IMPORTS

INTRODUCTION:

Imports cost is a major item of expenditure of foreign exchange for a country. There were various restrictions on imports transactions during and around 1991 in India and was subsequently diluted on strengthening the Foreign Exchange Reserves. However, restricting imports is not a good idea for the economy. Import of goods helps to boost the economy by providing capital good for infrastructure or industrial development, meeting shortages and improving quality of production. It also helps improving living standards by making available goods and products not produced in the country. With the rise in disposable incomes in India, the market for imported goods is growing. This section provides you details about  Regulations relating to imports and related FAQs.

IMPORT FINANCING: 

 Import Financing refers to a loan given to the importer to provide liquidity for buying with sight payment or Usance payment to the exporter. Each loan must be related to one specific import transaction and the term of the financing can vary depending on the type of products imported and the requirements of the importer. There are various ways the importer may get finance for his imports. However, in India most prevalent methods are

1) Buyer’s credit and

2) Seller’s Credit

Since, these arrangements involve various parties around the world, are more complicated as compared to the regular loans financed by the Banks. Also, in India such facilities are regulated by RBI and can be availed only for stipulated purposes and in the prescribed manner. For details of such guidelines please refer to the “Trade Credits in India” section of the RBI Master Circular on external Commercial Borrowings.

Buyer’s Credit:

A Buyer’s Credit is a loan facility extended to an importer by a bank or financial institution to finance the purchase of goods or services. Buyer’s credit is a very useful mode of financing in international trade, since foreign buyers seldom pay cash for large purchases, while few exporters have the capacity to extend substantial amounts of long-term credit to their buyers. A buyer’s credit facility involves a bank that can extend credit to the importer usually on the strength of a guarantee or letter of undertaking from the importer’s Bank. Buyer’s credit benefits both, the seller (exporter) and buyer (importer) in a trade transaction. The exporter is paid in accordance with the terms of the sale contract with the importer, without undue delays. The importer obtains the flexibility to pay for the purchases over a period of time, as stipulated in the terms of the buyer’s credit facility, rather than at the time of purchase according to the payment terms.

Seller’s Credit or Supplier’s credit:

In this arrangement the finance is extended by the exporter to the importer. It is an arrangement where the supplier provides the goods to the importer immediately but the payment is required to be made at a later date. Usually, Supplier’s Credit can be arranged against LC transactions. In this transaction, the drafts are drawn with some agreed usance period. The importer accepts the draft for payment at a future date. The supplier’s bank will discount the drafts and make the payment to the supplier. Thus the arrangement is comfortable for both, supplier as well as the importer.