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Former Member
May 15, 2010 at 07:07 AM

buyers credit

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As per LC terms when the payment is due, bank gives us two options.

1. Buyeru2019s credit.

Buyeru2019s credit is loan from foreign bank against guarantee by Indian bank. Whenever payment is due our

Indian bank can arrange a buyers credit through some foreign bank who will pay the amount to vendor

On our behalf. For example: If we have issued LC worth GBP 100,000 and as per payment terms 25%

is due on site (GBP 25,000), bank can arrange for buyers credit through foreign bank like HSBC or JPMC

Here the foreign bank will charge their interest say 3.5% on amount financed and India bank will charge

Commission to arrange for buyers credit.

In buyers credit terms of payment will be defined along with the amount payable in foreign currency on

due date. India bank will charge commission on amount arranged for buyers credit. For example 1.25%

on amount payable to foreign bank on due date with interest.

We can also take a forward cover for exchange fluctuation where we have to pay premium to our Indian

for the period till the payment of buyers credit is made.

How to map this in sap

Regards

Sree