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DA to India an Foreign Exchange
Posted: Thu Dec 05, 2013 4:28 pm
by Finance
We will be sending documents on DA basis to India. Bills will be at 120 days from BL.
We understand that India has specific exchange control requirements, and as such, we want to be sure that documents are released to the client only after they have permission to send foreign currency at the end of the credit terms.
How can we word our cover letter so that the Indian bank will release documents against proof of foreign exchange permission from the drawee on the bill.
Thank you in advance for your assistance.
Finance
To be backed
Posted: Thu Dec 05, 2013 10:24 pm
by picant
Hi Pal,
I think that you may instruct the bank to released documents only against acceptance of a draft, backed , availised by the cillecting bank, in few words collecting bank must guarantee payment at maturity.
Other comments appreciated
Ciao
FX permission in India
Posted: Fri Dec 06, 2013 1:31 pm
by Finance
Hi Picant,
Thank you for your comment. However, that will not work in this situation. Our client is not looking for the buyers bank to guarantee payment to him. He and the buyer have agreed to trade on open account.
The client will draw bills on the importer in India, and we will send them to the buyers bank with instructions to release the documents to the buyer only against the buyers acceptance of the bill (under URC 522)
The situation might arise that the buyer has the funds to pay at the end of the credit terms - in local currency - but is unable to buy dollars and/or send them out of the country, because of a lack of FX permission from Reserve Bank of India. Our client is willing to accept the credit risk on his buyer, but wants to eliminate (or at least substantially mitigate) the FX risk. To do this, he needs to be sure that the buyer has FX permission before the buyers bank releases documents to the buyer.
Any comments from trade finance bankers in India will be very appreciated.
Regards,
Finance
URC 522
Posted: Sat Dec 07, 2013 3:30 pm
by picant
Hi Pal,
where art 18 rules documents against payment, documents against acceptance are not included, so specific instructions
must be written in coll remittance that acceptance must be supported by a deposit of foreign currency ready to be transferred abroad without any further authorization.
Naturally I have no idea about Forex Regulations in India.
Other comments appreciated
Ciao