In a scenario where the import order is executed under D.A. or D.P. (short form for Documents under Acceptance – D.A. and Documents Against Payments – D.P.), the importer has an option to get the documents released at the time of Import by availing Buyers Credit.
In case of D.A. the Buyers Credit option can be availed on the due date at the time of making an actual payments by the importer to the exporter. In case of D.P. the Buyers Credit option can be availed at the time of making payments to the exporter. All the payments are made by marking a lien on the non fund based limits sanctioned in the account of the Importer by his working capital bank. The LOU is sent by Indian Bank to the Overseas financing Bank on behalf of the client, Once the LOU is received by the overseas bank, the funding follows.
The maximum tenor approved by RBI under the ECB Guidelines for availing Buyers Credit is 360 Days from the date of Shipment (in case imports are for Raw Materials) and Maximum upto 3 Years from the Date of shipment in case the imports are for Capital Goods.