about Withholding Tax (WHT), we have discussed about the process and applicability of Form 15CA and 15CB. On 5th August, 2013 CBDT revised the guidelines on Form 15CA and Form 15CB and further amended on 02nd September 2013. Below article gives a summary of changes made.

  • Revised Forms and Amendments shall come into force on the 1st October, 2013.
  • Applicable to : Any payment including any interest or salary or any other sum chargeable to tax, to non-resident, not being a company, or to a foreign company

Changes in New Form 15CA

Part A of Form 15 CA (Form 15CB not required)
Particulars Changes
Who Shall Fill It To be filled up if the remittance to non- resident or to a foreign company does not exceed Rs. 50000 per transaction and aggregate of such payments made during the financial year does not exceed Rs. 2,50,000
What information has to be filled 1. Particulars of Remitter, Remittee, Remittance made and TDS
2. Mandatory to furnish PAN of Remitter, if tax is deducted then TAN of the Remitter also needs to be provided
3. Form prescribes mandatory application of provisions of Section 206AA, if remittance is chargeable to tax and PAN of remittee is not available.
4. E-mail and Phone Number of remittee to be furnished, if available
Part B of Form 15 CA ***(Form 15CB required)
Who Shall Fill It To be filled up for remittances other those specified in Part A (If the Remittance is chargeable to tax and exceed Rs. 50000 per transaction and aggregate of such payments made during the financial year exceeds Rs. 2,50,000)
What information has to be filled 1. Forms prescribe mandatory application of provisions of Section 206AA, if PAN of remittee is not available;
2. Other Details
Secion A:
Details of Remitter, Remittee and Accountant to be specified in this section
Secion B:
Particulars of Remittance and TDS (as per certificate of accountant), namely:
a. Remittance details
b. Taxability under the Income Tax Act
c. Taxability under the relevant DTAA. Details of TRC (Tax Residency Certificate)
d. TDS details

*** Part B of Form 15CA is to be filled after obtaining either of the below

  • a certificate in form no. 15cb from an accountant (chartered accountant) or
  • a certificate from the Assessing Officer (AO) under Sec 197 or
  • an order from Assessing Officer under sub-sec (2) or sub-section (3) of sec 195

Changes in New Form 15CB(PDF) (Excel Format of  Revised Form 15CB)

Additional details to be provided in new Form 15CB are

  • Taxability under the Income-tax Act without considering the relief of the DTAA
  • If income is chargeable to tax in India and relief is claimed under the DTAA, whether TRC has been obtained from the recipient?
  • If remittance is on account of capital gains details of amount of short-term, long-term capital gains and the basis of arriving at the taxable income.

Revised Process for filing Form 15CA (atleast till the time NSDL site is update)

1. Login on the e-filing portal at the following link  –

2.  Visit the link – e-file → Prepare and Submit Online Form(Other than ITR) → Select Form 15CA and Assessment year.

Form 15CA & Form 15CB not required for Import Payments

Few banks have started asking for Form 15CA and Form 15CB sighting RBI circular of 2007 “Remittances to non-residents – Deduction of tax at source

CBDT Circular clearly states ” Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or salary or any other sum chargeable to tax under the provision of the Act, shall furnish the following information” (in form 15CA and Form 15CB)

Payments made against Import Purchases constitutes Business Income of the Overseas Supplier and is taxable in India only if it is attributable to a Business connection/Permanent Establishment in India as per Section 9(1)(i) and respective Double Tax Avoidance Agreement. Thus, in absence of any income chargeable to tax in India there cannot be any application of Section 195 & form 15CA and Form 15CB is not applicable for remittances towards import payments.

Few banks are taking a declaration from Importers in their forwarding letter that given Import payment amount is non chargeable to tax in India and carrying out transaction without Form 15CA and Form 15CB.

Specified List :  

Explanation 2: For the removal of doubts, it is hereby clarified that for payments of the nature specified in column (3) of the specified list below, no information is required to be furnished under sub-rule (1).

Thus no form 15CA and Form 15CB in applicable for below cases.

