Buyer's Credit

[KOHINOOR MITRA]

Dear All,

Could you kindly explain the entire process/meaning of Buyer's Credit ?

What is advantageous for a buyer wanting to buy foreign goods through say a letter of Credit  seeking a buyer's Credit  route? Does it ultimately help in a volatile foreign exchange scenario ?

I would be much obliged if you kindly reply in detail with the procedure.

Regards

Kohinoor  Mitra

AI Summary

Buyer's credit financing extends import payment terms and permits offshore funding subject to external commercial borrowing limits.
Buyer's Credit is a short-term overseas loan arranged for importers where an overseas bank funds the Indian bank or exporter, the importer records the borrowing as a loan, and repayment is made to the overseas lender via the Indian bank. The process requires an overseas offer, issuance of a Letter of Undertaking by the importer's bank, disbursement to the nostro or exporter, and recovery of principal and interest from the importer. Costs include overseas interest, issuance fees for the undertaking, arrangement and hedging charges, intermediary bank fees and withholding tax. Transactions are subject to external commercial borrowing regulatory limits and all-in-cost ceilings.