It is a facility of arranging funds for Importers using LC. This credit facility is extended to Importers for imports into India by Foreign Bank or Indian Bank Branches in Overseas based on LC issued by Importer’s Indian Bank. Letter of Credit issued by Indian Banks under Usance Bills on behalf of their Importers are discounted by Indian Bank Branches situated Overseas or Foreign Banks.
Procedure of Supplier’s Credit:
- Before opening LC, Importer share basic details of trade with the Arranger to get quote for Supplier’s Credit.
- The Arranger identifies best Bank with lowest quotes from Foreign Banks and from Indian Banks’ Overseas branches for Importer Acceptance.
- Upon acceptance of rate by Importer, the Arranger notifies specific clauses to be incorporate in the LC.
- Importer request their LC opening Bank to issue LC.
- LC issuing Bank opens and transmits the LC via SFMS to Off-shore Bank (arranged by the Arranger) which in turn sends LC to Beneficiary (ie., Exporter) Bank via SFMS.
- Exporter ships the goods to the Importer on intimation that the LC has been received by their Bank.
- Exporter lodges the documents evidencing the shipment of goods and all documents required as mentioned in the LC to their Bank which forwards them to LC issuing Bank via Off-shore Bank.
- Payment is made to the Exporter by disbursing Supplier’s Credit once acceptance from LC issuing Bank is received.
- On the due date, the principal plus interest recovered from Importer remitted by the LC issuing Bank to the Off-shore Bank.