international mktg project - pdf

8/12/2019 International Mktg Project - PDF

1/37

CHAPTER 1. INTRODUCTION TO EXPORT FINANCEExport Credit Scheme

The RBI first introduced the scheme of Export Financing in 1967. The scheme is intended to make

short-term orking capita! finance a"ai!a#!e to exporters at internationa!!$ compara#!e interest rates.

%nder the ear!ier scheme in force upto &une '() *(1() RBI fixed on!$ the cei!ing rate of interest for

export credit hi!e #anks ere free to decide the rates of interest ithin the cei!ing rates keeping in

"ie the B+,R and spread guide!ines and taking into account track record of the #orroers and the

risk perception. In order to enhance transparenc$ in #anks pricing of their !oan products) #anks ere

ad"ised to fix their Benchmark +rime ,ending Rate B+,R/ after taking into account i/ actua! cost

of funds) ii/ operating expenses and iii/ a minimum margin to co"er regu!ator$ re0uirement of

pro"isioning capita! charge and profit margin. 2oe"er) the B+,R s$stem) introduced in *((') fe!!

short of its origina! o#3ecti"e of #ringing transparenc$ to !ending rates. This as main!$ #ecauseunder the B+,R s$stem) #anks cou!d !end #e!o B+,R. For the same reason) it as a!so difficu!t to

assess the transmission of po!ic$ rates of the Reser"e Bank to !ending rates of #anks.

4ccording!$) #ased on the recommendations of the 5orking roup on Benchmark +rime ,ending

Rate hairman8 hri :eepak ;ohant$/ #anks ere ad"ised to sitch o"er to the s$stem of Bae

Rate !.e.". #$%& 1' ()1). The Base Rate $stem is aimed at enhancing transparenc$ in ,ending

Rates of #anks and ena#!ing #etter assessment of transmission of monetar$ po!ic$. %nder the Base

Rate $stem app!ica#!e .e.f. &u!$ (1) *(1( interest rates app!ica#!e for a!! tenors of rupee export

credit ad"ances i!! #e at or a#o"e Base Rate.

The $ear *((9 itnessed one of the se"ere g!o#a! recessions in the post ar period. ountries across

the or!d ha"e #een affected in "ar$ing degrees and a!! ma3or economic indicators of industria!

production) trade) capita! f!os) unemp!o$ment) per capita in"estment and consumption ha"e taken a

hit. The g!o#a! trade has dec!ined #$ 9< in "o!ume terms. Though India has not #een affected to the

same extent as other economies of the or!d) $et our exports ha"e suffered a dec!ine due to

contraction in demand in the traditiona! market of our exports. =o) there is some turn around and

emergence of >green shoots?. The urrent Foreign Trade +o!ic$ *((9-1@ estimates to dou#!e the

exports of goods and ser"ices #$ *(1@. The !ong term po!ic$ o#3ecti"e is to dou#!e IndiaAs share in

g!o#a! trade #$ *(*(. In order to meet these o#3ecti"es) the o"ernment ou!d fo!!o a mix of

po!ic$ measures inc!uding fisca! incenti"es) institutiona! changes) procedura! rationa!iation) and

1


2/37

enhanced market access across the or!d and di"ersification of export markets. Impro"ement in

infrastructure re!ated to exportsC #ringing don transportation costs and pro"iding fu!! refund of a!!

indirect taxes and !e"ies ou!d #e the three pi!!ars hich i!! support the achie"ement of the Trade

+o!ic$ Target.

Importa*t term to +e $*dertood a*d their precie ro%e i* Export,Fi*a*ce

I*tit$tio*a% Frame!or- "or De%ieri*/ Export Fi*a*ce0

The export acti"it$ of the countr$ is regu!ated) monitored) promoted and financed #$ "arious

institutiona! arrangements ha"ing distinct functions to perform.

oer*me*t o" I*dia 23i*itr& o" Fi*a*ce4

The ustoms on #eha!f of the o"ernment of India ;inistr$ of Finance/ c!ears the export

consignments.

Reere Ba*- o" I*dia 2RBI4

FE;4 authories RBI to frame ru!es for the conduct of Foreign Exchange #usiness. RBIAs directions

to 4uthorised :ea!ers on the conduct of export acti"it$ are contained in the 4+ :IR/ series

circu!ars issued from time to time and conso!idated in ;aster ircu!ars as on 1st &u!$ e"er$ $ear.

Directorate e*era% o" Forei/* Trade e*era% o" Forei/* Trade 2DFT4 $*der 3i*itr& o"

commerce

:FT frames the Foreign Trade +o!ic$ gi"ing roadmap for de"e!opment of IndiaAs foreign trade

#usiness. The !atest Foreign Trade +o!ic$ is from *((9- 1@ issued on *7th 4ugust *((9. The IT

2/ c!assification of the Foreign Trade +o!ic$ gi"es the c!assification of commodities hich can #e

traded.

Forei/* Excha*/e Dea%er Aociatio* o" I*dia.

FE:4I is an association of a!! 4uthorised :ea!ers such as +u#!ic ector %ndertaking +% Banks/)

foreign Banks) pri"ate sector #anks) cooperati"e #anks) and financia! institutions. It !a$s don theground ru!es) #ased on RBIAs directions for the da$ to da$ conduct of foreign exchange acti"it$ #$

4ds. It acts as a faci!itator #eteen mem#er #anks and RBI) Export Drganiations ham#ers of

ommerce and other #odies and a!so among the mem#ers.

*


3/37

Faci%itati*/ I*tit$tio*

EXI3 Ba*-promotes and faci!itates foreign trade for India. It coordinates ork of "arious agencies

engaged in financing exports and imports. It pro"ides finance to foreign go"ernments) financia!

institutions and companies.

Export redit and uarantee orporation 2ECC4.

ICpro"ide the transit insurance co"er to exporters. It is common!$ knon as marine insurance

co"er.

Internationa! ham#er of ommerce 2ICC4.

I framed %R for hand!ing Bi!!s under o!!ection. i.e. other than those under ,etters of redit. It

a!so framed %niform ustoms and +ractices on :ocumentar$ redit that are guide!ines to sett!epa$ments through the :ocumentar$ redit. %RR i.e %niform Ru!es for Bank to Bank

Reim#ursements in ,etter of redit transactions is a!so an I pu#!ication to faci!itate

Reim#ursements. %niform Ru!es for :emand uarantees i.e. %R: is another pu#!ication from

I.

Export +romotion ounci! 2EPC4

;inistr$ of ommerce set up Export +romotion ounci!s to promote exports of different

commodities. E+ he!ps to interface ith the ministr$ on matters affecting their mem#ers and a!so

represent their "iepoints to he!p formu!ate po!icies and the countr$As response at internationa! trade

forums.

D$* 5 Bradtreet

:un Bradstreet is an internationa! agenc$ ith hom BI has a strategic a!!iance to pro"ide its

#ranches ith opinion reports on re0uest on foreign #u$ers. The o#tention of such reports is

preferred if the #i!!s are not dran under ,etters of redit. uch reports are a!so re0uired to #e taken

for a!! high "a!ue ,s.

Federation of Indian Export Drganiation 2FIEO4.

FIED is the !eading exporterAs um#re!!a group in the countr$ representing their interests. It is a!so

the apex #od$ for a!! Export +romotion ounci!s. It a!so pro"ides trade information ser"ices to

'


4/37

exporters and he!ps the mem#er exporters in expanding export "o!umes.

onfederation of Indian Industries CII4.

onfederation of Indian Industr$ II/ is the apex #od$ for Indian industr$ supporting Indian

#usiness.

Federation of Indian ham#er of ommerce and Industr$ FICCI4.

FII is a nationa! organiation that represents and aggregates mu!tip!e cham#ers of commerce.

@


5/37

CHAPTER (. EXPORT CREDIT AT STATE BAN6 OF INDIA

SBI7 8oa* Po%ic& o* Export Credit tate0

Export sector has #een recognied as a thrust area considering its importance and contri#ution of this

sector to the econom$. Therefore this sector is #eing present!$ extended finance at concessiona!

rates) ith f!exi#i!it$ in financing norms.

