Deferred Payment Vs Usance Letter Of Credit

[Md.zakir Hossen]

I will appreciate if the forum members share their opinion about deferred Credit and Usance Credit.

[Mehdi]

Usance Credit generally means the exporter issues a draft for maybe 180 days sight, but gets the money at sight whereas the importer is debited after 180 days sight for the docs value plus interest. The financing is done by the issuing bank.

Deferred credit means payment is effected maybe 180 days after sight. If the exporter wishes a financing of the docs, s/he should ask his bank for a (without recourse) financing. Interests are then for his account.

The forum can further highligh on this issue based on current practice (such as Usuance BTB for RMG, Deferred LC for capital machinary imports) in Bangladesh.

Regards...........

[Currer]

The expression "usance credit" is often used to describe documentary credits which are payable after sight and being available either by deferred payment or by acceptance.

Based on this use of the term, a deferred payment credit would also be a usance credit.

This shows that the use of terminology used in documentary credit business differs – its really easy to talk at cross-purposes.

Regards