How does SBLC backed Buyer's Credit work? By Isaac Tudu
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- Опубліковано 22 тра 2021
- How does SBLC backed Buyer's Credit work?
RBI has banned issuance of Letter of Undertaking (LoUs)/ Letter of Comfort (LoCs) for Trade Credit (Buyer's Credit) for imports vide its circular dated 13.03.2018. Initially, there was some confusion that whether Trade Credit was completely banned by RBI or not? However, in the very same circular, LC and BG for Trade Credits for imports into India were allowed to continue.
Accordingly, Banks in India came out with another trade credit product based on SBLC i.e. SBLC backed Buyer's Credit.
However, I have observed that SBLC backed Buyer's Credit is not as popular as an earlier version of Buyer's Credit against LoUs / LoCs.
Therefore, I thought to share the working mechanism of SBCL backed Buyer's Credit so that more importers can know about this product and avail the same to reduce their overall financial cost.
About Speaker:- Isaac Tudu is an ex-banker with India’s largest Banks i.e. ICICI Bank and State Bank of India having more than 25 years of banking experience in Trade Finance and Credit with ICC certifications like CDCS, CSDG & CITF etc. Isaac’s Vision: To create a financial world where SMEs are well conversant with Trade Finance without any ambiguity. Isaac’s Mission: To help 100,000 SMEs to achieve their Sales & Business Growth drastically by enabling them through the "Hassle-Free Trade Finance" Online Programme.
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Nicely explained Sir. Thanks please
Informative, indepth study done. 👌
Glad you think so!
what does the term "backed by asset" mean in buyer's credit.
Very informative session Sir.
Thanks and welcome
Thank you very much Isaac. Can you do video on incoterms 2020?
Thanks a lot Samuel.. Will try to cover the topic in future.
Pls upload on EPC and pcfc details video
Great sharing.
Thanks a lot dear..
@@IsaacTudu Most welcome. Keep posting excellent material.
Elaborate LC vs SBLC
Letters of Credit (LC) and Standby Letter of credit (SBLC) both are payment instruments used in international trade. However, there are some basic differences between LC and SBLC.
A LC is the guarantee of payment when certain specifications are met and documents received from the selling party. However, a SBLC is paid when stipulated conditions have not been fulfilled.
LC is an irrevocable undertaking of the issuing bank to honour a complying presentation. LC is issued under UCP 600. SWIFT message type MT700 is used for issuance of LC.
SBLC is issued by an issuing bank with the purpose that it is only to be used for settlement if there has been some form of default or is to act as a form of financial guarantee. SBLC can be issued under UCP 600 and ISP 98. SWIFT message type MT760 is used for issuance of SBLC.
SBLC adopts the same basic forms as LC, but the intention is often that the beneficiary, in whose favour a SBLC is issued, draws only in case of default on the transaction to which the SBLC relates.
Thus, unlike a LC, a SBLC acts as a guarantee if there is a failure to perform a contractual undertaking, such as the obligation of the buyer to pay or that of the seller to deliver. SBLC is not legally distinct from BG.
Sir, Who is working capital Bank and who is lending bank , please confirm