At present in the international business, we usually see importers always want a long credit period (Borrowing). But exporters want a sight (cash) payment. In order to solve this problem, the financial institutions have reviewed and come up with a new method to protect the interests of both parties. The medium of financing is UPAS. UPAS stands for USANCE PAYMENT AT SIGHT.
UPAS means Usance Payable at sight. Under this Letter of credit, the exporter will get the payment at sight if the documents are credit compliant. The importer will be charged interest, acceptance commission, and other charges as per the terms of LC for using this letter of credit.
When to use UPAS LC:
The situation of UPAS LC happens when the exporter/beneficiary wants immediate payment for his goods where the applicant may not have the facility with his bank to issue sight LC’s.
Terms of UPAS LC: Customers using UPAS LC must satisfy all conditions that exist in LC.
Credit Period of UPAS LC:
UPAS Funding for raw materials would be extended to 180 days but in the case of capital machinery, this credit term would be 180 days/ 270 days/ 360 days/ 720 days.
Features:
1. UPAS refers to Usance paid at sight.
2. The third bank is authorized to pay the supplier at sight.
3. It is Usance at the counter of issuing bank.
4. Rate of finance not more than 6% including LIBOR. (All-in-cost).
UPAS Clause: The UPAS clause "Usance Paid At Sight" is an option included by the issuing bank in the documentary credit, at the request of the buyer, authorizing the supplier to ask the issuing bank for a payment request while the documentary credit is payable at maturity.
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