Buyer's Credit (SBLC)

Buyer's credit is a form financing which is availed by importer's to finance their import transactions.Financing is done by financial institutions outside India at LIBOR linked rates.

Buyer's credit is provided to importer based on SBLC (Standby Letter of Credit).Importer's bank issues SBLC on behalf of importer which serves as a guarantee to the overseas bank.Based on SBLC, overseas bank fund the nostro A/C of the importer's bank.Importer gets the fund at LIBOR linked rates from financial institutions outside India (including Indian bank's offshore branches).As per RBI guidelines, importers can avail buyers's credit (SBLC) on their imports for a period equal to their operating cycle.Thus Buyer's credit (SBLC) provide a medium for Indian importers to benefit from lower cost LIBOR linked funds.

Advantages:

1) Importers can benefit from cheap LIBOR linked funds.

2) Can get credit for raw material upto their operating cycle.

3) Supplier's get paid on sight and importer's bargaining power rises.

4) Off balance sheet financing.

Key Features Of Buyer's Credit (SBLC):

Eligibilty: Any importer of India having import transactions. 

Documents required : Import transaction details, SBLC, & loan agreement to be executed with the funding bank.

Period : For non capital goods up to 1 year from the date of shipment or the operating cycle whichever is less. 

Funding Amount : Minimum: NA; Maximum: USD 20 million per tansaction