Lecture 33: Foreign bill negotiated (FBN) and letter of credit bill discounting (LCBD) facility.

[@SDCGJ03]

Sir.. Thank you so so so much. Being in credit processing dept. I have always faced issues with trade finance and forex facilities. Piche dekho aage chalo method se processing ho jata tha but it never gave the satisfaction or confidence. Also at times customers have various miscellaneous requests for waiver of forex charges which was also very difficult to process due to lack of adequate forex knowledge. These videos will help improve TAT as there is more clarity of concept now. Thank you so much sir keep imparting such good knowledge. Finding a mentor inside the bank was very difficult but your videos have given so much clarity

[@AnkushJain]

Thank you 😌

[@Shillpijain]

Very insightful 🎉

[@AnkushJain]

Thank you

[@Amreenkhan-rw8tx]

Thank you so much for this video sir🙏

[@AnkushJain]

Your welcome

[@anuragpareek6121]

Thanks a lot for this wonderful lecture 😃

[@AnkushJain]

Your welcome

[@ramudgaryadav2760]

Nice but jain sir awaj clear nahi h

[@AnkushJain]

Yeah in old videos, it was a problem.. but in new videos same is resolved

[@rounak3470]

@@AnkushJain

[@kiranjeetkaur8700]

Very Well Explained Sir

[@AnkushJain]

Thank you

[@aayushisingh5478]

Thank you so much 🙏🙏

[@AnkushJain]

Your welcome

[@yogeshmaheshwari5992]

Sir jo professional managed companies hoti usme promoter margin kaise calculate karte

[@AnkushJain]

You mean public limited company with large shareholders?

[@yogeshmaheshwari5992]

Yes

[@AnkushJain]

Calculation is same.. large shareholders money is also counted as capitak

[@TheSuresh2022]

Sir, for FBN still need a good financial, means good capital infusion, profit etc..

[@AnkushJain]

Average financials is ok even below average also accepted as proposal is backed by LC

[@priyankaupadhyay9097]

What is purchase bill discounting against lc.plz explain sir

[@AnkushJain]

Purchase bill discounting is for simply making payments to suppliers. LC is merely security in this case

[@jaineshshah-y7x]

Dear Sir, What is the difference between pre acceptance & post acceptance LCBD? Why these limits are required and what points are to be taken into consideration while assessing these limits?

[@AnkushJain]

Pl check lecture no. 37 + 38 and lecture of letter of credit

[@diyamitra3291]

Thank you sir for such detailed explanation. I have one question from the exporter's point of view, if he has taken PSFC facility under which he will receive payment once all the documents have been verified by the issuing bank post export,in that case the exporter shall not need LCBD facility,please let me know if logically I am correct

[@AnkushJain]

Yeah if the payment is to be released just after docs verification then there is no debtor cycle basically thus the LC discounting facility shall not be given

[@vaibhavsharma646]

Sir ek baat bill discounting lgta jaise bill draw Kiya seller n uski discounting apne bank se krwana...but aap bolte ho ki export docs including LC ki discounting...I am a little confused....discounting kis chiz ki h

[@AnkushJain]

Discounting to bill ki hi hai but hamare paas LC ki security hai..

[@DeepakKumar-xz6gc]

But sir LC to humne all other documents k sath bhejni h but you are saying that after LC confirmation, exporter is starting manufacturing of goods. Kindly clarify this, there is confusion sir.

[@AnkushJain]

Main query nhi samjha nhi.. initially to LC just ik piece of paper hai jo importer send krta hai... Iske aane k baad exporter LC k hisab se goods bnata hai.. but LC paper effective document tb bnta hai jb hum LC ki conditions k hisab se goods export krte hai

[@DeepakKumar-xz6gc]

@@AnkushJain Sir, does Importer send LC to exporter before production of goods by Exporter?

[@AnkushJain]

Yes

[@AnkushJain]

Yes

[@ashishbhargava9333]

Can exporters get 100%LC discounting in one go?

