Buyers credit and margin money

This query is : Resolved

Rashmi Raj (Querist)
Follow

24 December 2012 what is Buyers credit and MArgin money? what is the role of the bank ? please can u expliain with an example

i would like to know the audit procedure to be followed for the above.

thanks

Ram Avtar Singh

Ram Avtar Singh (Expert)
Follow

24 December 2012 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 comfort (a bank guarantee) issued by the importers bank. Importer's bank or Buyers Credit Consultant or importer arranges buyer's credit from international branches of a domestic bank or international banks in foreign countries. For this service, importer's bank or buyer's credit consultant charges a fee called an arrangement fee.

Buyer's credit helps local importers gain access to cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates.

The duration of buyer's credit may vary from country to country, as per the local regulations. For example in India, buyer's credit can be availed for one year in case the import is for trade-able goods and for three years if the import is for capital goods. Every six months, the interest on buyer's credit may get reset.

Message likes : 2 times

Ram Avtar Singh

Ram Avtar Singh (Expert)
Follow

24 December 2012 Definition of 'Margin'
1. Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".

2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.

3. In a general business context, the difference between a product's (or service's) selling price and the cost of production.

4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender.

Message likes : 2 times

Upgrade to CAclubindia Pro. Subscribe Now!

CA BHARATH KUMAR

CA BHARATH KUMAR (Expert)
Follow

24 December 2012 wonderful solution given by Ram avatar Singh

Rashmi Raj

Rashmi Raj (Querist)
Follow

26 December 2012 Hello Sir,
Thanks for the above information. it was very useful but please can u explain the meaning of margin money accurately?

Thank You
Rashmi

Rashmi Raj

Rashmi Raj (Querist)
Follow

26 December 2012 Hello Sir,
Thanks for the above information. it was very useful but please can u explain the meaning of margin money accurately?

Thank You
Rashmi

Rashmi Raj

Rashmi Raj (Querist)
Follow

26 December 2012 Hello Sir,
Thanks for the above information. it was very useful but please can u explain the meaning of margin money accurately?

Thank You
Rashmi

Rashmi Raj

Rashmi Raj (Querist)
Follow

26 December 2012 Hello Sir,
Thanks for the above information. it was very useful but please can u explain the meaning of margin money accurately?

Thank You
Rashmi

Upgrade to CAclubindia Pro. Subscribe Now!

Ram Avtar Singh

Ram Avtar Singh (Expert)
Follow

27 December 2012 Bank Guarantee is a non funded facility granted by a bank against the deposit of
margins and collateral securities. It is granted in favour of a person who may invoke
and cash the amount of guarantee undertaken in the event of non-performance. It
is issued for a fixed term and commission is charged accordingly. The terms and
conditions are reduced in writing and signed by bank and the person who has taken
the guarantee. A chart of guarantees may be prepared and margins given for each
guarantee in the form of FDR or otherwise may be noted thereagainst. The service
charges/commission may also be noted. This will help in adjusting the expenses on
mercantile basis and giving a note under the head of contingent liabilities.