Export redit- pre shipment post shipment/ is !arge!$ regu!ated through directi"es guide!ines

issued #$ RBI) :FT FE:4I and fo!!oed #$ the Bank present!$ #eing extended finance at

concessiona! rates ith f!exi#i!it$ in financing norms.

Ba*-7 /ro!th i* Export Credit0

The BankAs export credit groth is not keeping pace ith countr$As exports groth. Therefore) there

is a !ot of potentia! hich the Bank has to tap.

BIAs re!ati"e figures for Export redit dispensed ith stood at Rs @'6' crores in =o"A1'. ;arket

share of our Bank "is-a G"is 4B has come don from 1.''< in *((9-1( to 1H.@1< in *(11-1* .

This shos that though rate of groth of exports from India ma$ #e hindered) other #anks are

performing #etter than tate Bank of India e"en in the tight market condition. Though man$ reasons

ma$ #e attri#uted for the dec!ine) much orr$ing fact is that e are a!so !osing our market share toother #anks as far as export credit is concerned.

Ada*ta/e to the Ba*- i* exte*di*/ Export Credit0

Se%",%i9$idatio*

Export finance can #e !i0uidated #$ discounting purchasing the shipment documents #$ the

exporter re!ated to the export credit.

Pro"it thro$/h Forei/* Excha*/e

5hi!e con"erting export proceeds into rupees) the profit margin is #ui!t into the exchange rate.

I*come "rom the other re%ated +$i*e

Besides interest income on negotiation of export #i!!s and commission on export #i!!s) ad"ising of


6/37

,etters of redit) income can #e deri"ed from re!ated #usiness !ike issue of ,etters of redit for

import of ra materia!) machines etc. hich add "a!ue to the export product and issue of #ank

guarantees.

Aet 8ia+i%it& 3a*a/eme*t

Increase of components !ike #i!! financing) export negotiationsC demand !oans etc in the BankAs asset

portfo!io impro"e the BankAs a#i!it$ to manage 4sset ,ia#i!it$ mismatches more efficient!$.

Re"i*a*ce "rom RBI.

4s an incenti"e) RBI refinances the Bank ith hate"er the Bank has financed to the exporter.

ECC coer

E co"ers the risk of exporters and financing #ankers. It gi"es po!icies to the exporters and EIB

Export redit Insurance for Banks/.

Characteritic o" Export Credit0

e!f-,i0uidation

:omestic credit is not se!f-!i0uidating #ut export finance can #e !i0uidated #$ discounting

purchasing the shipment documents #$ the exporter re!ated to the export credit.

Export order,etters of redit

, is more common in export finance than domestic credit.

;onitoring of end use

Export credit is gi"en at a concessiona! rate. The #ank has to ensure the usage of the credit for the

purpose it is extended.

ountr$ Risk

ountries are p!aced in remo"ed from the caution !ist #$ the Bank from time to time due to

changing risk perceptions.

orrespondent Bank Risk

BI dea!s ith its on #ranch a#road or through a correspondent #ank.

Importing countr$ Regu!ations

6


7/37

The exporter needs to #e c!ear that the product he exports is a!!oed to #e imported in the respecti"e

countr$.

4dherence to time and 0ua!it$

Time and 0ua!it$ is to #e maintained) fai!ing hich the entire consignment can #e re3ected or theorder ma$ #e cance!!ed. Export Inspection ounci! of India certifies the goodsser"ices fit for export.

Dpinion Reports on Bu$ers

Dpinion Report on the #u$ers shou!d #e o#tained to ensure the safet$ of export proceeds rea!iation.

o"erage of po!itica! and commercia! risks

The po!itica! and commercia! risks in exporting can #e co"ered #$ E.

Export re%ated Faci%itie aai%a+%e "or exporter thro$/h State Ba*- o" I*dia

+re hipment Finance in Rupees.

+ost hipment Finance in Rupees.

+re hipment Finance in Foreign urrenc$ +F/.

Export Bi!!s Rediscounting EBR/.

BI Exporters o!d ard cheme.

Execution of Bid Bonds.

4d"ance +a$ment Bank uarantees.

+erformance uarantees.

Esta#!ishment of ,etters of redit 4rranging ,ines of credit in foreign countries.

Export redit to 4E units.

Trade Information er"ices.

Forex 4d"isor$ er"ices.

7


8/37

CHAPTER :. T;PES OF EXPORT CREDIT

Export redit- +re hipment credit

Export Finance as administered #$ the Bank is #$ and !arge #ased on the RBI directi"es guide!ines.

Exporters o#tain financia! assistance from the #ank at8

Pre Shipme*t Sta/e0 +re hipment finance is extended as orking capita! for purchase of ra

materia!s) processing) packing) transportation) arehousing etc. +re hipment finance ma$ #e

extended to exporters in Rupees as e!! as in Foreign urrenc$. The finance extended in rupees at

+re hipment stage is ca!!ed Export +acking redit and the finance in Foreign urrenc$ extended at

+re hipment stage is ca!!ed +F- +re hipment redit in Foreign urrenc$.

Pot Shipme*t Sta/e0 +ost hipment finance is extended after shipment to #ridge the time !ag

#eteen the shipment of goods and rea!iation of proceeds.

ome of the c!ients ser"ed #$ tate Bank of India at #oth the stage are) ;s. Radium reation +"t

,td) ;s. ,init Exports +"t ,td) ;s. umpro :ri!!ing F!uids +"t ,td) ;s. omati hemica!s +"t

,td) ;s. Riddhi :$echem +"t ,td) ;s. !o#a! 5riting Instruments and ;s. :eepak Traders.

T&pe o" Pre Shipme*t Credit0

+acking redit

4d"ance against :ut$ :ra#ack Entit!ements

+re hipment redit in Foreign urrenc$ +F/

Pac-i*/ Credit,Cate/orie o" exporter

The categories of exporters ho are genera!!$ e!igi#!e for export finance are as fo!!os8

;anufacturer Exporter

;anufacturer Exporter is an exporter ho actua!!$ manufactures the goods and exports in his on

name.

;erchant Exporter

;erchant Exporter is a trader intermediar$/ ho does not manufacture the goods himse!f #ut #u$s

the same from another supp!ier domestic or foreign/ ho is the actua! manufacturer and exports the

same in his name. The exporter in such cases is ca!!ed the Export Drder 2o!der ED2/.

H


9/37

Export 2ouse

Export 2ouse is a manufacturer exporter or a merchant exporter ith minimum export turno"er

prescri#ed under the pre"ai!ing trade po!ic$.

+acking redit can a!so #e extended for

Export onsu!tanc$ er"ices and omputer oftareFinance against goods for Exhi#itions and a!e 4#road

+acking redit to u# upp!iers

Aeme*t o" EPC, Baic co*ideratio*

Export +acking redit is #asica!!$ orking capita! finance. To appraise assess a packing credit

proposa!) the points to #e kept in "ie are8

Integrit$ and redit orthiness of the #orroer. Export +erformance for the !ast * to ' $ears here app!ica#!e/

+eriod for packing credit hich is #ased on the trade manufacturing c$c!e shou!d norma!!$

not exceed 1H( da$s 4t present concessiona! credit is a"ai!a#!e for *7( da$s/.

+ercentage of margin to #e decided keeping in "ie the RBI guide!ines for !i#era! finance to

export sector and a!so the "arious incenti"es recei"ed #$ the export sector.

The concept of need #ased finance is the guiding princip!e to decide the 0uantum of finance

to #e granted to the exporter. The period of packing credit depends upon the manufacturing

c$c!e or specific re0uirements of the exportC norma!!$ not exceeding 1H( da$s *7( da$s at

present/.The percentage of margin is dependent on the nature of order) commodit$ and

capa#i!it$ of exporter.

The +aic co*ideratio* i* the aeme*t o" EPC are0

%ndertaking

The exporter shou!d pro"ide an undertaking that ad"ance ou!d #e uti!ied for the specific purpose

of procuring manufacturing shipping etc) the goods are meant for export on!$ as stated in the

re!ati"e confirmed export order ,.

onfirmed export order

The exporter shou!d pro"ide confirmed export order , in origina!.

