Aditya Bhatt Anubhav Yadav Nitin Arora Shadab Mansoori

EXPORT FINANCE

Export Finance Post shipment Pre shipment Export Finance

Pre-shipment credit Provides the working capital for the purchase of raw material, processing, packaging, transportation, warehousing etc. of the goods prior to export. Provided in Indian Rupees and foreign currency.

Provides the working capital for the purchase of raw material, processing, packaging, transportation, warehousing etc. of the goods prior to export.

Provided in Indian Rupees and foreign currency.

'Pre-shipment credit' means any loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment, on the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods from India or any other evidence of an order for export from India having been placed on the exporter or some other person, unless lodgment of export orders or letter of credit with the bank has been waived .

Time period depending upon the circumstances of the individual case, such as the time required for procuring, manufacturing or processing Released in one lump sum or in stages, as per the requirement for executing the orders/LC.

Time period depending upon the circumstances of the individual case, such as the time required for procuring, manufacturing or processing

Released in one lump sum or in stages, as per the requirement for executing the orders/LC.

Pre shipment credit in Indian rupee

Eligibility for packing credit facility Merchant/manufacturer exporter Suppliers/sub suppliers of goods to merchant exporter Business associates of exporter/trading house

Merchant/manufacturer exporter

Suppliers/sub suppliers of goods to merchant exporter

Business associates of exporter/trading house

Packaging credit Available for Cash export-: Deemed export-:

Available for

Cash export-:

Deemed export-:

Condition for giving loan Against an confirmed export order Through LC

Against an confirmed export order

Through LC

Running account facility Without LC or confirm order Conditions Extended to those exporter having goodwill Units in EOU, SEZ, technology parks LC or confirm order has to be produced at reasonable time frame

Without LC or confirm order

Conditions

Extended to those exporter having goodwill

Units in EOU, SEZ, technology parks

LC or confirm order has to be produced at reasonable time frame

Amount granted It depends on FOB/Domestic value The amount granted is the one which is lesser of the two.

It depends on FOB/Domestic value

The amount granted is the one which is lesser of the two.

Time period of loan Max. 180 days or the contract time between buyer and seller. Extension of 90 days but no concession is given for that extended period. After 90 up to 120 days PLR + 4% After 360 days normal rate + penality charging from day 1.

Max. 180 days or the contract time between buyer and seller.

Extension of 90 days but no concession is given for that extended period.

After 90 up to 120 days PLR + 4%

After 360 days normal rate + penality charging from day 1.

Pre-shipment credit in foreign currency (PCFC) International rates applicable. Basic strategy is to avail the loans at international competitive rates. Extended in hard currencies. Lending rate to the exporter should not exceed 0.75 percent over LIBOR/EURO LIBOR/ EURIBOR excluding withholding tax.

International rates applicable.

Basic strategy is to avail the loans at international competitive rates.

Extended in hard currencies.

Lending rate to the exporter should not exceed 0.75 percent over LIBOR/EURO LIBOR/ EURIBOR excluding withholding tax.

Disbursement of PCFC Full or part is utilized for domestic inputs the spot rates are applicable. Minimum amount of transaction is left up to the bank convince

Full or part is utilized for domestic inputs the spot rates are applicable.

Minimum amount of transaction is left up to the bank convince

Cancellation/Non-execution of Export Order Exporter to repay the loan together with accrued interest Purchasing foreign exchange (principal + interest) from domestic market through the bank. Interest rate applicable to ECNOS is LIBOR+4% + penal rate.

Exporter to repay the loan together with accrued interest

Purchasing foreign exchange (principal + interest) from domestic market through the bank.

Interest rate applicable to ECNOS is LIBOR+4% + penal rate.

Rates applicable in PCFC Up to 180 days LIBRO/euro /EURIBOR +.75 From 180 to 360 days add 2% to initial rates (depends on bank)

Up to 180 days LIBRO/euro /EURIBOR +.75

From 180 to 360 days add 2% to initial rates (depends on bank)

Draw back of PCFC In case of the foreign currency depreciation the exporter does not get the benefit.