[@AnkushJain]

Couldn't get. Pls elaborate

[@ashishbhargava9333]

@@AnkushJain Agar exporter ke paas LC aati hai aur client Bank ko LC discounting ke liye bolta hai aur shipment 90 din baad jaayegi to kya hum is case mein 100% LC discounting Kar saktey hai aur agar exporter nay time par shipments nahi kiya tab…

[@AnkushJain]

@@ashishbhargava9333 nahi bank kuch margin rakhta hai 10% minimum

[@ashishbhargava9333]

@@AnkushJain kya aisa kar saktey hai ki additional Margin na lekar LC discounting karke 10% kaat kat amount disburse Kar de

[@ashishbhargava9333]

Sir please advice

[@kundanroy8998]

Sir in case an LC is confirmed and the LC issuing bank becomes bankrupt, then i understand the payment to the exporter will have to be made by the confirming bank. But from where will the confirming bank recover the money? As in what is the recourse for a confirming bank in case of default of issuing bank

[@AnkushJain]

Borrower

[@soyasreenith8185]

Sir can we discount the LC before the shipment of the goods

[@AnkushJain]

This is not allowed. Since this involves too much of risk. However if in rare circumstance, terms of LC are such that the issuing bank has accepted/confirmed the LC even before shipment then In that case the discounting bank can discount it

[@entertainment7167]

Sir what is difference between DAP against LC DP and USUANCE BILL and LC USUANCE?

[@AnkushJain]

Pl watch this kzbin.info/www/bejne/emHMfX6NgZtno8Usi=65lBMfKhUo6n5X7c

[@nsd1001]

Sir has it happened in ur experience that client, for getting higher DP has shown in debtors even though he has discounted the bill?

[@AnkushJain]

It happens everytime. That's why we need to assess it and calculate actual situation

[@nsd1001]

@@AnkushJain ok thank you sir

[@AnkushJain]

👍

[@surbhisharma7237]

Sir can we appraise OD main limit and sub limit LC, Further if we want to restrict exposure under fund based then can we appraise Non Fund Base as main limit and Fund base as sublimit?

[@AnkushJain]

Yes either way is possible

[@surbhisharma7237]

Sir, LCBN - Bill discounting facility need to consider for gearing / leverage ?

[@AnkushJain]

Post shipment finance is part of gearing and leverage

[@TheSuresh2022]

Sir, can LC be a standalone facility??

[@AnkushJain]

It can but banks doesn't sanction it standalone and they always give limit along with it. Usually standalone is sanctioned 100% fd backed

[@lsinghal1649]

Are all foreign bank LC's issued accepted by indian banks..or is there any category classifications for foreign banks in India...Pls clarify

[@AnkushJain]

Every country and their banks have risk classification in bank to bank. For example, in East African countries, most banks are not comfortable in discounting their LC's. In Bangladesh, few banks are there which are not approved by Indian banks for LC discounting. So large private banks of India generally have more bandwidth to cover more bank and more countries

[@lsinghal1649]

@@AnkushJain Can you pls share the authorization matrix for India...so as to identify which LC's are accepted by india

[@AnkushJain]

This matrix is diff. From bank to bank. There is nothing standard in it. Further it is confidential data of banks and can not be shared

[@umeshmiglanii2869]

Sir, bill of exchange par video banaye pls in context to export bussiness

[@AnkushJain]

Have already made it. Pl refer in below link kzbin.info/www/bejne/mafWZpp3idF5bqM

[@umeshmiglanii2869]

Thanks sir

[@AnkushJain]

👍

[@sriram2sri]

Sir for who many days a bill can hold for export bill crystallization , can export bill can hold for more than 240 days without realisation kindly clarify same sir

[@AnkushJain]

Export payments need to be realised in max. 15 months

[@nsd1001]

One doubt sir - I understand LCBD will have to be adjusted in debtors for calculating DP. But will LC affect DP calculation for importer/exporter? Acc to me, LC shouldn't impact, since payment is yet to be made. Kindly advise.

