• letter-of-credit

    Letter of Credit (L/c)

    Also, known as Documentary Credit, an L/c is an undertaking by the buyer’s bank to pay a specific amount of money to the seller on due date, subject to compliance of all terms and conditions of the L/c (like submission of documents, adherence to time lines, etc).

    There are various parties to an L/c. For e.g. Applicant, Issuing Bank, Beneficiary, Advising Bank, Negotiating Bank, Confirming Bank etc.

    There are various types of L/cs. For e.g. Sight & Usance L/c, Confirmed L/c, Transferrable L/c, Back-to-back L/c, Red Clause L/c etc.

    Did you know that – “Just the fact that the applicant has accepted the discrepancies, does not mandate the L/C Issuing bank to honour the presentation and make payment of the L/C “!!!

  • EXPORT FINANCE

    What is Export Credit / Finance?
    Export credit is the finance extended to the exporters, either in INR or in Foreign currency. It is bifurcated into
    (i) Pre-shipment finance and (ii) Post-shipment Finance.

    History of Export Credit
    The Reserve Bank of India first introduced the export credit scheme of Export Financing in 1967. The scheme is intended to make short-term working capital finance available to exporters at internationally comparable interest rates.

    We will keep discussing more about this product in our subsequent posts. Keep reading.. OR

    click on “QUERY FORM” & submit your query.

    We shall get back to you at the earliest..

  • What is Factoring

    Factoring is an arrangement between the bank / financial institution (who is called the Factor) and a company, wherein the Factor buys the book debts of a company and pays cash to the company against their receivables. The Factor then collects the amounts from the debtors of the company. 

     

    There is a factoring arrangement, wherein the client makes a sale, delivers the product or service and raises an invoice. The factor buys the right to collect on that invoice by agreeing to pay the client the invoice’s face value at a discount. The factor normally pays about 75 percent to 80 percent of the face value immediately and pays the balance when they receive the amount from the Debtor.

     

    Because a Factor extends credit not to their own clients but to their clients’ Debtors, they are more concerned about the Debtors’ ability to pay on due date, rather than the client’s financial status. There are 2 types of Factoring – “With Recourse Factoring” & “Without Recourse Factoring”. Factoring, particularly “without recourse” is not a loan and hence it does not create any liability on the company’s balance sheet. It is the sale of an asset by the company whereby they convert it into Cash.

     

    We will keep discussing more about this product in our subsequent posts. Keep reading..

     

  • What is UCP 600

    UCP 600 is the latest revision of the Uniform Customs and Practices that govern the operation of letters of credit. UCP 600 came into effect on 01 July 2007.

    The earlier version was UCP 500, which had 49 articles, while UCP 600 has 39 articles.

    The 39 articles of UCP 600 are a comprehensive and practical working aid to bankers, lawyers, importers, and exporters, transport executives, educators, and everyone involved in letter of credit transactions worldwide.

    In simple terms, anyone who needs to deal with a Letter of Credit while doing a Buy / Sell transaction (whether within country OR out of country) would be guided by the articles of UCP 600.

    We shall study about each of these articles in further detail going forward..

     

  • Who can benefit from this Blog..

    I have started this Blog for the benefit of all the following people :

    • Fresh graduates / post graduates who wish to make their career in the Banking Industry
    • Junior executives in the Public / Private / Foreign banks, who wish to update their knowledge in Trade Finance and Banking for better performance in their roles
    • Export-Import professionals / Businessmen
    • Students of International Business / International Finance who wish to study the subject in greater detail
  • What topics would be covered under this Blog..

    You can feel free to ask me any queries on topics like :

    • FEMA guidelines and Basics of Trade
    • Letters of Credit, Imports, UCP 600, ISBP
    • Exports and Export Finance – Pre and Post Shipment
    • Bill Discounting, Invoice Discounting
    • Incoterms 2010
    • Bank Guarantees, URDG 758
    • Buyers Credit, Suppliers Credit, External Commercial Borrowings
    • Structured Trade Finance Products – like Factoring, Forfaiting, Avalization
    • Bills on Collection, URC 522
    • Discrepancy management and documentation under Letters of Credit
    • Standby Letter of Credit, ISP 98
    • EEFC accounts
    • Any other related topics pertaining to International Trade
  • Liberalised Remittance Scheme (LRS)

    It has been decided vide RBI’s  A.P.(DIR Series) Circular No. 138 dated June 3, 2014, to increase the limit of Liberalised Remittance Scheme from USD 75000 to USD 125,000 per financial year (April-March)

    Accordingly, AD Category –I banks have been allowed to remit up to USD 125,000 per financial year, under the Scheme, for any permitted current or capital account transaction or a combination of both.

    Further, it is clarified that the Scheme can now be used for acquisition of immovable property outside India also.

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