In case of the foreign currency depreciation the exporter does not get the benefit.

Duty draw back scheme Finance available to pay the imports of goods used for export products The customs take few weeks from the date of shipment to refund the customs duty.

Finance available to pay the imports of goods used for export products

The customs take few weeks from the date of shipment to refund the customs duty.

Post-Shipment Financing

Need For Post Shipment Financing Time gap b/w shipment of goods and collection of export proceeds Time consumed in process of preparing documents, submitting them to the bank and then forwarding of them by the bank……. Includes a minimum time period of 25 days To bridge this gap commercial banks provide post shipment financing

Time gap b/w shipment of goods and collection of export proceeds

Time consumed in process of preparing documents, submitting them to the bank and then forwarding of them by the bank…….

Includes a minimum time period of 25 days

To bridge this gap commercial banks provide post shipment financing

What is Post Shipment Financing…..???? can be defined as… “ any loan or advance granted or any other credit provided by an institution to an exporter of goods from India from the date of extending the credit after shipment of the goods to the date of realization of export proceeds and includes any loan or advance granted to an exporter, in consideration of, or on security of, any duty drawback or any other incentive receivable from Govt. of India.”

can be defined as…

“ any loan or advance granted or any other credit provided by an institution to an exporter of goods from India from the date of extending the credit after shipment of the goods to the date of realization of export proceeds and includes any loan or advance granted to an exporter, in consideration of, or on security of, any duty drawback or any other incentive receivable from Govt. of India.”

Features of Post Shipment Financing Available after the shipment of goods. Facility extended to exporters in whose name goods were shipped or in whose names documents are transferred. Can be short term or long term finance. Essentially a working capital finance granted on strength of a/c receivables. Facility is extended only the shipping documents which evidence that the goods have been shipped.

Available after the shipment of goods.

Facility extended to exporters in whose name goods were shipped or in whose names documents are transferred.

Can be short term or long term finance.

Essentially a working capital finance granted on strength of a/c receivables.

Facility is extended only the shipping documents which evidence that the goods have been shipped.

Classification Of Post Shipment Finance Purchase/Discount of export documents under confirmed orders/exports contracts etc. Advances against export bills sent on collection basis. Advances against exports on consignment basis. Advances against undrawn balance of exports. Advances against retention money related to exports. Advances against claims of duty drawback. Negotiation/Payment/Acceptance of export documents under letter of credit.

Purchase/Discount of export documents under confirmed orders/exports contracts etc.

Advances against export bills sent on collection basis.

Advances against exports on consignment basis.

Advances against undrawn balance of exports.

Advances against retention money related to exports.

Advances against claims of duty drawback.

Negotiation/Payment/Acceptance of export documents under letter of credit.

Purchase/Discounting of Export Documents drawn under Export Orders Negotiating banks provide finance by By purchasing documents drawn under D/P By discounting documents drawn under D/A Generally granted to customers enjoying Bill Purchasing/Discounting limits from the bank D/A bills due to their nature are unsecured and here banks run the risk of non-payment Thus, banks generally opt for ECGC schemes.

Negotiating banks provide finance by

By purchasing documents drawn under D/P

By discounting documents drawn under D/A

Generally granted to customers enjoying Bill Purchasing/Discounting limits from the bank

D/A bills due to their nature are unsecured and here banks run the risk of non-payment

Thus, banks generally opt for ECGC schemes.

ADVANCES AGAINST EXPORT SENT ON COLLECTION It may sometimes be possible to avail advances against export bills sent on collection. In such cases, the export bills are sent by the bank on collection basis as against their purchase/discounting by the bank. Advances against such bills is granted by way of a separate loan usually termed as “post shipment loan”.

It may sometimes be possible to avail advances against export bills sent on collection. In such cases, the export bills are sent by the bank on collection basis as against their purchase/discounting by the bank.

Advances against such bills is granted by way of a separate loan usually termed as “post shipment loan”.