9


10/37

+re!iminar$ examination of contract

If the customer ants to a"ai! packing credit ad"ance against pre!iminar$ information of contract

here#$ at a !ater stage the contract or ,) as the case ma$ #e i!! #e recei"ed #$ him) an

undertaking to the effect that the same i!! #e produced to the #ank ithin a reasona#!e time sa$

ithin a month/ for "erification and endorsement. If the need is of a recurring nature) e ma$ extend

running account faci!it$ to those exporters ith good track record.

+acking credit for a su# supp!ier

If the customer asking or packing credit is a su# supp!ier and ants to supp!$ the goods to the Export

2ouse or ;erchant exporter) an undertaking from Export 2ouse ;erchant Exporter stating that the$

ha"e not i!! not a"ai! of packing credit for the same purpose ti!! the origina! packing credit is

!i0uidated.

ecurit$ documents.

Examp!es of securit$ documents are :+ =ote) +acking redit agreement) !etter of guarantee here

there is a guarantor or an$ other specified documents as stated in the sanction ad"ice of the Bank for

the purpose.


11/37

particu!ars of the export !etters of credit orders and the outstanding of the packing credit account to

#e extinguished #$ negotiation of #i!!s under such In!and ,etters of redit.

Bi!!s dran on the Export 2ouse #$ the supp!ier for goods supp!ied for export and ad3ust packing

credit ad"ances from the proceeds of such #i!!s.

4 certificate from the Export 2ouse stating the goods ha"e in fact #een exported to #e taken at the

end of e"er$ 0uarter) in case #i!!s are not accompanied #$ #i!!s of !ading or other export documents.

This certificate shou!d ha"e particu!ars of #i!! date) #i!! amount and name of the #ank through hich

#i!!s ha"e #een negotiated.

4n undertaking from the supp!ier that the ad"ance pa$ment) if an$) recei"ed from the Export 2ouse

against the export order ou!d #e credited to the packing credit account.

4 !etter of disc!aimer from tar Export 2ouse.

Di+$reme*t

The Branches shou!d ensure the fo!!oing things hi!e making dis#ursements8

:is#ursements are made in a phased manner

4d"ances shou!d not #e dis#ursed in !ump sum amounts instead the$ shou!d #e dis#ursed in parts

taking into account purpose and needs of the exporter) shipment schedu!es) production c$c!es and

other aspects. 4!so) the progress made #$ exporters in time!$ execution of export orders has to #e

monitored.

:irect!$ through pa$ orders drafts to supp!iers

To ensure the end use of funds) !oan amount shou!d #e dis#ursed direct!$ through issue of pa$

orders drafts to the supp!iers #$ taking necessar$ authoriation !etter from the #orroer. There are

certain exceptions !ike fe agricu!tura! or marine products that demand cash pa$ments. In such

cases) the sanction accorded #$ the anctioning 4uthorit$ shou!d pro"ide for it.

To BorroerAs account

5here direct dis#ursa!s are not possi#!e) the proceeds are credited to #orroerAs account and

dis#ursa!s are super"ised herefrom. If !oan proceeds are credited to the current account or cash

11


12/37

credit account) cash ithdraa!s for sma!! pa$ments !a#our pa$ments ma$ #e a!!oed.

ecurit$

4s a genera! ru!e) export packing credit ad"ances shou!d #e secured #$ p!edge or h$pothecation of

stocks. It ma$ not #e feasi#!e for manufacturer- exporters ha"ing extensi"e domestic operations and

export #usiness to segregate stocks meant for export and p!edge h$pothecate them separate!$ to the

Bank. In such cases) it is ade0uate if it is ensured that the aggregate outstanding in domestic cash

credit accounts/ and export packing credit account are fu!!$ co"ered #$ the ad"ance "a!ue of the

stocks p!edged h$pothecated to the Bank.

o!!atera! ecurit$

Branches ma$ o#tain co!!atera! securit$ #$ means of a third part$ guarantee e0uita#!e mortgage of

immo"a#!e propert$. Branches shou!d assess export credits on the condition that it is need #ased andnot direct!$ !inked to the a"ai!a#i!it$ of co!!atera! securit$.

Export Credit I*$ra*ce "or Ba*- 2ECIB4 a*d Po%icie o" ECC0

Bank has opted out of the 5ho!e turno"er +acking redit uarantee of E ith effect from

17*((' hich ear!ier co"ered a!! packing credit ad"ances. The Bank shou!d no o#tain indi"idua!

+acking redit Insurance for Banks EIB-+/ on a case to case #asis if the o#tention of such a

co"er is part of the terms of sanction of the packing credit.

E premium shou!d #e paid at the prescri#ed periodicit$. 5here"er app!ica#!e) it shou!d #e

checked hether notification to E E appro"a! is on record in cases of exports to restricted

countries) reporting of defau!ts and nursing of accounts.

;onitor and ontro!

Branches shou!d monitor and contro! packing credit !oans to ensure proper end use of the amounts as

the$ are granted at concessiona! rates of interest and are specific purpose oriented ad"ances. TheBorroers shou!d strict!$ comp!$ ith ru!es regarding su#mission of stock statements and insurance.

5hen dis#ursement is to #e made in stages depending on the needs of the exporter/) the schedu!e of

dis#ursement ma$ #e ca!!ed for #efore granting the ad"ance. :ue date diar$ shou!d #e maintained

shoing the due dates of repa$ments and it shou!d #e ensured that documents are recei"ed e!! in

1*


13/37

time or proper extension app!ications are o#tained from the exporter here"er necessar$. 5here

stipu!ated) separate periodic stock statements for export stocks shou!d #e o#tained and stocks

inspected.

If export takes p!ace and the Bi!! is purchased discounted negotiated etc) such export proceeds or

an$ ad"ance pa$ment recei"ed co"ering the re!ati"e export order shou!d #e ad3usted through thepacking credit account and the re!ati"e packing credit account shou!d #e c!osed. In this regard) if the

exporter makes a re0uest to ad3ust the proceeds otherise) it shou!d not #e granted.

For a proper contro! o"er the pre shipment credit granted to exporters) #ranches need to8

;aintain separate account in respect of each packing credit granted to an exporter except for those

ith JRunning 4ccountA faci!it$.

,i0uidate the pre shipment credit from the proceeds of the re!ati"e export #i!! hen purchased

discounted negotiated.

If the export #i!! against hich the ad"ance is o#tained is cance!!ed) then the exporter i!! #e una#!e

to tender export documents for ad3ustment !i0uidation of the ad"ance #$ the re!ati"e export

proceeds. 4s a resu!t) the outstanding ad"ance is ad3usted against the export #i!! dran on some

other importer either in the same countr$ or in an$ other countr$) pro"ided the re!ati"e export #i!! is

in respect of the same goods for hich the pre shipment credit as origina!!$ granted.

,i0uidation of +re hipment ad"ances

The Bank decides the period of packing credit ad"ance depending upon the time re0uired to procure)

manufacture or process here necessar$/ ship the re!ati"e goods. 5ith the introduction of Base

Rate from 1st &u!$ *(1() the interest rate app!ica#!e to a!! market segments for +re hipment credit

upto *7( da$s is 1.< a#o"e Base Rate and to specified categories of #orroers is (.*< #e!o

Base Rate for *7( da$s.

In case the shipment takes p!ace after '6( da$s from the date of ad"ance the ad"ance ceases to

0ua!if$ for concessi"e rate of interest a# initio. Interest app!ica#!e to JExport redit =ot Dtherise

specifiedA is app!ica#!e and in case the exports do not materia!ie at a!! pena! interest rate is

app!ica#!e from the date of ad"ance.

1'


14/37

Extension of Time ,imit for !i0uidation of +re hipment redit

Extensions in the period for !i0uidation are to #e a!!oed on!$ in genuine cases and for "a!id reasons.

In case of extensions in the time !imit for !i0uidation of pre shipment credit) #ranches shou!d8

;onitor the progress made #$ exporters in time!$ fu!fi!!ment of export orders so that the period of

credit does not exceed the actua! re0uirement of the #orroer and the pre shipment credit does not

remain !ocked up for unnecessar$ !ong period.

Running 4ccount Faci!it$

In a running account #asis) the first de#it in the account is ad3usted repaid against the first credit to

the account. This is irrespecti"e of the fact) that the packing credit !oan pertaining to the first de#it

ma$ not re!ate to the export order under hich the export #i!! is su#mitted for negotiation purchasediscount.

