Buyer’s Credit Tenor

1. Buyer’s Credit Tenor

2. Bill of Lading is discussed in a detailed manner in the following link: Bill of Lading - An Overview The Buyers Credit Period is linked to B/L Date. In the following slides we will see the tenures that are allowed for different sectors and for what spans. Concept of B/L Date

3. Payment prior to B/L Date considered to be ADVANCE PAYMENT 360th day from B/L Date – For Non Capital Goods 90th day from B/L Date – For Bullion & Diamonds A B B/L Date or AWB Date 3 years from B/L Date – For Capital Goods Point A = B/L Date Point B = Maximum Allowed Period for buyers credit

4. In case any payment is made before the B/L date, then such payment is considered to be advance payment, as very well known In such cases the buyers credit cannot be availed for such advance amounts Advance Payments Example 1.1 Let us say XYZ Co. had received an overseas invoice of US$ 250,000 and supplier stipulated 30% to be paid prior to shipping i.e. US$ 75,000. So, this payment would go prior to B/L date and hence it is advance. The buyers credit can be taken for the rest of the amount. i.e. 250000 - 75000 US$ 175,000

5. Example 1.2 XYZ Co. imported non capital goods from Germany. It has to make payment of US $ 100,000. The B/L date is January 1, 2012 Hence maximum allowed period would be 26/12/2012 Excel calculation: For Non-Capital Goods the maximum allowed period is 360 days from the date of B/L. One can avail rollover until this period is exhausted 26/12/2012

6. Now in Example 1.2, the BL date is 01/01/2012. The Company availed the Offer Letterand sent the Letter of Undertaking/Comfort on 15/01/2012 requesting a buyers credit of tenor 180 days (as sanctioned by LoU bank) The interest advise copy (sent by financing bank) would then give the maturity date as: 13/07/2012 {can be calculated on excel, as earlier} On the Maturity date i.e. 13/07/2012 the XYZ Co. can avail a rollover of the same transaction. If availing the finance from earlier financing bank, then only needs to pay interest part and send the Letter of Comfort/undertaking requesting rollover If availing the finance from other financing bank, the principle + interest must be paid to earlier bank Rollover • The rollover could be taken upto 26/12/2012 (maximum allowed period), so the rollover period would be 166 days. Hence, XYZ Co can take quote for maximum that many days only

7. For Capital Goods the maximum allowed period is 3 years from the date of B/L. One can avail rollover until this period is exhausted as discussed earlier for non capital goods For Bullion and Diamond transactions, the rollovers are not allowed. The maximum period that is allowed is 90 days from B/L and subject to conditions stipulated by the bank

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