ADVANCES AGAINST EXPORTS ON CONSIGNMENT BASIS When goods are exported on consignment basis at the risk of the exporter for sale to the agent/consignee and eventual remittance of sale proceeds to him by the agent or consignee, banks may agree to finance against such transactions subject to the customer enjoying specific limits to that effect. exporter consignee bank Overseas branch

When goods are exported on consignment basis at the risk of the exporter for sale to the agent/consignee and eventual remittance of sale proceeds to him by the agent or consignee, banks may agree to finance against such transactions subject to the customer enjoying specific limits to that effect.

ADVANCE AGAINST UNDRAWN BALANCES In certain lines of export, it is the trade practice that bills are not drawn for the full invoice value of goods but to leave small part undrawn for payment after adjustments due to difference in rates,wts,quality. Banks do finance against the undrawn balance if the undrawn balance is in conformity with the normal level of balance left undrawn in particular line of export subject to a maximum of 10% of the value of export.

In certain lines of export, it is the trade practice that bills are not drawn for the full invoice value of goods but to leave small part undrawn for payment after adjustments due to difference in rates,wts,quality.

Banks do finance against the undrawn balance if the undrawn balance is in conformity with the normal level of balance left undrawn in particular line of export subject to a maximum of 10% of the value of export.

RATES OF INTEREST 1. on demand bill for transit period -not exceeding BPLR minus 2.5 percentage points 2. Usance bill upto 90 days - not exceeding BPLR minus 2.5 percentage points. upto 365 days - for exporter under - do- gold card scheme

RATES OF INTEREST

1. on demand bill for transit period

-not exceeding BPLR minus 2.5 percentage points

2. Usance bill

upto 90 days - not exceeding BPLR

minus 2.5 percentage

points.

upto 365 days -

for exporter under - do-

gold card scheme

3. Against incentives - not exceeding BPLR receivable from minus2.5 government percentage points 4. Against undrawn balance upto 90 days - not exceeding BPLR minus 2.5 percentage point 5.Against retention money (for supplies portion only)- -do-

3. Against incentives - not exceeding BPLR

receivable from minus2.5

government percentage points

4. Against undrawn balance

upto 90 days - not exceeding BPLR

minus 2.5

percentage point

5.Against retention money

(for supplies portion only)- -do-

1.Who is eligible for post shipment finance? Exporter if the goods have been shipped by him directly. Exporter in whose name the export documents have been transferred. In case of deemed exports, finance is extended to the suppliers of goods who supply the goods to designated agencies

1.Who is eligible for post shipment finance?

Exporter if the goods have been shipped by him directly.

Exporter in whose name the export documents have been transferred.

In case of deemed exports, finance is extended to the suppliers of goods who supply the goods to designated agencies

2.On what basis is post shipment finance extended? Proof of shipment of goods In case of deemed exports, supplies made to designated agencies 3.What is the purpose of post shipment finance? Provide working capital finance to an exporter to bridge the gap between the shipment of goods and the realisation of export proceeds. In case of deemed exports, it is extended to finance the receivables against supplies made to designated agencies.

2.On what basis is post shipment finance extended?

Proof of shipment of goods

In case of deemed exports, supplies made to designated agencies

3.What is the purpose of post shipment finance?

Provide working capital finance to an exporter to bridge the gap between the shipment of goods and the realisation of export proceeds.

In case of deemed exports, it is extended to finance the receivables against supplies made to designated agencies.

4.What is the quantum of this finance? Can be extended upto 100% of invoice value of goods. If domestic value of goods exceeds the value of export order, finance for differentials can be extended if covered by receivables from government.

4.What is the quantum of this finance?

Can be extended upto 100% of invoice value of goods.

If domestic value of goods exceeds the value of export order, finance for differentials can be extended if covered by receivables from government.

5.What is the period for which this funding is available? In case of cash exports, can be granted upto period of 180 days. This facility is not available on deferred credit exports. 6.In which form this finance is extended? It is in the form of self liquidating finance as it is recovered out of export proceeds realised from the foreign buyer.

5.What is the period for which this funding is available?

In case of cash exports, can be granted upto period of 180 days.

This facility is not available on deferred credit exports.

6.In which form this finance is extended?

It is in the form of self liquidating finance as it is recovered out of export proceeds realised from the foreign buyer.