Corporate practice bd |
Loan Against Trust Receipt(LATR)-Corporate practice bd
LATR Stands for loan against trust receipt is a short-term loan facility that a commercial bank allows the importer to purchase spare parts for long-term projects.
It’s basically a short-term loan against Trust Receipt that enables the importer to form the payment to the vendor. The bank retains the ownership of the products. A buyer can retreat to the ownership after repaying the loan amount. Though the LATR facility is for the short-term usually for 90 days, it should reach a year under special circumstances.
Trust Receipt – How it Works?
The importer, when especially needed to spare parts in their Project but insufficient fund to pay the Exporter’s (seller), in such a scenario, the client gets the funds from the bank via TR (trust receipt) so pays the vendor. It works then as an asset for the sleek functioning of the project.
Basically, trust receipts work as a debt instrument indicating that the customer pays them after the sale of products. The bank, during this case, gives the fund to the borrower or issue a letter of credit to the vendor or seller’s bank guaranteeing the payment.
So, Trust Receipt could be a payment facility from the Bank under the LC obligation that allows the customer to defer the payment to the Supplier without reducing his credibility.
Advantages of Trust Receipt:-
The trust receipts are very essential for highly long projected, for better performance of the project. There’s more advantage of trust receipts are as follows-
01. Easy Documentation.
02. Fast Processing.
03. Allow an importer to require possession of the products for resale.
04. Increase this income of the exporter to boost the status and strengthen the financial ability.
05. Global loan limit exposure for the client.
06. Online banking facilities for repayment.
Supporting Documents:-
01. Application received from the customer for LTR facility.
02. Photograph of the signatory to be attested by Chairman of the corporate.
03. Copy of valid trade license
04. Official seal with designation
05. Tax Certificate
06. KYC Form
07. Transaction Profile
Fees and charges
01. Form for the request for loan facility – Taka 250/-.
2.2% on the approved loan amount.
3 .13% p.a. at quarterly rests subject to change(s) which will be made by the Bank from time to time.
Let’s start with some idea for clear concept against (LATR)
Ist step: (LC Margin Deposit as a security charged by bank)
For opening Spare parts LC a bank charged LC margin Deposit @ 5% of there Total LC value .
Say for example a spare parts LC-296722105050 value was $2,50,000.There are 5%
LC margin Deposit @ 5% of there Total value =$2,50,000@5% = $12,500.00
The Accounting treatment is -
LC -296722105050 MD $12500@109.50(Debit) TK.13,68,750
XYZ Bank Ltd CD -2998 (Credit) TK.13,68,750
(Bank charged LC Margin for S/P LC-105050 dt.26.09.22)
2nd step:(LC opening & Others charged by bank)
1.For LC Issuing Charge Bank Debit Credit
Bank Payment Voucher (BV)
Transit S/P LC-2967220105050 ****
XYZ Bank Ltd CD -2998 *****
(Charges deducted for LC issue . Bank dt.26.09.22)
02. For issuing cheque Against insurance premium Debit Credit
Journal Voucher (JV)
Transit S/P
LC-2967220105050 ****
Prime Insurance Company Ltd *****
(Cheque issue for Insurance premium dt.23.10.22)
03. For LC Indemnity Charge Bank Debit Credit
Bank Payment Voucher (BV)
Transit S/P LC-2967220105050 ****
XYZ Bank Ltd CD -2998 ****
(LC Indemnity charge deduction for LC No, 2967220105050 Bank dt.12.01.23)
4. For C & F requisition for Spare Parts under S/P LC-2967220105050
Journal Voucher (JV)
Transit S/P
LC-2967220105050 (Debit)
****
Advance income tax (Import) (debit) ****
C & F Agent Advance against Clearing (credit) *****
C & F Agent AIT Deduction (Credit) *****
(Payable against C &F requisition for Spare Parts under LC-2967220105050, BE NO.C-47980
Dt.17.01.2023 MAWB NO.607-2890-21670 dt.07.01.2023)
5. For Foreign Bank charge by bank against S/P LC-105050
Bank Payment Voucher (BV)
Transit S/P LC-2967220105050 ****
XYZ Bank Ltd CD -2998 *****
(Foreign Bank Charge for
LC-2967220105050 dt.01.02.23)
06. For creation (PAD)Payment Against document
Journal Voucher (JV)
Transit S/P LC-2967220105050 ****
PAD-325-410950,
SP-LC-105050 – ****
(For creation against PAD)
7. For Purchase Spare Parts
Purchase Journal Voucher
508090-Round belt dia-9.5mm,L-1000mm *****
Transit S/P LC-2967220105050 *****
(Amount payable against purchase of Round belt dia-10.5mm,L-1000mm)