Co-acceptance is a means of non-fund based import finance whereby a Bill of Exchange drawn by an exporter on the importer is co-accepted by a Bank. By co-accepting the Bill of Exchange, the Bank undertakes to make payment to the exporter even if the importer fails to make payment on due date.
The co-acceptance by the importer’s banker acts as a guarantee for the exporter for timely receipt of proceeds from the importer. For the Bank, it is a non-fund based exposure on the importer. It is an increasingly used form of import finance offered by many Banks across the world.
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Benefits to Customer:
ADVERTISEMENTS:
1. For the importer, Co-acceptance works out cheaper as compared to opening Import Letter of Credit (LC) since under LC, commission is payable from the date of opening LC whereas in the case of co-acceptance commission is applicable after shipment has taken place from the overseas exporter’s end.
2. Further, unlike in LC, the importer need not use up his non-fund based limit until the goods are shipped by the exporter and documents are received at the counters of the importer’s Bank.
3. It is a means of non-recourse finance for the exporter, thereby strengthening the importer’s bargaining power.
Benefits to Bank:
1. Additional Avenue for fee income.
ADVERTISEMENTS:
2. An addition to Trade Services product range in general and import finance product range in particular, which can be used by the Bank to attract new clients.
3. Customers, who do not use their LC limits with the Bank, can be encouraged to make use of the Co-acceptance facility, which is cheaper.
Process Flow:
1. Sanctioning of Co-Acceptance Limit (Non-Fund based limit) to the client by the co-accepting Bank and signing of one-time co-acceptance Facility Agreement.
2. Receipt of import documents including a Bill of Exchange from the overseas exporter drawn on Indian importer by the Co-accepting bank.
ADVERTISEMENTS:
3. A presentation memo generated and sent to the customer (importer) for acceptance.
4. On receipt of Acceptance Letter and a request letter from the customer (importer), Bank will co-accept the bill of exchange.
5. The exporter notified of Co-acceptance by the co-accepting Bank through a SWIFT message sent to his bank.
6. From here on, the process flow will be same as that of an Import Bill under LC.