Short term dollar credit back in demand

The availability of greenback in the overseas market seems to be easing at least for the short-term credit after May-June 2008.

With some signs of improvement in the financial markets, Indian banks have witnessed a spurt in buyer’s credit, a form of short-term trade finance facility after taking a pause last year on acount of the liquidity crisis.

Even after hiking interest rate ceilings on buyers’ credit by the RBI, no bank could afford to provide short-term credit as the dollar nearly vanished from the markets. With signs of easing monetary situation, corporates have been rolling over buyers’ credit facilities, which wer4e mostly unused due to non-availability of the greenback.

As the dollar availability has moderated somewhat in the recent months, corporates could hope for getting buyer’s credit at 125-150 basis points over the London Inter-bank Offered rate (Libor- currently at 0.91% for six months).