Sl.No. Purpose code as per RBI Nature of payment
(1) (2) (3)
1 S0001 Indian investment abroad -in equity capital (shares)
2 S0002 Indian investment abroad -in debt securities
3 S0003 Indian investment abroad -in branches and wholly owned subsidiaries
4 S0004 Indian investment abroad -in subsidiaries and associates
5 S0005 Indian investment abroad -in real estate
6 S0011 Loans extended to Non-Residents
7 S0202 Payment- for operating expenses of Indian shipping companies operating abroad.
8 S0208 Operating expenses of Indian Airlines companies operating abroad
9 S0212 Booking of passages abroad -Airlines companies
10 S0301 Remittance towards business travel.
11 S0302 Travel under basic travel quota (BTQ)
12 S0303 Travel for pilgrimage
13 S0304 Travel for medical treatment
14 S0305 Travel for education (including fees, hostel expenses etc.)
15 S0401 Postal services
16 S0501 Construction of projects abroad by Indian companies including import of goods at project site
17 S0602 Freight insurance – relating to import and export of goods
18 S1011 Payments for maintenance of offices abroad
19 S1201 Maintenance of Indian embassies abroad
20 S1 202 Remittances by foreign embassies in India
21 S1301 Remittance by non-residents towards family maintenance and-savings
22 S1302 Remittance towards personal gifts and donations
23 S1303 Remittance towards donations to religious and charitable institutions abroad
24 S1304 Remittance towards grants and donations to other Governments and charitable institutions established by the Governments
25 S1305 Contributions or donations by the Government to international institutions
26 S1306 Remittance towards payment or refund of taxes.
27 S1501 Refunds or rebates or reduction in invoice value on account of exports
28 S1503 Payments by residents for international bidding


Buyers Credit for Co Operative Bank Customers

Co Operative BankImporters 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


Period of Buyers Credit Linked to Operating Cycle

Operating CycleIn the circular issued on 11th July 2013, RBI has made following two changes in relation to Trade Credit transactions:

  1. Period of Trade Credit (Buyers Credit / Suppliers Credit) should be linked to the operating cycle and trade transaction. 
  2. All in cost ceiling of 6 Month L+ 350 bps will continue to be applicable till September 30, 2013 and is subject to review thereafter.

This circular has removed the ambiguity on tenure for which buyers credit (Trade Credit) can be availed. Earlier RBI circular was open ended stating tenure allowed for raw material import was upto 360 days and decision was left on the banks (AD) to decide on clientwise tenure based on their internal criteria.

Above changes in the circular will have impact on…

  • Buyers Credit rollover transaction will not be possible for tenure more than mentioned in sanction limits.
  • Those clients who were using buyers credit for arbitrage purpose earlier, this window has closed.


Change in LIBOR Tenures and Impact on Trade Finance

Libor changesLIBOR scandal was discussed in the earlier articles like Pushing the reset button on LIBOR – Speech by Martin Wheatley and Impact of Libor Review on Trade Finance in India .

Effective from 01 June 2013, two major change has been implemented.

  1. Henceforth LIBOR rates will be available for below tenures only:
    1. LIBOR – overnight
    2. LIBOR – 1 week
    3. LIBOR – 1 month
    4. LIBOR – 2 months
    5. LIBOR – 3 months
    6. LIBOR – 6 months
    7. LIBOR – 12 months
  2. Libor rates for the below currencieshas been discontinued.
    1. NZD (New Zealand Dollar)
    2. DKK (Danish Krone)
    3. SEK (Swedish Krona)
    4. AUD (Australian Dollar)
    5. CAD (Canadian Dollar)

3. Libor rates is now only available for below currencies

Impact on Buyers Credit & all Trade Finance Transactions

  1. If importer is looking for buyers credit for tenures for which Libor rates are not available, buyers credit providing banks has started using higher tenure LIBOR rates  & thus resulting in increase in cost for importers. For Example: If Importer is looking for buyers credit for tenure of say 120 days or 150 days. Earlier buyers credit was provided at 4 Month Libor or 5 Month Libor respectively. But since yesterday banks have started quoting for such transactions at 6 Months Libor only. Same way if importer is looking for  any tenure above 6 Months,  banks have started quoting rates at 12 Month Libor.
  2. Currencies for which Libor rates are not available, banks will have to start using alternate benchmark for providing trade finance. For example, as of now buyers credit would stop for these currencies transaction till the time banks find an alternate benchmark. As this currencies are used  limitedly by Indian importers it will limited impact.

Note: The above changes is yet not been made to Euribor. Thus will not impact EURO Transactions.

Reference Article

Swift Code & Messages Used in Buyers Credit Transaction

Latest Article:

What is SWIFT Code ?


SWIFT code (also known as ISO 9362, SWIFT-BIC, BIC code, SWIFT ID or SWIFT code) is a standard format of Business Identifier Codes approved by the International Organization for Standardization (ISO). It is a unique identification code for both financial and non-financial institutions. 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 (Society for Worldwide Interbank Financial Telecommunicationdoes not facilitate funds transfer; rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features.

