Lecture 34: Buyers credit facility with SBLC and Nirav Modi PNB Scam

[@the_accidental_banker]

Very Insightful Lecture. You're a great storyteller

[@AnkushJain]

Thank you

[@maturuhamsagayatri1439]

Excellent, pl upload this kind of videos again on various other topics

[@AnkushJain]

Your welcome 👍

[@gulfamali8194]

Wow, thank you sir for sharing the knowledge. Very informative session..

[@AnkushJain]

Thank you

[@sarika9333]

very detailed video ,keep posting :)

[@AnkushJain]

Thank you

[@VIVAAN-XD]

Awesome Sir, you are doing a very good job i.e. knowledge sharing. Thank You

[@AnkushJain]

Thank you Amit

[@maheshks5178]

Thank you so much for this lecture and series

[@AnkushJain]

Thank you

[@sweetyshah9328]

Insightful session as always!!!

[@AnkushJain]

Thank you

[@VikashKumar-gt6zw]

Hi Sir Thanks for making Sunday such knowledgeable! Plz guide for below mentioned 1.Can a Importer avail both LC & Buyers Credit at simultaneously. 2. In case of LC... who will make payment to exporter. Is it LC issuing Bank or payment will be done directly by importer. If LC issuing bank is doing the payment than in which account that bank will transfer. 3. If Indian exporter demands payments in $(as per agreement) from LC issuing bank than in this case how the payment will process took place. 4.Is Bill Discounting is same as LCBD/Drull or this is something different. Can Bill discounting can be done for both creditors/Debtors as well.

[@AnkushJain]

Hi vikash, pl find reverts for observations raised: Question 1: No both can not be availed simultaneously for same import order. Only one of them can be availed at one point of time. Question 2: Importer will make payment to exporter however if importer fails to pay the LC issuing bank shall pay to the banker of exporter in foreign country Question 3: on due date, exporter bank will send communication to importer bank for payment as per LC terms. Just that way, the payment will have to honoured by the importer bank Question 4: no both are different. Bill discounting is on invoices/bill however LCBD/DRUL is on LC only. Bill discounting term is used for debtor side financing only. However there is purchase bill discounting facility also which is done for creditor side

[@VikashKumar-gt6zw]

@@AnkushJain Thanks Sir ! & Happy Teachers Day🙏

[@AnkushJain]

Thank you

[@hunnykhatnani817]

@@AnkushJain sir for first question why lc and buyer credit cannot be used together ?? When lc period knock through buyer credit can be done and buyer credit will stand outstanding

[@hunnykhatnani817]

@@AnkushJain Lc payment can be honoured though opening buyer credit and Importwr will get financing for longer tenure if its drs days are high

[@pardeepmawlia21]

Thank you sir! Sir concepts are explained well and easy to understand. Sir have u written any book/notes on all these topics ? Any book you would recommend for credit manager ?

[@AnkushJain]

Thank you. No I have not written any book. You can refer "hands on credit" by d d Mukherjee, snow white publication

[@uditagarwal6484]

Hi, need to understand couple to point 1) Under UPAS LC ( Usance payable at Sight) LC, the importer finance the sight payment with reimbursement finance by foreign bank. What is the diff between Buyer credit & reimbursement finance 2) Under LC, many time it is written Available at any bank by Acceptance or Negotiation. What is the technical difference between the two 3) Under Document against Acceptance , after the importer gives its accept on the draft, it become negotiate instruments. Can it be discounted Thanks in advance & your video are really great

[@AnkushJain]

Hi udit, For first point, i don't think there is any diff. Since buyers credit also works the same way. Pl check the name of facility taken by the importer for reimbursement and confirm me Could not understand second question, pl explain in detail For third question, DA bills after acceptance becomes instrument which is why bank funds post shipment credit facility to exporters against them

[@uditagarwal6484]

@@AnkushJain In field 41 D of LC, many times it is written Available with any bank by Acceptance or Available with any bank by Negotiation. Need to understand the technical difference between both. Further with regards to reimbursement finance ,a importer is financing it's sight payment with a foreign bank with which it does not have any sanction limits. In my view the foreign bank treasury is taking a credit call on importer applicant bank. What are your views on this?

