Buyer's credit

Buyer's credit

Buyers credit (Buyer's Credit)

In the usual practice, an importer requests his bank to open a Letter of Credit. When the Letter of Credit is honoured i.e, when the importer's Bank makes payment on behalf of the importer, the importer reimburses the money so paid by the importer's Bank. However, in the case of Buyer's Credit, the importer requests LC opening Bank to pay the dues on behalf of the importer. Thus this is a form of credit facility given to the importer.

Steps involved in buyer's credit

External Commercial Borrowing] with one of the banks abroad with whom the Bank has tie up. For this, the Bank will provide an undertaking to make payment on the new due date. Technically, the Bank credit facility provided to the bank extending the pays the funding Bank. With this, the transaction gets closed.

ee also

Trade finance


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