HSBC issues first documentary credit in yaun to city drug co

Sep 28 2012, 14:44 IST
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HSBC issues first documentary credit in yaun to city drug co. (Reuters) HSBC issues first documentary credit in yaun to city drug co. (Reuters)
SummaryA documentary credit (DC) is a commitment issued by a bank to pay a supplier within a prescribed time limit.

The second largest foreign lender HSBC India today said it has issued its first yuan-denominated documentary credit (DC) in the country for a Mumbai-based pharma firm, without name the borrower.

A documentary credit (DC) is a commitment issued by a bank to pay a supplier within a prescribed time limit as long as the clearly defined terms and conditions are met, and acts as a shield for traders against cash flow issues.

Commenting on the development, HSBC India managing director and commercial banking head Sandeep Uppal said "domestic businesses have recognised the enormous growth potential of doing business with suppliers in China.

"As trade between the two economic powerhouses gathers pace, domestic businesses that use DCs in yuan can expect higher discounts from their Chinese suppliers who no longer need to hedge against the dollar."

Quoting HSBC's own research, he said around USD 2 trillion, or a third of China's annual trade, will be settled in yuan by 2015. Momentum is building fast as over 10 percent of China's trade was settled in yuan in the first quarter of this year.

As per the HSBC global connections report released in July, China is India's largest import partner and growth is projected to remain strong at around 10.5 percent over the next five years, led by audio visual, telecom equipment and

computers, Uppal said.

China is also the third largest export partner, led by iron ore, copper and cotton, for India with growth projected at around 9.5 percent over the next five years.

"Our research reveals a clear shift in global trade, with China set to become the world's largest importer by 2016, said HSBC India global trade & receivables finance head Surath Sengupta.

HSBC India recently executed its first yuan-denominated cross-border trade finance for a major Chennai-based pharma firm. Currently HSBC Group offers yuan trade services in over 59 markets.

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