11 June 2010
Buyer's credit is the credit availed by an Importer (Buyer) from overseas Lenders i.e. Banks and Financial Institutions for payment of his Imports on due date. The overseas Banks usually lend the Importer (Buyer) based on the letter of Credit (a Bank Guarantee) issued by the Importers (Buyer's) Bank. In fact the Importers Bank brokers between the Importer and the Overseas lender for arranging buyers credit by issuing its Letter of Comfort for a fee.
Buyers credit helps local importers access to cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates.
External Commercial Borrowing with one of the banks abroad with whom the Bank has tie up. For this, the Bank will provide an undertaking to make payment on the new due date.
It gives additional time to the importer to make the final payment to the L/c issuing bank.
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