Trade Finance

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gururaj

gururaj (Querist)
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27 August 2016 Hi this is Gururaj, My Query is whether Buyers Credit will come under Secured Loan or unsecured Loan?

ACA Anurag

ACA Anurag (Expert)
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28 August 2016 Dear Gururaj, It will showns as advanced from debtors. kindly like if my response has helped you

gururaj

gururaj (Querist)
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23 October 2016 Hi.. Can you explain me in detail

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Hi Gururaj,

Your query about **Buyers' Credit** is a common one in trade finance. Here's the clear explanation:

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### ✅ **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.

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### 🏦 **Is Buyers' Credit a Secured or Unsecured Loan?**

It depends on how the loan is backed:

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### 🔹 **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**

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### 🔹 **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).

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### 📌 **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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