Libor rates

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2011 respected experts ,
our company used import raw material from out side India. We used to avail buyers credit for payments. These days our baker is unable to arrange the funds at LIBOR+2% so we are approaching a dealer who will make the arrangements with foreign bank for remittance at LIBOR+4% rate . but in offer letter the foreign bank mention only LIBOR+2%. additional 2% they are calling it as handling charges or affront fee. But they wont mention about this extra 2% any where. Our Indian banker is denying to remit the extra 2% as it is not as per RBI norms. we are not even able to account for that remittance also . Please help me in this regard what to do on our behalf to account for such extra 2% remittance. very urgent . Thanks in advance

CA Navin Jain

CA Navin Jain (Expert)
Follow

19 October 2011 who is the dealer. dealer is foreigner of resident of India.

YES, BANK WILL HAVE PAY ONLY THE AMOUNT WHICH IS MENTIONED IN THE OFFER LATTER.

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2011 sir, dealer is resident of India and individual
then how can we account for that extra 2% remmited

Upgrade to CAclubindia Pro. Subscribe Now!

CA Navin Jain

CA Navin Jain (Expert)
Follow

19 October 2011 i think this a commission part which is not remitted outside India therefore you can considered is as arrangement fee

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2011 sir,how to account for such remittance because our dealer is remitting on behalf of our company by using his contacts in foreign countries. we are also unable to show it in our accounts

CA Navin Jain

CA Navin Jain (Expert)
Follow

19 October 2011 can u send me offer letter on navinjainj@gmail.com

Querist : Anonymous

Querist : Anonymous (Querist)

20 October 2011 sir i sent the offer letter to ur mail

CA Navin Jain

CA Navin Jain (Expert)
Follow

20 October 2011 Hello,

I have saw the offer letter. its mentioned libor+ 200bps. hence your future liability will be arise at libor+200bps,

as you said the you have arrange this buyers credit through the dealer at libour+400bps, i wanna to clarify the margin of 200bps would be paid to dealer just now or at the time of due date of payment of buyers credit.

Futher, I think payment to dealer will be done in INR currency.

Hence you can book the margin of 200bps as arrangement fee in books of accounts.

Upgrade to CAclubindia Pro. Subscribe Now!

Querist : Anonymous

Querist : Anonymous (Querist)

20 October 2011 sir , we arranged the amt in INR to dealer and (in no2).Dealer also remitted that amt to the foreign bank by using his contacts outside India. Now we need to pay another amount in near future , we want to account for that transaction.we want raise payment on his name as arrangers fee. Is this amt remitted by him to the bank is deductible in his hands . What is the accounting treatment

CA Navin Jain

CA Navin Jain (Expert)
Follow

20 October 2011 simple booked the arrangement fee and credit to dealer name then pay that amount to dealer in INR

CA Navin Jain

CA Navin Jain (Expert)
Follow

20 October 2011 R U ONLINE?

Querist : Anonymous

Querist : Anonymous (Querist)

20 October 2011 YES SIR ,
will it be a deductible expenditure to the dealer on his remittance to the bank

Upgrade to CAclubindia Pro. Subscribe Now!

CA Navin Jain

CA Navin Jain (Expert)
Follow