The SWIFT code is of 8 or 11 characters, made up of: 

For Example: HDFC IN BB AHM

  1. The first four characters represent the Bank code, for example HDFC (HDFC Bank)
  2. The next two characters represent the ISO Country code, for example IN (India)
  3. The next two characters are the Location code, for example BB (Mumbai)
  4. Optionally a three character branch code can be added at the end of the address.  For example HDFCINBBCCAHM might be the Ahmedabad branch. These codes are primarily used for internal routing purposes within the bank, as the branches themselves do not have direct connection. Usage is often more common in some countries. 

Where an 8-digit code is given, it may be assumed that it refers to the primary office.

Type of Swift Message

SWIFT messages are identified in a consistent manner. They all start with the literal “MT” which denotes Message Type. A 3-digit number then follows this. The first digit represents the Category. A category denotes messages grouped together because they all relate to particular financial instruments or services. The full list is as follows:

MT0nn System Messages
MT1nn Customer Payments
MT2nn Financial Institution Transfers
MT3nn FX, Money Market & Derivatives
MT4nn Collections and cash letters
MT5nn Securities Markets
MT6nn Precious Metals & Syndications
MT7nn Documentary Credits & Guarantees
MT8nn Travellers Cheques
MT9nn Cash Management & Customer Status

The last digit is the Type and denotes the individual message. There are several hundred message types across the categories in total.

A special subset of Messages is known as the Common Group because the last two digits represent the same message in each category. For example:

MTn99 Free format
MT299 Free format relating to transfers
MT599 Free format relating to securities
MT999 General free format

Types of Swift Message used in Buyers Credit.

  1. MT799 :  Authenticated Free Format Message type.  
    1. LOU Issuing Bank: For sending letter of undertaking / letter for comfort for availing buyers credit
    2. Buyers Credit Bank: For confirmation of funding along with repayment details
  2. MT202: Requests the movement of funds between financial institutions
    1. Buyers Credit Bank: At the time of payment of buyers credit to LOU issuing Bank
    2. LOU Bank: At the time of repayment of buyers credit of principal and interest
  3. MT999 : Unauthenticated Free Format Message. Cases where there is no direct swift key arrangement, banks use this free format for basic communication.

How to Search a Swift Code of a Bank

Using the below link, one can find swift code for a particular financial institution. Filling up details of two fields i.e. Institution Name and Country, will provide the desired Swift Code.

Swift Code Search

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Tax Residency Certificate Not Required in Prescribed Format

CertificateIn 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. Below article gives further details on the same.

Sub-section (4) of 90 and 90A provides that treaty benefit will not be available to any Non Resident unless he furnishes TRC from the Government of his country of residence containing such particulars as may be prescribed. The Finance Bill, 2013 had proposed to insert sub-section (5) in sections 90 and 90A to provide that TRC shall be a necessary but not a sufficient condition for claiming any relief under a DTAA.

The Finance Minister had subsequently clarified, by way of Press Release dated 1st March 2013, that the TRC issued by the Government of a foreign country would be accepted as evidence of tax residency and the tax authorities cannot go behind the TRC to question the residential status.

In order to incorporate the said clarification in the statute, sub-section (4) of sections 90 and 90A is proposed to be amended to substitute the words “a certificate containing such particulars as may be prescribed of his being a resident” with the words “a certificate of his being a resident”. Therefore, a certificate issued by the Government of a foreign country would constitute proof of tax residency, without any further conditions regarding furnishing of prescribed particulars therein.

Also, sub-section (5) of sections 90 and 90A which provided that TRC shall be a necessary but not a sufficient condition for claiming any relief under a DTAA is proposed to be substituted to provide that the assessee referred to under sub-section (4) of sections 90 and 90A shall also provide such other documents and information, as may be prescribed.


  1. Amendments to Finance Bill 2013
  2. Sec 90 of Income Tax Act 1961
  3. Sec 90 A of Income Tax Act 1961
  4. Sec 90 (4) of Income Tax Act 1961
  5. Finance Bill, 2012 – Direct Taxes
  6. CBDT Circular on “Certificate of Tax  : Dated 17-09-2012
  7. India Mauritius Double Taxation Avoidance Agreement (DTAA)
  8. Country-wise Double Taxation Summary Chart
  9. Countrywise DDTA Agreements Copy
  10. Ministry of Finance Notification on 194LC (5% WHT – Not Applicable to Buyers Credit)Dated: 21-09-2012

Surcharge and Education Cess on Withholding Tax

taxEarlier articles have discussed about applicability of Withholding Tax on Interest payment in case of Buyers Credit and Suppliers Credit. Readers have come back asking query whether Surcharge and Education Cess is applicable or not on withholding tax amount. Below article answers these queries.

