Supplier’s Credit is a financing arrangement under which an exporter or overseas bank extends credit to the importer for his imports. There would be an L/c issued by the importer’s bank, and a specific bank with whom a prior arrangement has been made, undertakes to pay to the supplier on presentation of L/c compliant terms. The exporter gets the payment at sight basis and importer needs to repay to overseas bank only at the end of the Usance period.
In India, supplier’s credits for imports up to USD 20 million per import transaction is permissible under the current Foreign Trade Policy of the DGFT with a maturity period up to one year (from the date of shipment) for current a/c imports and upto 3 years for capital goods imported into India.
Did you know that – “Supplier’s Credit is only possible when there is an L/c involved in an import transaction. Hence, unlike Buyer’s Credit, for DA transactions Supplier’s Credit cannot be availed”!!!