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Rong Xin Da ECA Finance


 

Introduction

For sellers that have covered insurance with the China Export & Credit Insurance Corporation (SINOSURE) or other credit institutions recognized by Bank of China, Bank of China provides finance services for such sellers by relevant documents, relevant vouchers of credit insurance covered, reparation transfer agreement and so on, which is one of the trade finance featured products of the "Da" series developed by Bank of China.

Category

According to the business scope of SINOSURE, the product is divided into:  short-term "Rong Xin Da", medium- and long-term "Rong Xin Da".

The products are divided by whether or not the right of recourse is reserved: "Rong Xin Da" with right of recourse and "Rong Xin Da" without right of recourse (procedures such as export tax rebates and write-off after verification can be conducted in advance.)

Functions

The product is designed to satisfy the finance needs of the seller under export trade and domestic trade that have been covered by credit insurances.

Features

1. The product allows to accelerate capital turnover, improve cash flow and mitigate risks;

2. It lowers the threshold, reduces occupation and expands finance scale; for the export "Rong Xin Da", procedures of export tax rebates and write-off after verification can be conducted in advance in case there is no right of recourse.

Interest Rate

The interest rate is implemented according to the interest rate authorization of trade finance of the bank, and the fee is implemented according to the service price list.

Target Customers

1. Enterprises hope to mitigate the buyer credit risk and nation risk, and have covered credit insurance.

2. Enterprises have limited working capital and need to accelerate the turnover of accounts receivable.

3. Enterprises with inadequate credit line hope to expand finance scale.

Application Qualifications

I. Customers conducting Rong Xin Da with right of recourse should have the following qualifications:

1. In principle, the period of international settlement business conducted in Bank of China should be over one year or the continuous operation period should be over two years;

2. Sound conditions of operation and financial position;

3. Customers should have good records for agreement performance without any bad credit records in Bank of China or other financial institutions, without any serious incompliance records in the State Administration of Foreign Exchange, customs house, tax bureaus or other institutions.

II. Customers conducting Rong Xin Da business without right of recourse should have the following qualifications in addition to the above qualifications:

1. In principle, the customers should be international settlement customers with Bank of China's key support or quality customers Bank of China actively strives for;

2. Customers' credit rating in Bank of China is above Grade BBB (inclusive);

3. The enterprise's business scale ranks among the top ones locally.

Process

1. The seller covers the settlement business applying for finance with credit insurance from SINOSURE or other credit insurance institutions, while SINOSURE or other credit insurance institutions issue the seller with an insurance policy;

2. The seller declares and pays the premium prior to the specified deadline according to the insurance policies or relevant provisions in the premium payment agreement signed between the seller and SINOSURE or between the seller and other credit insurance institutions;

3. The seller submits Bank of China with the finance application form/receipts related to settlement business and relevant receipts forming a complete credit insurance policy;

4. Under export "Rong Xin Da", the seller conducts the short-term Rong Xin Da business and signs a Reparation Transfer Agreement with Bank of China and SINOSURE; the seller conducts the medium- and long-term Rong Xin Da business, and signs Reparation Transfer Agreement with Bank of China, meanwhile the seller issues a Power of Attorney for Reparation Transfer to SINOSURE, which makes confirmation in written form with the seller and Bank of China in term of reparation transfer.  Under domestic "Rong Xin Da", the seller needs to sign Reparation Transfer Agreement with Bank of China and SINOSURE or other credit insurance institutions;

5. With Bank of China's verification and approval, finance funds is transferred to the seller's account after determining finance ratio, and relevant receipts are mailed to overseas banks or the payer claiming for reimbursement;

6. Overseas banks or payer make payments to Bank of China on the maturity date. Bank of China first pays the principal, interest and relevant charges of finance funds with the remittance, and the balance (if any) is paid to the seller.

Case

Company A exports machinery to an African developing country with the settlement of 5-year L/C with deferred payment, meanwhile it has covered export credit insurance with SINOSURE. Although the company has acquired acceptance from the issuing bank (payment is made every half year), Company A urgently hopes to conduct outright sale of the export accounts receivable under the L/C to a bank so as to lock the cost, considering the high risks of the issuing bank and its country as well as the RMB appreciation pressure. However it is confronted with two difficulties:

1. Due to bad credit of the issuing bank, no bank is willing to buy the bill accepted by it;

2. With inadequate credit line, Company A can not conduct the discount, so it applies to Bank of China for the medium- and long-term Rong Xin Da business without  right of recourse. The process is as follows:

Company A transfers reparation rights under medium- and long-term export credit insurance to Bank of China, and it is confirmed by export credit insurance companies;

Bank of China determines a reasonable finance ratio and transfers corresponding finance funds to the company's account, within the credit limit and the reparation ratio verified by export credit insurance companies;

The funds is received normally under export L/C. The balance is paid to Company A after deducting the finance principal and interest, thus the business is ended.

From the case above, we can see that with "Rong Xin Da", Company A has successfully acquired finance with inadequate credit line; meanwhile it has effectively mitigated risks of remittance receiving and enjoyed the treatment of export tax rebates in advance, which is what we say "kill several birds with one stone".

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