[@AnkushJain]

Hi udit, for second point of foreign finance, only possibility i see that the exporters has taken supplier credit facility from its banker in foreign country. Else importer must have taken some facility from Indian Bank else foreign bank will not take call. Checking 41d related point which I think is giving allowance to some other bank for negotiation of LC. Will get back on that

[@uditagarwal6484]

@@AnkushJain Thanks!!

[@AnkushJain]

Hi udit, for 41d, for acceptance i think same is for usance lc and negotiation is for sight lc.

[@himani051]

Great lecture Thank you so much.

[@AnkushJain]

Your welcome

[@aayushisingh5478]

Awesome lecture

[@AnkushJain]

Thank you

[@rohitbhatia1537]

Sir, It's really great. Please share the video on Supplier Credit too. Regards

[@AnkushJain]

Sure Rohit. Thank you 👍

[@rahulwagh6070]

Awesome video sir. One confusion - 1. customer first using usance LC and then again under BC using LC/sblc facility. Doesnt become double use of LC? 2. For BC facility - doea we need to sanction SBLC also as sublimit of BC? Pls guide.

[@AnkushJain]

For answer of 1st question, you can watch lecture 36 and it will answer the risks involved. For 2nd question we can sanction SBLC standalone since this facility is nothing but buyers credit only

[@rahulwagh6070]

@@AnkushJain thanks alot

[@AnkushJain]

Your welcome 👍

[@kiranjeetkaur8700]

Very well explained Sir

[@AnkushJain]

Thank you

[@karanbhagat7661]

SO NICELY EXPLAINED....BEST VIDEO ON YT FOR BC AND LOU.

[@AnkushJain]

Thank you

[@Shortexpert-oz8sb]

Nice explanation

[@AnkushJain]

Thank you

[@nishantsalve6517]

Thank you very much sir.

[@AnkushJain]

Your welcome

[@TheSuresh2022]

is it fund based or non fund based facility?

[@AnkushJain]

It's a debate.. ideally non fund based

[@yogeshmaheshwari5992]

Indian bank ke fcnr aur eefc deposit se bhi loan de sakte foreign bank se funding ku lena

[@AnkushJain]

Yes Aaj kal ye bhi krne LG gye hain

[@IMRANANSARI-yo1mm]

Hi Sir, when lending bank charges is paid by importer at time of availment of bc or at time of repayment of bc amount ?

[@AnkushJain]

Charges for issuance are paid upfront

[@sriram2sri]

Sir general banks will ask for forward cover for buyers credit naa sir , what will be tenor of buyers credit with how many days importer need to close the loan

[@AnkushJain]

Watch it in next video in next week

[@kraggarwalassociates4236]

what is difference between sblc and lc? please explain in detail...

[@AnkushJain]

kzbin.info/www/bejne/jnjRpqVvnLF5o9E Pl watch this video, your query will get resolved

[@hunnykhatnani817]

So currently Indian banks are issuing SBLC/giving buyer credit facility through their gift city branch to overseas Bank or their gift city branch works as overseas bank as per example shown in video????

[@AnkushJain]

Both are done

[@RajanKumar-gh2qx]

Sir if indian bank are giving SLBC instead of actual fund transfer buyer's credit should be a non-fund based facility..right?

[@ashishbhargava9333]

Ankush ji, is facility ko arrange karwane mein Indian bank ka kya fayda. Overseas bank say quotation liya aur wo indian Importer ke saath share kar diya.

[@AnkushJain]

Commission milta hai

[@ashishbhargava9333]

@@AnkushJain Thanks

[@AnkushJain]

@@ashishbhargava9333 ok

[@ashishbhargava9333]

@@AnkushJainCommission kaun deta hai Overseas Bank ya Indian Importer

[@AnkushJain]

@@ashishbhargava9333 borrower deta hai

[@rajanshah2507]

is it better to open LC rather to use buyers credit ? because In buyers credit importer has to make interest at around 5%, whereas in LC importer is charged with only around 0.25% commission of LC issuance.

[@AnkushJain]

Pl understand that both are totally separate concepts and are not interchangeable at all. The supplier may require the importer to submit the LC upfront. In that case importer will not have any choice. Therefore same is not in control of importer. Further, buyers credit is in control of importer. If the importer thinks that he has sufficient funds to repay the import bill on due date then he may choose not to take buyers credit at all.