[@AnkushJain]

Against LC, importer will book creditors (from whom purchases are done against LC) and on asset side stock will be booked. So if your bank follows simple DP formula like (Stock+ debtors - creditors)*75% then there will be no impact. However if your bank follows formula like (stock + debtors)*75% minus creditors then there will be some impact

[@nsd1001]

@@AnkushJain thank you sir!

[@AnkushJain]

👍

[@divyanidhikapil4382]

Sir in this facility with recorce and without recource is also available. #- sir in this case Icici Bank as a advising Bank should mention negative mark for bank of america on LC. # because of ICICI takes charge for it. Sir in my this facility called. DRUL ( Discounting with recorce under LC)

[@AnkushJain]

@@divyanidhikapil4382 no it is always with recourse.. may be for big corporates they offer without recourse but for msme's it is not possible

[@AnkushJain]

@@divyanidhikapil4382 yeah advising bank should mention if there is anything negative or wrong in LC formation challenging it's enforcement

[@divyanidhikapil4382]

Thanks Sir

[@AnkushJain]

@@divyanidhikapil4382 👍👍

[@chakshutrikha6728]

Can you pls make one lecture explaining LCBD Purchase and diff between LCBD & LCBD Purchase

[@AnkushJain]

Ok 👍

[@MONUKUMAR-xu7xg]

Hiii, I have recived one case in which Limits offered are Foreign SBLC Backed OD and Foreign SBLC Backed BG Limit at 80% Value of SBLC only (This 80% is including 10% Cash Margin on BG above) LCBD Limit, FD Backed OD Limit at less than 100% Cash Margin, 100% Cash backed Forward Cover Limit, Please suggest what are Key Points I need to assess in the proposal in addition to Normal Credit Assessment like CIBIL, Banking and CMA Analysis. Please suggest

[@MONUKUMAR-xu7xg]

My Borrower is one Foreign subsidiary of Italy based Holding company (Holds 90%) in this case and out of 3 Directors one is Indian Director and 2 are Foreign nationals. Remaining 10% shareholding is held by wife of this indian Director. However being SBLC Backed case, we have not been offered PG of any Director/Shareholder in this case not even of Indian Director and his wife (wife is 10% shareholder in Borrower). Business team is saying no PG required being SBLC Backed case as per last sanction.

[@AnkushJain]

Is the SBLC issuing bank same in which you work or different?

[@MONUKUMAR-xu7xg]

@@AnkushJain That I need to check again in the proposal but how will it impact my decision making of the case, if SBLC issuing Bank is different

[@AnkushJain]

Basically I wanted to see if bank is same then you can always take feedback from foreign branch team members about the entity in foreign country and may be can obtain its latest financial results as well. Anyways if bank is not same then atleast take D & B report of foreign entity. Further, in some banks, for doing transactions like this, concurrence from compliance department is required upfront since security is foreign SBLC and it's term and conditions should not be anyway detrimental to interest of our exposure here in India. Rest credit analysis part you need to see as per normal norms.

[@MONUKUMAR-xu7xg]

@@AnkushJain Thanks for your reply- my one Query is still there as I mentioned Value of SBLC is only 80% which implies some portion is unsecured, how to go with it ? 2. PG of Indian Director and his wife should be taken, is there anything like we don't PG in case of SBLC.

[@nileshjadhav7539]

Hi sir purpose code p0107 under discounting/purchase/negotiated Can you share purpose codes with explain

[@AnkushJain]

These codes are defined by RBI for reporting inward and outward foreign currency transactions by the banks to RBI. Each transaction has to be reported in defined code only. RBI has shared the list of defined codes. Like the code mentioned by you is related to realisation of export bill. Reporting transactions in proper code helps in better control and standardization of procedures.

[@nileshjadhav7539]

ok thanks realisation export bills purpose is p0102