Bra*che ma& exte*d pre hipme*t credit o* =R$**i*/ Acco$*t7 +ai $+>ect to

the "o%%o!i*/ co*ditio*?

atisfactor$ track record

This faci!it$ is a"ai!a#!e on!$ to >Exporters ith ood Track Record? as defined #$ RBI. 4n

exporter ith good track record is one hose o"erdue export #i!!s are not more than < of the

a"erage annua! export rea!iations of the preceding three ca!endar $ears. tatus can #e certified #$

the hartered accountant and needs to #e o#tained e"er$ $ear.

,etter of redit onfirmed order

The exporter shou!d su#mit re!ati"e ,etter of redit onfirmed Drder in a reasona#!e time after

a"ai!ing pre shipment finance a!so su#mit them hene"er ca!!ed for #$ the #ranch.

;arked off export #i!!s.

The indi"idua! export #i!!s shou!d #e marked off) hene"er the$ are recei"ed for negotiation and

co!!ection) against the ear!iest outstanding pre shipment credit on >First in First out #asis?. The

concessiona! credit shou!d not #e ((6 extended #e$ond a period of *7( da$s.

1@


15/37

4mount of pre shipment credit exceeds the "a!ue of export order. For instance) to procure the ra

materia!s re0uired to execute the export order as in the case of 2+ ground nuts) de oi!ed cakes etc.

Then the excess shou!d #e ad3usted either in cash #$ sa!e of non-exporta#!e #$ products ithin a

period of '( da$s from the date of ad"ance.

Reser"e Bank Refinance.

Reser"e Bank refinance is a"ai!a#!e for export finance not exceeding 1H( da$s.

Fre0uent re"ie of draa!s.

Branches shou!d constant!$ re"ie the draa!s in the account "is a "is the export #i!!s tendered for

negotiation co!!ection to ad3ust the pre shipment credit and ensure that the exporter does not misuse

the faci!it$ #$ draing funds in excess of their genuine re0uirement for in"entor$ #ui!dup other

purposes. The faci!it$ shou!d #e ithdran immediate!$ if it is mis- used and #ranches shou!d insist

on production of firm order , #efore granting further pre shipment ad"ances.

+acking redit for Export onsu!tanc$ er"ices and omputer oftare .

In case of consu!tanc$ ser"ices and computer softare the pre shipment finance at concessiona! rate

of interest is extended to exporters to ena#!e them to undertake pre!iminar$ arrangements such as

mo#i!iing technica! and other staff) training staff and for purchase of materia!s re0uired.

Finance against oods for Exhi#itions and a!e a#road

Branches ma$ pro"ide finance against goods for exhi#ition and sa!e a#road in the norma! course at

pre shipment stage and after the sa!e is comp!eted.

+acking redit to u# upp!iers

+acking redit granted to su# supp!iers co"ers the , or export order recei"ed in fa"our of Export

2ouse Trading 2ouse tar Trading 2ouse etc or manufacturer exporters on!$. The faci!it$ of

concessiona! finance can #e shared ith su# supp!ier or a supporting manufacturer if a merchant

exporter or an export house ha"ing recei"ed a confirmed order or ,) needs to procure goods and

get the same processed manufactured #$ another supp!ier or manufacturer. In such a case) the

manufacturer su# supp!ier norma!!$ a"ai!s the export packing credit and supp!ies good to the

merchant exporter export house against pa$ment or against an in!and , or an$ other simi!ar

1


16/37

arrangements.

4 supp!ier ho ants to a"ai! the pre shipment ad"ance against the export contract or , recei"ed in

the name of an Export 2ouse or an$ ;erchant Exporter shou!d su#mit to the Bank a !etter from the

Export 2ouse ;erchant Exporter incorporating detai!s of the goods to #e supp!ied and confirming

that he has not a"ai!ed an$ packing credit from an$ other #ank source against the same contract ,.

uch ad"ance shou!d #e repaid against the proceeds of the #i!! dran under In!and , Back to

Back/ opened #$ the Export 2ouse ;erchant Exporter in fa"our of the su# supp!ier) in case it is not

possi#!e to open Back to Back ,) su# supp!ier can dra #i!!s on the Export 2ouse ;erchant

Exporter and ad3ust the ad"ance from the proceeds of such #i!!s. If the #i!! is not accompanied #$ a

Bi!! of ,ading indicating that the export is affected) a certificate shou!d #e o#tained from the Export

2ouse ;erchant Exporter stating that the goods ha"e actua!!$ #een exported.

The credit extended under the s$stem is treated as export credit from the date of ad"ance to the su#

supp!ier to the date of !i0uidation #$ ED2 under the in!and export , s$stem or to the date of

!i0uidation of packing credit on shipment of goods #$ ED2.

4fter the su# supp!ier has made a"ai!a#!e the goods as per terms of in!and , to the ED2) his

o#!igation of performance under the scheme is treated as comp!ied ith. In such circumstances)

pena! pro"isions are not app!ica#!e to him for de!a$ #$ ED2) if an$.

It is the responsi#i!it$ of the ED2 to export the goods as per export order ,. 4n$ de!a$ in the

process i!! su#3ect him to the pena! pro"isions issued from time to time.

5hen credit is extended under this s$stem) refinance from RBI to the respecti"e #anks is made

a"ai!a#!e for appropriate periods. It is necessar$ to ensure that no dou#!e financing of the same

transaction is in"o!"ed.

Ada*ce a/ai*t D$t& Dra!+ac- e*tit%eme*t

Export redit can #e gi"en at pre shipment !e"e! for an amount in excess of export order. The excess

that represents dut$ dra#ack recei"a#!e is e!igi#!e for interest at concessionar$ rate. If Export

+roduction Finance uarantee of E co"ers the transaction) the amount of dra#ack can #e

reco"ered from appropriate authorities and !i0uidated from :ut$ :ra#ack recei"ed.

16


17/37

The in!and , in fa"our of u# upp!ier can #e issued for an amount higher than the re!ati"e export

order or the , from a#road as the export documents are in the name of the exporter ho a!one is

entit!ed to dut$ dra#ack reco"era#!e from appropriate authorities. This is to ensure that

manufacturer gets packing credit to co"er fu!! manufacturing cost.

D"erdraft or ash redit granted on account of dut$ dra#acks shou!d #e secured #$ h$pothecationof dut$ dra#ack entit!ements. ,etters of 4uthorit$ +oers of 4ttorne$ shou!d #e o#tained from the

#orroers and registered ith the dis#ursing agencies concerned) if such agencies are prepared to

accept the !etters in fa"our of the #ank and agree to pa$ to the Bank direct c!aims !odged #$ the

exporter. 4 suita#!e margin ma$ #e retained on the dut$ dra#ack recei"a#!es financed depending on

the credit risks.

Pre Shipme*t Credit i* Forei/* C$rre*c& 2PCFC4

The scheme of +re hipment credit in foreign currenc$ ena#!es the exporters to a"ai! packing credit

at internationa! interest rates through 4uthorised +ersons. The scheme co"ers the cost of #oth

domestic and imported inputs of exported goods. The scheme is operated on!$ at designated

#ranches as ad"ised from time to time #$ the IB) orporate entre. Exporter customers of non-

designated #ranches =:B/ can a"ai! the faci!it$ at the nearest designated #ranch :B/.

E!igi#i!it$8

4!! exporters ha"ing firm export orders irre"oca#!e ,etters of redit are norma!!$ e!igi#!e for

+F) pro"ided the$ satisf$ other credit norms. Exporters ho ant to a"ai! +F are o#!igated to

discount the export #i!!s under Export Bi!! Rediscounting EBR/ cheme.

urrenc$8

+F can #e a"ai!ed in8

% :o!!ar

+ound ter!ing

E%RD

&apanese Ken

+eriod8

17


18/37

+F is a"ai!a#!e for a maximum period of 1H( da$s from the date of dis#ursement.

Rate of Interest8

4s per the current stipu!ations) the rate of interest app!ica#!e ef 19th Fe#A1( is *(( #asis points

o"er six months ,IBDR E%RD,IBDRE%RIBDR as on the date of dis#ursement.

Extension8

4n$ extension of the +F i!! #e su#3ect to the same terms and conditions as app!ica#!e for

extension of Rupee +acking redit. It i!! entai! an interest of *< o"er the origina! spread a#o"e six

months ,IBDR pre"ai!ing at the time of extension for the extended period.