[@SANTOSHKUMAR-pb2lb]

Can we say that lc is for procurement of stock and can only be converted in fund based when it is devolved however SBLC is Fund based facility with reference to lender bank and come in picture after the shipment of goods

[@MONUKUMAR-xu7xg]

1. Please clarify why Buyers Credit cannot be used for Advance payment to Exporter ? 2. Can we give Buyer Credit without LC or LC limit is mandatory with Buyer Credit ?

[@AnkushJain]

Buyers credit is working capital cycle based. It results in currency outflow. Since I'm advance payment, there is no confirmation whether goods are dispatched or not, there is high risk of misusing the facility and divert the funds. Buyers credit backed by SBLC can be given without LC being main limit

[@MONUKUMAR-xu7xg]

@@AnkushJain So Borrower will use Cash Credit or Overdraft Limit for making Advance payment to Exporter then is it okay. 2. You mentioned as Main Limit so without LC being Main Limit or sub-Limit, is Buyer Credit possible, if yes then How as we see that Buyers Credit is used to make timely payment to Exporter when he is not able to pay LC on time

[@sayeediqbal8621]

Can you please share HDFC Bank Working capital loan segment knowledge

[@AnkushJain]

All concepts apply to all banks

[@vikasaggarwal1902]

Hi Ankush, Is my understanding correct that BC can be availed on DP/DA bills? Also, who decides the tenor of the BC to be availed, is it Indian bank basis the appraisal and the operating cycle of Importer? Is this BC can be rolled over, if yes then how many times? Please guide.

[@AnkushJain]

Yes it can be on DA/DP bill. Tenor is decided basis the operating cycle of the borrower. Roll over of BC is not allowed as it is negative/concerning point

[@vikasaggarwal1902]

@@AnkushJain thanks for the clarification.

[@AnkushJain]

👍

[@ashishbhargava9333]

LC ke case mein bhi bank ko payment karni hi padti hai phir Buyers credit ki facility ka kya fayda…

[@AnkushJain]

LC mein payment borrower krta hai but buyers credit mein bann

[@ashishbhargava9333]

@@AnkushJain Buyers credit mein bhi Bank collateral leta hai importer say aur LC issuance ke time bhi Bank FD ya Deposit leta hai to dono hi case mein kya difference hua.. Mujhey confusion ho rahi hai..

[@AnkushJain]

@@ashishbhargava9333 difference payment ka hai majorly.. LC ki payment borrower ne krni hoti hai pehle and then supplier ko jati hai.. but buyer credit mein bank pehle payment kr deta hai supplier ko and credit period deta hai borrower ko e.g. 90 days ka then borrower 90 days baad payment kr deta hai bank ko

[@ashishbhargava9333]

@@AnkushJain Nahi samajh aaya, dono hi case mein Buyer say bank collateral le raha hai.

[@nsd1001]

Hi sir great lecture. One point i didn't understand. You said LoU was replaced by LC/BG but towards the end u said it was replaced by SBLC. Could u pl clarify thank you .

[@AnkushJain]

LC/SBLC are kind of same thing.

[@nsd1001]

@@AnkushJain thank you!

[@AnkushJain]

👍

[@nsd1001]

One more question sir - in sanction letter, the facility offered by domestic bank is mentioned as buyers credit or SBLC?

[@AnkushJain]

SBLC

[@vikasaggarwal1902]

Hi Ankush, could you please guide the difference in the process flow between buyer's credit and Supplier's credit.

[@AnkushJain]

It is lengthy. I will have to make separate video on that

[@vikasaggarwal1902]

@@AnkushJain request if you could keep this in your list as when you get time. It would be helpful.

[@AnkushJain]

Sure vikas 👍

[@vikasaggarwal1902]

@@AnkushJain thanks a lot

[@AnkushJain]

👍

[@reemayadav6329]

SBLC outstanding agar Stock statement me dikh rha hain to kya iska mtlb client ne default kiya hoga?

[@AnkushJain]

No it is just outstanding which need to be reduced from dp

[@hunnykhatnani817]

Is SBLC sublimit to buyer credit?

[@AnkushJain]

No. It can be given on its own

[@hunnykhatnani817]

@@AnkushJain buyer credit used is to classified in short term borrowing as we do for cc ??

[@AnkushJain]

Yes if it is for working capital then short term loan like CC limit

[@hunnykhatnani817]

@@AnkushJain sir how to check track of SBLC and buyer credit ??

[@AnkushJain]

You can check from banking or internal reports of the banks. Also can confirm from internal trade department