Is Surcharge and Education Cess Applicable on WHT ?

Yes. The basic gross rate of withholding tax on a foreign currency loan, availed by an Indian holding company from non-residents is 20% which, with applicable surcharge and education cess.

Incase of DTAA limits Surcharge and Education Cess

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.

Incase where DTAA is Silent on Surcharge and Education Cess

Incase where double taxation avoidance agreement does not say anything about inclusion of surcharge and education cess for the purpose of deduction of tax at source, there is an apparent conflict between the Income-Tax Act and DTAA between the two sovereign countries.  Thus one needs to refer Sec 90(2) of Income-Tax Act

“Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent that are more beneficial to that assessee.”

In view of the above, in respect of a taxpayer to whom the double taxation avoidance agreement applies, the provisions of the Indian Income-tax Act shall apply to the extent they are more beneficial to that taxpayer. In other words, if the provisions of DTAA are more beneficial to the taxpayer, then the provisions of DTAA would prevail over the Indian Income-tax Act. Incase where DTAA is silent about the surcharge and education cess for the purpose of deduction of tax at source,  taxpayer can take advantage of that provision in the DTAA for deduction of tax.


Transfer of Limits from One Bank to Another : Buyers Credit Rollover Process

transferBuyers 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 needed for smooth transition. For understanding let assume,

  • X Bank: Existing Bank of Importer
  • Y Bank: New Bank of Importer where limits are shifted
  • A Bank: Existing Overseas Bank from where buyers credit is arranged
  • B Bank: New Overseas Bank from where the rollover buyers credit will be arranged.


  1. Importer arranges for NOC from X Bank in favour of Y  Bank to arrange buyers credit.
  2. Importer arranges quote from overseas bank (other than existing overseas bank).
  3. Y Bank issues lou to B Bank against the existing import transaction
  4. B Bank transfer funds to the Nostro Account of Y Bank
  5. Y Bank transfer funds  to the Nostro Account of X Bank
  6. X Bank transfer funds to the Nostro Account of A Bank, thus completing the whole transaction.

Documents to be submitted by Importer to Y Bank

  1. ECB Form for Extension
  2. Photocopy of the Import document and Bill of Entry
  3. Fresh Offer Letter, LOU Format & Swift Address
  4. NOC from X Bank


In the above example it is assumed that buyers credit rollover is taken from bank other than existing buyers credit providing overseas bank to avoid complications. From Importers perspective its an ideal position. Reason: Incase of rollover from the same bank there is no transfer of funds but only extension of tenure. As buyers credit is taken against LOU issued by X Bank whereas because of takeover rollover LOU needs to be sent by Y bank, there is issue of knocking of transaction at A Bank level.  Also issue will arise on how existing liability of X bank against A bank to be removed. 

Buyers Credit on Import of Precious and Semi Precious Stone

semiprecious-stones1In earlier articles, we had seen that, banks are permitted by RBI to approve Suppliers’ and Buyers’ Credit (Trade Credit) including the usance period of Letters of Credit opened for  Import of gold in any form including jewelery made of gold/ precious metal and or studded with diamonds /semi precious /precious stone not exceeding 90 days from the date of shipment.

RBI has further clarified with circular dated 20-02-2013, that Suppliers’ and Buyers’ Credit (Trade Credit) including the usance period of Letters of Credit opened for import of even precious stones and semi-precious stones should not exceed 90 days from the date of shipment. The revised directions will come into force with immediate effect.

Reasons for the above step taken by RBI

  • Reduce Current Account Deficit.
  • Discouraging importers using the above products solely for arbitrage.


  1. RBI Circular: Import of Precious Stones and Semi Precious Stones – RBI Clarification: Dated: 20-02-2013
  2. RBI Circular : Fema 1999 – Import of Gold in any form including Jewellery – ClarificationDated: 24-09-2012
  3. RBI Master Circular on External Commercial Borrowing (ECB) and Trade Credit: Dated: 01-07-2014
  4. RBI Master Circular on  Import of Goods and Services: Dated: 01-07-2014
  5. RBI Circular for Buyers Credit and Suppliers related to of import of Rough, Cut and Polished diamondDated: 06-05-2011
  6. RBI Circular for Import of Platinum, Palladium, rhodium, and SilverDated: 28-01-2008

Meaning, Process, Procedure, RBI Regulation & More

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