=o export8

If no export takes p!ace e"en ithin '6( da$s) +F is ad3usted at the ru!ing TT se!!ing rate for the

currenc$ concerned. Interest right from the date of dis#ursement ti!! the date of pa$ment shou!d #e

reco"ered at *< o"er the interest rate app!ica#!e for the cash credit of the exporter and the interest

ear!ier reco"ered at ,IBDR re!ated rates shou!d #e ad3usted there from. Remittance of foreign

exchange for repa$ment of principa! ith interest does not re0uire RBI appro"a!.

PCFC @ T;PES OF ACCOUNTS

+F is made a"ai!a#!e #$ a$ of cash credit account.

+F can #e car"ed out of the E+ !imits a"ai!a#!e to them su#3ect to the out standings under #oth

the rupee and foreign currenc$ faci!ities con"erted at the prescri#ed notiona! rate/ not exceeding the

!imits sanctioned.

There is no need for sanction of a separate su# !imit for +F.

Export +acking redit E+/ in Rupees in part and +F in part can #e granted against the same

order.

+F- su#stitution of Drders and commodities8

Repa$ment of packing credit ma$ #e a!!oed ith export documents re!ating to an$ other order

co"ering the same or an$ other commodit$ exported #$ the exporter. The re!axation is a!!oed

su#3ect to the conditions "i) it is necessar$ and una"oida#!e) it is not #$ its sister associate group

1H


19/37

concerns) dec!aration from the exporter to #e o#tained that he has not a"ai!ed +F from an$ #ank

against such orders documents from hom repa$ment is #eing made.

Other Feat$re o" PCFC0

Funding8

!o#a! ;arkets %nit Lo!kata/ acts as the noda! centre to raise dep!o$ the offshore and on shore

funds to !end under +F. It maintains +F !oan nostro account to raise funds and route +F

repa$ments at the macro !e"e! ith the BankAs =assau %:/) Frankfurt E%RD/) ,ondon B+/

and Tok$o Ken/.

4ccounting8

Dn!$ designated #ranches ha"e to open a enera! ,edger account st$!ed >ash redit Foreign

urrenc$ account? to route a!! transactions under +F. The rupee #a!ances under this head is

merged ith the ash redit #a!ances in the 5eek!$ 4#stract under the head >,oans and ash

redits?.

E o"er8

E co"er is a"ai!a#!e is respect of +F ad"ances on indi"idua! #asis as in the case of Rupee

+acking redit.

5ithho!ding Tax8

4s the Bank a"ai!s !ines of credit from its on foreign offices and a!so uti!ies the F=B corpus for

funding the +F) the exporters need not pa$ 5ithho!ding Tax.

Forard ontracts8

Forard ontract can #e #ooked in respect of future draa!s) if the$ are to #e con"erted to Indian

Rupees for purchase of domestic ra materia!s. ross urrenc$ forard contracts can a!so #e

a"ai!ed in an$ of the permitted currencies against the in"oiced currenc$ in hich +F is a"ai!ed)

minimum amount #eing %: *()(((.

19


20/37

+F G Running 4ccount Faci!it$8

Running 4ccount faci!it$ is permitted to exporters ith good track record hose export outstanding

are not more than < of a"erage of past three $earAs export proceeds rea!iations/. In cases here

Running 4ccount faci!it$ has #een extended to exporters8

, or firm order need not #e insisted upon initia!!$ for dis#ursements of +F. 4s and hen the

exporter recei"es , or Firm order) the particu!ars thereof shou!d #e noted separate!$ in Registers.

, or firm order need not #e ph$sica!!$ deposited ith the Bank. 2oe"er) statement of ho!ding of

the ,s firm orders from the #orroer co"ering the outstanding in +F shou!d #e o#tained at

month!$ inter"a!s. The #ranches need to introduce a suita#!e s$stem of ho!ding of ,s firm orders

and a!so arrange for ph$sica! scrutin$ of the , Firm orders) hene"er considered necessar$.

,i0uidation of +F can #e done on

a/ First in First Dut #asis. +F account is opened in the name of the exporter. 5hi!e a!!oing

repa$ments into the +F account) order to order app!ication of repa$ments ma$ not #e necessar$.

But order to order monitoring through :raing +oer register is essentia! to ensure proper end use

of funds and repa$ment of particu!ar +F ithin the stipu!ated period.

#/ The proceeds of #i!!s re!ating to another contract for hich no packing credit has #een a"ai!ed)

can a!so #e used to pa$ off the +F.

PCFC, Other proiio*

+F for :eemed Exports8

+F can a!so #e granted for :eemed Exports co"ering supp!ies to pro3ects financed #$

mu!ti!atera! #i!atera! agenciesfunds. +F granted for deemed exports shou!d #e !i0uidated #$

EBR ithin a maximum period of '( da$s or upto the date of pa$ment #$ pro3ect authoritieshiche"er is ear!ier) su#3ect to comp!iance ith other conditions re!ating to deemed exports.

+F sharing #eteen ED2 and manufacturer supp!ier8

+F can #e granted to a manufacturer supp!ier against the , or export order recei"ed #$ the ED2

*(


21/37

on the #asis of the disc!aimer from the ED2 through his #anker. The manufacturer can #e repaid #$

transfer of foreign currenc$ from the ED2 #$ a"ai!ing of +F or discounting of #i!!s under EBR.

This shou!d #e done in a a$ that dou#!e financing is a"oided and the tota! period of packing credit

is !imited to the actua! c$c!e of production of the exported goods.

+F sharing #eteen to ED% E+ units8

+F can a!so #e made a"ai!a#!e to #oth the supp!ier ED% E+ unit for purchase of ra materia!s

components of goods and fina!!$ exported #$ the recei"er ED%E+ unit. upp!ier ED%E+ unit

has to #e !i0uidated #$ receipt of foreign exchange from the recei"er ED%E+ unit for hich the

recei"er ED%E+ can a"ai! +F.

,i0uidation of +F #$ pa$ment in Foreign Exchange8

Transfer of foreign Exchange from the #anker of the recei"er ED%E+ unit to the #anker of

supp!ier ED%E+ unit meets the stipu!ation regarding the !i0uidation of +F #$ pa$ment in

foreign exchange. Thus) there i!! not norma!!$ #e an$ post shipment credit in the transaction from

the supp!ier ED%E+ unitAs point of "ie. :ou#!e financing has to #e a"oided in this transaction.

+F granted to recei"er ED%E+ unit i!! #e !i0uidated #$ discounting of export #i!!s.

E+ Dutstanding8

Existing E+ outstanding of the exporters in rupees cannot #e con"erted into +F ad"ances.

Exporter a"ai!ing upp!iers redit8

In case the Exporter a"ai!s upp!iers redit in respect of his imports) he i!! #e e!igi#!e for +F

on!$ for purchase of domestic inputs.

omp!iance ith norma! credit discip!ine8

+F amounts are taken into account for the purpose of comp!iance ith norma! credit discip!ine

!ike tota! assessed !imits.

4% ;echanism8

+F can #e granted for Exports under 4% mechanism.

:iscounted under EBR cheme8

*1


22/37

Before granting +F) it shou!d #e made c!ear to the exporters that ,s shou!d not #e restricted to

other #anks and the #i!!s shou!d #e in"aria#!$ discounted ith the Bank under EBR scheme.

Exporters a"ai!ing +F at the BankAs #ranches shou!d not #e a!!oed to #ook Forard ross

urrenc$ forard contracts ith an$ other #ank in respect of the re!ati"e #i!!s.

+F and EBR =ostro ,oan 4ccounts8

:esignated #ranches shou!d not #e sending an$ messages re!ating to de#its credits in the +F and

EBR =ostro ,oan accounts of ;% L/ to the foreign offices concerned direct!$. The foreign

offices act on!$ on the instructions of ;% L/ hich is the noda! centre and ignore messages

re!ating to +F and EBR transactions from the other domestic offices.

,i0uidation of +F8

Exporters ho a"ai!ed +F ha"e to necessari!$ a"ai! EBR and cannot a"ai! Rupee post shipmentfinance for discounting the re!ati"e #i!!s.

