Trade Finance
This query is : Resolved
27 August 2016
Hi this is Gururaj, My Query is whether Buyers Credit will come under Secured Loan or unsecured Loan?
ACA Anurag
(Expert)
28 August 2016
Dear Gururaj,
It will showns as advanced from debtors.
kindly like if my response has helped you
02 August 2025
Hi Gururaj,
Your query about **Buyers' Credit** is a common one in trade finance. Here's the clear explanation:
---
### ✅ **What is Buyers' Credit?**
**Buyers' Credit** is a **short-term loan** facility available to Indian importers to finance imports. It is typically provided by **overseas lenders** (foreign banks or financial institutions) against a **Letter of Comfort (LOC)** or **Bank Guarantee** issued by the importer’s bank in India.
---
### 🏦 **Is Buyers' Credit a Secured or Unsecured Loan?**
It depends on how the loan is backed:
---
### 🔹 **1. If Bank Gives Letter of Comfort / Bank Guarantee → Secured Loan**
* In most cases, the Indian importer’s bank gives a **Letter of Undertaking (LOU)** or **Bank Guarantee**.
* This creates a **security** interest — making the buyers' credit a **secured loan**.
* The bank may also hold collateral from the importer (cash margin, assets, etc.).
✅ **In this case:**
**Buyers' Credit = Secured Loan**
---
### 🔹 **2. If No Security or Guarantee is Provided → Unsecured Loan**
* If buyers' credit is arranged **without** any collateral or guarantee (very rare in practice), then it may be considered an **unsecured loan**.
⚠️ **This is uncommon**, especially under Indian banking regulations post-PNB scam (2018).
---
### 📌 **Conclusion:**
> ✅ **In practical and regulatory terms, Buyers’ Credit is treated as a *Secured Loan*** because it involves guarantees from Indian banks (LOU, LOC, or BG).
---
Your query about **Buyers' Credit** is a common one in trade finance. Here's the clear explanation:
---
### ✅ **What is Buyers' Credit?**
**Buyers' Credit** is a **short-term loan** facility available to Indian importers to finance imports. It is typically provided by **overseas lenders** (foreign banks or financial institutions) against a **Letter of Comfort (LOC)** or **Bank Guarantee** issued by the importer’s bank in India.
---
### 🏦 **Is Buyers' Credit a Secured or Unsecured Loan?**
It depends on how the loan is backed:
---
### 🔹 **1. If Bank Gives Letter of Comfort / Bank Guarantee → Secured Loan**
* In most cases, the Indian importer’s bank gives a **Letter of Undertaking (LOU)** or **Bank Guarantee**.
* This creates a **security** interest — making the buyers' credit a **secured loan**.
* The bank may also hold collateral from the importer (cash margin, assets, etc.).
✅ **In this case:**
**Buyers' Credit = Secured Loan**
---
### 🔹 **2. If No Security or Guarantee is Provided → Unsecured Loan**
* If buyers' credit is arranged **without** any collateral or guarantee (very rare in practice), then it may be considered an **unsecured loan**.
⚠️ **This is uncommon**, especially under Indian banking regulations post-PNB scam (2018).
---
### 📌 **Conclusion:**
> ✅ **In practical and regulatory terms, Buyers’ Credit is treated as a *Secured Loan*** because it involves guarantees from Indian banks (LOU, LOC, or BG).
---
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