Buyer’s credit is a credit facility at hand to an importer from overseas lenders like banks and other financial institutions for goods they are importing. This credit facility is utilized for making payments against imports. The overseas banks normally lend the importer based on the letter of comfort or Letter of undertaking (a bank guarantee) issued by the importer's bank. The Reserve Bank of India on 13th March 2018 had decided to terminate issuance of the letter of undertaking (LoU) and letter of comfort (LoC) for trade credit for imports into India. This was the move by RBI after the Nirav Modi scam came into light. This move has really shaken the whole Nation. Causing a lot of people especially the businessman to suffer as their financial flexibility of most importers is completely lost. Supplier’s credit is a good method of financing imports into India. Importers are given funds at LIBOR connected rates by overseas banks and financial institutions (known as the funding bank) these are much more economical as compared to locally available funding. Funds can be issued beneath usance letter of credit.
The credit period limit here is same as buyer’s credit being one year for tradable commodities and three years for capital goods. Supplier’s credit