Dther 4spects of +re hipment redit8

Execution of Bid Bonds Tender uarantees on #eha!f of exporters and in fa"our of o"erseas

#u$ers in !ieu of earnest mone$ for the supp!$ of goods or ser"ices a#road.

Issue of uarantees in respect of 4d"ance +a$ments8

Bank uarantees are issued in fa"our of o"erseas #u$ers in respect of ad"ance pa$ments to #e made

#$ them. uch ad"ance pa$ments are a common feature in contracts pertaining to export of capita!

goods or turnke$ pro3ects.

Esta#!ishment of ,etters of redit at the re0uest of exporters in fa"our of supp!iers of ra materia!s)

components and ser"ices. Back to Back ,etters of redit are issued at the re0uest of export houses

and merchant exporters in fa"our of domestic manufacturing units for the supp!$ of goods contracted

for export.

4rranging ,ines of redit in foreign countries is usua!!$ re0uired here the execution of an export

order in"o!"es ork to #e done in #u$erAs countr$. The !oca! cost ma$ #e financed #$ arranging a

!ine of credit from a foreign #ranch or a correspondent #ank against the BankAs guarantee here"er

necessar$.

**


23/37

Execution of +erformance uarantees at the re0uest of exporter for the performance of machiner$)

e0uipment) etc supp!ied #$ them. +erformance uarantees are genera!!$ stipu!ated in contracts

pertaining to the export of capita! goods or turnke$ 3o#s. uarantees are a!so issued in !ieu of

retention mone$.

Export redit to Exporters of 4gricu!tura! +roducts8 To maintain the desired 0ua!it$ in the

commodit$ to #e exported) exporters of 4gricu!tura! products 4gri Export Driented %nits

processing/ ma$ procure and supp!$ 0ua!it$ inputs to the farmers. Branches ma$ treat such inputs to

farmers as ra materia! and sanction export credit to co"er the cost of such inputs. Branches ma$

extend the faci!it$ in case of Tie up arrangements) arrangement ith o"erseas #u$er or contracts

entered ith farmers in respect of crops to #e purchased.

pecia! Financia! +ackage for ,arge "a!ue Exports introduced #$ RBI. 5hi!e extending such creditfaci!ities) #ranches shou!d #e go"erned #$ interna! guide!ines) RBI :BD:IE:E:/ guide!ines)

ru!es of FE:4I) FE;4 and odes of I "i.) %+:) %R etc.

Export Fi*a*ce, Pot Shipme*t Fi*a*ce

Exporters ho se!! goods a#road ha"e to ait for a !ong time #efore pa$ment is recei"ed from

o"erseas #u$ers. The period of aiting depends upon the terms of pa$ment. To tide o"er this period)

exporter needs post shipment finance. +ost hipment credit is an$ !oan or ad"ance granted or an$

other credit pro"ided #$ the Bank to an exporter of goods from India from the date of extending thecredit after shipment ti!! the date of rea!iation of the export proceeds i.e. ti!! the #ankAs nostro

account is credited a#road.

E!igi#i!it$8

+ost hipment finance shou!d a!a$s #e extended to actua! exporter ho has exported the goods) an

exporter in hose name the export documents are transferred and supp!iers of goods ho supp!$

goods to the designated agencies in case of deemed exports.

E"idence of hipment8

Export Finance shou!d a!a$s #e extended against e"idence of shipment of exports or supp!ies

made. The export has to su#mit the Export :ec!aration Forms as prescri#ed #$ RBI.

*'


24/37

Basis of Finance8

+ost hipment finance can #e gi"en after shipment against export documents su#mitted #$ the

exporter against ,etter of redit recei"ed #$ the exporter from the supp!ierAs #ank or against a

purchase order recei"ed in his fa"our. The Bank is said to =egotiate the Bi!!s hen extending

finance against ,etter of redit and +urchase in case of ad"ance against order on sight #asis and

:iscount in case of #i!!s su#mitted against order on Issuance #asis.

Muantum of Finance8

+ost hipment finance can #e extended upto 1((< of the in"oice "a!ue of goods. :epending upon

the pa$ment terms offered #$ Indian exporters to o"erseas #u$ers) post shipment finance can #e

short term or !ong term finance.

+eriod of finance8

The maximum period usua!!$ a!!oed for rea!isation of export proceeds is six months from the date

of shipment.

Rate of interest8

5ith the introduction of Base Rate from 1st &u!$ *(1() the interest pa$a#!e on post shipment finance

upto 1H( da$s is 1.< a#o"e Base Rate. The interest rate app!ica#!e for the specified categories of

#orroers is (.*< #e!o Base Rate for post shipment credit upto 1H( da$s.

;argin8

In case of post shipment finance) other than #i!! negotiation purchase discount) the margin ma$ #e

stipu!ated depending upon the merits of each proposa! and t$pe of securit$ that is8 ,) firm order or

co!!atera! and E co"er.

,imits to #e sanctioned8

eparate !imits shou!d prefera#!$ #e sanctioned for #i!!s dran under !etters of credit and #i!!s dran

ithout !etters of credit. In case of pecified Branches) !imits for negotiation of #i!!s under !etters of

credit of foreign offices correspondents of the Bank can #e fixed outside the 4ssessed Bank Finance

and in such cases) #ranch managers of the specified #ranches ha"e un!imited poers to fix !imits for

negotiation of #i!!s. In case of non-specified #ranches) Bi!! !imit ou!d #e part of 4ssessed Bank

*@


25/37

Finance.

E co"er8

E co"ers po!itica! and commercia! risks. 5hen re0uired) E post shipment po!ic$ du!$

assigned to the Bank shou!d #e stipu!ated as a condition of sanction) especia!!$ if the post shipment

finance is not #acked #$ an ,. It shou!d a!so #e stipu!ated that the exporter shou!d authorie the

#ank to de#it his account ith the amount of premium pa$a#!e under Export redit Insurance for

Banks-+ EIB-+/ of E.

Interchangea#i!it$ #eteen pre shipment and post shipment finance8

=eed #ase interchangea#i!it$ #eteen pre shipment and post shipment faci!ities ma$ #e permitted to

take care of #unched export orders or ph$sica! exports. The #ranches shou!d comp!$ ith instruction

in regard to the extent to hich such interchangea#i!it$ is permitted and the authorit$ to permit suchinterchangea#i!it$.

Basic onsiderations for +ost hipment8

5hi!e purchasing the #i!! dran #$ exporters on foreign #u$ers) the Bank takes into consideration8

The track record of the exporter

ountr$ risk

=ature of merchandise

Terms of pa$ment

+a$ment record of the draee.

uide!ines for +ost hipment

Foreign Trade +o!ic$ re0uirements.

FE;4 pro"isions

pecific 4ppro"a! ,ist of E

Dur BankAs on guide!ines from IB;%.

FE:4I Ru!es +ro"isions of I "i.) %+:) %R etc

C%ai"icatio* o" Pot Shipme*t Fi*a*ce0

=egotiation+a$ment4cceptance of export documents under ,etters of redit

*


26/37

+urchase :iscount of export documents under confirmed orders export contracts

4d"ances against #i!!s sent on co!!ection #asis.

4d"ances against exports on consignment #asis.

4d"ances against dut$ dra#ack entit!ements

4d"ances against undran #a!ances retention mone$

=egotiation +a$ment 4cceptance of export documents under ,etter of redit8

The exporters need to su#mit documents for negotiation strict!$ in accordance ith the terms and

conditions of the ,. It is e0ua!!$ necessar$ for the negotiating #ranch to check this comp!iance ith

reference to the documents su#mitted "is- a "is the ,. It shou!d # ensured that a!! documents are

, comp!iant.

4!! !etters of credit are su#3ect to guide!ines of Internationa! ham#ers of commerce in the form of

%niform ustoms and +ractices of :ocumentar$ redit %+:/. The ,atest pu#!ication of

%+: is %+: 6(( effecti"e from 1st &u!$ *((7. The examination of documents su#mittedagainst ,etters of redit must ensure the fo!!oing8

Each #ank has fi"e #anking da$s for scrutin$ of documents as per %+: 6((. The documents ha"e

#een su#mitted ithin the "a!idit$ of the ,etter of redit. 4!! documents ca!!ed for are su#mitted and

in the re0uisite num#er. Each document is issued as per the stipu!ation in the , and their content

satisfies the pro"isions of %+: and the ,. The description of goods in in"oice and documents

corresponds to that in the ,. hipment has #een made #efore stipu!ated date. :ocuments are

presented ithin the period permitted from shipment date as per %+: 6((FE;4 i.e. *1 da$s

from the date of shipment. Insurance +o!ic$ co"ers the risk as stipu!ated in the , and is for

ade0uate amount. The amount of #i!! is ithin the , "a!ue. Fu!! set of c!ean on #oard Bi!! of

,ading is su#mitted and the Bi!! of ,ading is issued or endorsed in fa"our of , opening Bank) or as

stipu!ated in the ,. tamps and a!terations if an$) on an$ of the documents are du!$ authenticated.

4!! export #i!!s are exempted from stamp dut$.

+urchase :iscount of Bi!!s8

In case of =on redit #i!!s) fo!!oing points need to #e considered8

4 satisfactor$ status or opinion report on the importer.

E has fixed the credit !imit on the #u$er Bu$er ise !imit/ and the exposure is ithin

that !imit. The exporter shou!d o#tain the ontractshipments omprehensi"e/ Risks

*6


27/37

+o!ic$ of E.

4!! documents su#mitted are in accordance ith firm order sa!es contract The shipping

documents are to #e dran endorsed consigned to #ank and not a!!o tit!e to the goods to

#e passed on to the #u$er direct!$.

redit orthiness of the exporter

tatus report on the draee importer/

+ast experience E Risk Insurance a"ai!a#i!it$.

Ada*ce a/ai*t Bi%% e*t o* Co%%ectio* Bai0

Branches ma$ a!so sometimes grant ad"ances against #i!!s sent on co!!ection #asis. The need to

resort to this arrangement norma!!$ arises8

5hen the accommodation a"ai!a#!e under the Foreign Bi!!s +urchased ,imit is exhausted.

5hen some export #i!!s dran under , ha"e discrepancies.

5here it is customar$ practice in the particu!ar !ine of trade. In the case of exports to countries here there are pro#!ems of externa!iation ountries

uni!!ing or una#!e to permit remittance in a con"erti#!e currenc$ outside the countr$.

The #ranches ma$ send the #i!!s on co!!ection #asis and finance the exporter after retaining a suita#!e

margin out of the tota! #i!! amount and de#it such ad"ances to an account st$!ed >4d"ance against

#i!!s sent on co!!ection #asis?. rupee ad"ance/. This ma$ #e sanctioned as cash credit or o"erdraft.

The ad"ance shou!d #e !i0uidated out of the export proceeds. The ad"ances against #i!!s sent on

co!!ection #asis ou!d attract interest rate as app!ica#!e for post shipment credit i.e. as per the tenure

of the #i!!.

4d"ance against goods sent on onsignment Basis8

The Branches ma$ finance goods exported on consignment #asis at the risk of the exporter

for sa!e and e"entua! remittance of sa!e proceeds to him #$ the agent consignee su#3ect to

the customer en3o$ing specific !imit for the purpose. 5hen goods are exported on

consignment #asis) #ranches shou!d instruct the BankAs o"erseas #ranch orrespondent

hi!e forarding shipping documents to de!i"er the documents on!$ against Trust Receipt

%ndertaking to de!i"er the sa!e proceeds #$ a specified date ithin the time prescri#ed for

rea!isations of export proceeds.

Retain appropriate margin hi!e granting ad"ance against such exports.

*7


28/37

4d"ance against :ut$ :ra#ack Entit!ements8

The exporter is entit!ed to "arious incenti"es as per the Foreign Trade +o!ic$ of the countr$.

Dne such incenti"e is :ut$ :ra#ack Entit!ement cheme.

%nder this scheme #anks are a!!oed to grant ad"ances to exporters against their entit!ements

of dut$ dra#ack on export of goods. The period of such ad"ances is up to a maximum of 9(

da$s #e$ond hich the Bank ma$ not a!!o the ad"ances or ma$ charge interest app!ica#!e to

export credit. 4d"ance against dut$ dra#ack at post shipment stage shou!d #e co"ered

under Export redit

I*$ra*ce "or Ba*-, EF 2ECIB,EF4.

Dther conditions to #e fu!fi!!ed #efore granting !oans against :ut$ :ra#ack Entit!ements are8

:ec!aration from the exporter to #e o#tained on the export promotion cop$ of the shipping

#i!! containing the E; num#er Export enera! ;anifest =um#er issued #$ ustoms

:epartment/ mentioning the amount of dut$ dra#ack e!igi#!e.

The amount of c!aim thus dec!ared shou!d #e supported #$ a certificate from a hartered

4ccountant authenticating the amount of c!aim on the #asis of Trade +o!ic$ustoms Ru!es.

4 !ien for the amount of ad"ance to #e noted ith the designated #ankAs #ranch conducting

the account of the ustom department under E:I E!ectronic :ata Interface/ scheme.

The financing #ranch shou!d a!so make necessar$ arrangement ith the designated #ankAs

#ranch for transfer of funds as and hen dut$ dra#ack is credited #$ the customs through

e!ectronic fund transfer s$stem.

Branches ma$ stipu!ate a margin #eteen the amount of dut$ dra#ack pro"isiona!!$

certified and the amount of ad"ance to #e granted.

Ada*ce a/ai*t U*dra!* Ba%a*ce Rete*tio* 3o*e&0

In certain !ines of exports) it is the practice of exporters not to dra #i!!s for the fu!! in"oice "a!ue of

the goods. Exporters !ea"e a sma!! part undran for pa$ment after ad3ustments due to differences in

eight) 0ua!it$ etc ascertained after arri"a! and inspection. In such cases) #ranches ma$ a!!o

ad"ance against the undran portion for a maximum of 9( da$s) pro"ided8

%ndran #a!ance is in conformit$ ith the norma! !e"e! of #a!ance !eft undran in the

particu!ar !ine of export su#3ect to a maximum of 1(< of the export "a!ue) and

The exporter pro"ides an undertaking that six months from the date of shipment of goods he

i!! repatriate #a!ance proceeds of the shipment.

*H


29/37

Retention ;one$8

imi!ar!$ under certain contracts) foreign #u$ers retain a sma!! portion of the #i!! amount up to an

agreed period to ena#!e themse!"es to #e satisfied a#out the 0ua!it$ of the items supp!ied. 4d"ance

against such retention mone$ can #e a!!oed to the exporters pro"ided the retention mone$ is

repatriated to India ithin '6( da$s from the date of export. uch ad"ance carries interest at

concessi"e rate up to a maximum of 9( da$s.

4s regards post shipment credit not supported #$ !etter of credit) post shipment EIB-+ co"er is

genera!!$ o#tained against commercia! and po!itica! risks. These co"ers pro"ide credit enhancements

to the Bank #$ ensuring that a good portion of BankAs !oss arising from the exporter not discharging

his !ia#i!ities cou!d #e made good #$ E.

Export Bi!! Rediscounting EBR/8

RBI formu!ated the scheme of JRediscounting of Export Bi!!s 4#roadA #$ 4uthorised dea!ers to

make a"ai!a#!e to the exporters post shipment finance at internationa! rates of interest. %nder the

scheme) exportersA #i!!s are discounted at the post shipment stage and simu!taneous!$ rediscounted

a#road #$ the #ank to raise foreign currenc$ funds that are app!ied to !i0uidate the under!$ing +F

!oan. Both sight and usance #i!!s are discounted under the EBR scheme.

The scheme of EBR is operati"e at on!$ the designated #ranches on!$. Exporter customers of non-

designated #ranches can a"ai! the EBR faci!it$ at the nearest designated #ranch.

EBR- E!igi#i!it$8

4!! exporters are e!igi#!e to co"er their #i!!s dran under ,s) non-credit #i!!s under

sanctioned !imits under the scheme.

Exporters a"ai!ing +F shou!d in"aria#!$ a"ai! EBR faci!it$ to discount the re!ati"e export

#i!!s.

Both demand and issuance #i!!s are e!igi#!e for co"erage. EBR faci!it$ is norma!!$ a"ai!a#!e

for a maximum period of 1H( da$s. If the #i!!s discounted are not paid on the 1H(th da$)

extension can #e permitted on!$ ith appro"a! of RBI.

If an exporter does not a"ai! +F or rupee E+) he can a"ai! EBR faci!it$.

4!so exporters a"ai!ing rupee E+ can a"ai! EBR faci!it$.

EBR- urrenc$8

*9


30/37

The scheme is restricted to four ma3or currencies. The$ are8

% :o!!ar

+ound ter!ing

E%RD

&apanese Ken

ross urrenc$ sett!ements are a!so permitted8

For examp!e) exporters ha"ing , or export order in iss Francs or Ita!ian ,ira can a!so a"ai!

+F and EBR in an$ of the four designated currencies. For cross currenc$ dis#ursements) #oth

+F and EBR shou!d #e a"ai!ed in the same designated currenc$. The exchange risk in cross

currenc$ dis#ursements is #e #orne #$ the exporters.

Rate of Interest8

The rate of interest app!ica#!e as per RBI guide!ines is *(( #asis points o"er six months ,IBDR.

;% L/ ad"ises the six month ,IBDR rate for the designated currencies that is % :o!!ar) E%RD)

+ound ter!ing and &apanese Ken.

Funding8

;% L/ is designated as the noda! centre to raise offshore funds and use onshore funds to fund the

rediscounting portfo!io. It maintains rediscounting !ine =ostro accounts to arrange for necessar$

funds ith the BankAs8

=assauAs office for % :o!!ars

Frankfurt office for Euro

,ondon office for +ound ter!ing

Tok$o office for &apanese Ken

Forard ontracts8

Forard ontracts can #e #ooked for the surp!us portion of EBR #i!! that is to #e con"erted in to

Indian rupees for credit to exporterAs account after ad3ustment of its foreign currenc$ portion to the

+F.

'(


31/37

Return of Export Bi!!s %npaid8

The EBR ad"ance that is a foreign currenc$ !oan is c!osed) hen the o"erseas #u$er pa$s the #i!! and

the export proceeds are rea!ied. But if an$ export #i!! discounted under EBR scheme is returned un-

paid) a sa!e entr$ is to #e put through at the pre"ai!ing TT se!!ing rate.

5ithho!ding Tax8

=o ithho!ding Tax is pa$a#!e if the interest on the foreign currenc$ !ine is remitted to the BankAs

on foreign offices. 4s !ines of credit a"ai!ed for this purpose is on!$ from the BankAs foreign

offices) the exporters ma$ not pa$ ithho!ding Tax.

EBR- :irect :iscounting8

Exporters can arrange for themse!"es a !ine of credit ith an o"erseas #ank or an$ other agenc$

inc!uding a factoring agenc$/ through a #ank in India direct!$ to discount their export #i!!s su#3ect

to the condition that discounting of export #i!!s is routed through the designated #ank authoried

dea!ers from hom the packing credit faci!it$ has #een a"ai!ed.

If the #i!!s are routed through an$ other #ank authoried dea!er) the !atter i!! arrange to ad3ust the

amount outstanding under packing credit ith the concerned #ank out of the proceeds of the

rediscounted #i!!s.

5rite Df %nrea!ised Export Bi!!s Extension of Time ,imit to Rea!ise Export +roceeds e!f 5riteDff8

4n exporter ho has not #een a#!e to rea!ie the outstanding export dues) ma$ e!f 5rite off an

Export Bi!! upto the !imit specified #$ RBI i.e. 1(< of export #i!!s due during the current $ear.

4pproaching the 4:8

If the exporter has not #een a#!e to rea!ie the outstanding export dues) the$ ma$ approach an

4uthoried :ea!er ho had hand!ed the re!e"ant shipping documents ith appropriate supporting

documentar$ e"idence) ith a re0uest for rite off of the unrea!ied portion. 4uthoried :ea!er ma$

agree to such re0uest su#3ect to the fo!!oing conditions8

The export #i!! has #een outstanding for a period of more than one $ear.

4!! efforts ha"e #een taken to rea!ie the export proceeds and satisfactor$ documentar$

'1


32/37

e"idence is furnished in support of that.

The aggregate amount of rite off a!!oed #$ the authoried dea!er during a ca!endar $ear

does not exceed 1(< of the tota! export proceeds due during the current $ear.

BI Exporters o!d ard cheme8

BI ExporterAs o!d ard cheme as !aunched to meet orking capita! needs of exporters after--8

ENI; +o!ic$ *(('-(@ proposed to introduce o!d ard cheme for credit orth$ exporters

ith good track record.

Reser"e Bank of India announced a mode! scheme on the same !ines to #e imp!emented #$

the Banks after due customiation.

Feat$re o" SBI Exporter o%d Card Scheme0

E!igi#i!it$8

4ccounts c!assified as tandard 4sset for the !ast three consecuti"e $ears.

=o irregu!arities ad"erse features o#ser"ed in the conduct of the accounts. 2oe"er)

occasiona! o"er draings shou!d not #e construed as an ad"erse feature.

The exporter is not #!ack !isted #$ E and or inc!uded in RBIAs defau!ters aution !ist.

The unit has not incurred !osses during the !ast three consecuti"e $ears.

D"erdue Export Bi!!s are not in excess of 1(< of the pre"ious $earAs turno"er. This

condition has #een ai"ed for a $ear / In case of takeo"er of the account the extant take o"er norms shou!d #e comp!ied ith)

together ith the other e!igi#i!it$ norms !isted a#o"e.

reenfie!d +ro3ects i.e. a ne pro3ect in an existing industr$ hich an entrepreneur ho

cou!d #e an exporter endea"ors to esta#!ish from scratch and run profita#!$) ma$ a!so #e

considered on a case to case #asis.

Existing customers and ne connections are e!igi#!e for BI Exporters o!d card scheme.

+eriod of the ard8

BI Exporters o!d ard is issued for a period of ' $ears. It is reneed automatica!!$ for another

three $ears hen the pre"ious sanctioned !imit inc!uding stand#$ !imit steps up su#3ect to the

fu!fi!!ment of terms and conditions of sanction and the unit continuing to satisf$ the e!igi#i!it$

criterion for the scheme.

'*


33/37

Credit "aci%itie i* "orei/* C$rre*c&0

Exporters o!d ard ho!ders i!! #e gi"en priorit$ in sanction of +F ad"ances.

Aeme*t o" Credit 8imit0

;anufacturing Exporters and Trading Exporters ith pro3ected export turno"er upto Rs 1((

crore or #e!o imp!ified Turno"er Based 4ssessment ;ethod or =a$ak committee method

%nit ith #oth export and domestic components8

Turno"er Based 4ssessment method.

oftare Exporters8 ash Budget ;ethod prescri#ed in respect of softare finance)

irrespecti"e of 0uantum of turno"er.

%nits ith pro3ected export turno"er a#o"e Rs 1(( crore8 +ro3ected Ba!ance heet ;ethod or

ash Budget ;ethod.

%nits ith pro3ected export turno"er upto Rs 1(( crore or #e!o and pro3ected domestic

turno"er upto Rs * crore or #e!o8 Turno"er Base assessment method.

%nits ith pro3ected export turno"er upto Rs 1(( crore or #e!o and pro3ected domestic

turno"er a#o"e Rs * crore8 +ro3ected Ba!ance heet ash Budget method.

=on Fund #ased faci!ities re0uired #$ the exporter i!! #e assessed as per existing norms.

tand#$ ,imit8

tand#$ !imit of *(< ma$ #e sanctioned to a!! o!d card ho!ders #$ the appropriate authorit$ a!ong

ith sanction of assessed credit !imits to meet credit demands arising out of receipt of sudden orders.

Exporters i!! #e e!igi#!e to a"ai! stand #$ !imit for a maximum period of 1H( da$s in one instance.

tep up Faci!it$8

Exporters are e!igi#!e for a tep up faci!it$ of 1(< e"er$ $ear.

Rate of Interest8

Interest Rate on BI Exporters o!d ard i!! #e * #ps !oer than our norma! export credit for

#oth pre and post shipment finance. 5ith the introduction of Base Rate from 1st &u!$ *(1() the

interest rate app!ica#!e for +re hipment credit upto *7( da$s for a!! market segments i!! #e 1.*

international mktg project - pdf

Documents