UNIFORM CUSTOMS AND PRACTICE FOR

DOCUMENTARY CREDIT (UCPDC 600)

➢ UCP 600 comes into effect on 01 July 2007

➢ Article 1: Application of UCP: UCPDC 600 rules will be applicable

when the credit expressly indicates that is subject to these
“Rules”(SWIFT changes have been made to bring in line)

➢ Article 2: Definition

➢ Article 3: Interpretation

• Where applicable, words in the singular include the plural

and in the plural include the singular
• A credit is irrevocable even if there is no indication to that
effect
• A document may be signed by handwriting, facsimile
signature, perforated signature, stamp, symbol or any other
mechanical or electronic method of authentication.
• Branches of a bank in different countries are considered to
be separate banks.
• Unless required to be used in a document, words such as
"prompt", "immediately" or "as soon as possible" will be
disregarded.
• The expression "on or about" or similar will be interpreted as
a stipulation that an event is to occur during a period of five
calendar days before until five calendar days after the
specified date, both start and end dates included.
• The words "to", "until", "till", "from" and "between" when used
to determine a period of shipment include the date or dates
mentioned, and the words "before" and "after" exclude the
date mentioned.
• The words "from" and "after" when used to determine a
maturity date exclude the date mentioned.
• The terms "first half" and "second half" of a month shall be
construed respectively as the 1st to the 15th and the 16th to
the last day of the month, all dates inclusive.
• The terms "beginning", "middle" and "end" of a month shall
be construed respectively as the 1st to the 10th, the 11th to
 the 20th and the 21st to the last day of the month, all dates
inclusive.

➢ ARTICE 4: CREDIT V. CONTRACTS :

• L/C is a separate transaction from the underlying contract.
• Banks should discourage any attempt to include contract
as Integral part of L/C

➢ ARTICLE 5: DOCUMENTS V. GOODS, SERVICES OR PERFORMANCE

• Banks deal with documents and not with goods, services or
performance to which the documents may relate.

➢ ARTICLE 6: AVAILABILITY, EXPIRY DATE AND PLACE FOR

PRESENTATION
• A credit must state the bank with which it is available or
whether it is available with any bank. A credit available with
a nominated bank is also available with the issuing bank.
• A credit must state whether it is available by sight payment,
deferred payment, acceptance or negotiation.
• Except as provided in sub-article 29 (a), a presentation by
or on behalf of the beneficiary must be made on or before
the expiry date.

➢ ARTICLE 7: ISSUING BANK GUARANTEE:

• Honour complying presentation made to nominated bank
or to issuing bank itself.
• Reimburse the nominated bank that has
honoured/negotiated and forwarded complying
documents to issuing bank.
• Irrevocably bound as of the time L/C is issued.
• Issuing Bank’s undertaking to reimburse nominated bank is
independent of its undertaking to beneficiary.
➢ ARTICLE 8: CONFIRMING BANK UNDERTAKING:
• Honour a complying presentation, or negotiate without
recourse.
• Reimburse nominated bank that has honoured/negotiated
and forwarded complying documents to confirming Bank.
• Irrevocably bound as of the time of confirmation.
•
➢ ARTICLE 9: ADVISING OF CREDITS AND AMENDMENTS:-
 • By advising the credit or amendment, the advising bank
signifies that it has satisfied itself as to the apparent
authenticity of the credit or amendment and that the
advice accurately reflects the terms and conditions of the
credit or amendment received.
• A bank utilizing the services of an advising bank or second
advising bank to advise a credit must use the same bank to
advise any amendment thereto
• If a bank is requested to advise a credit or amendment but
elects not to do so, it must so inform, without delay, the bank
from which the credit, amendment or advice has been
received.

➢ ARTICLE 10: AMENDMENTS :-

• Except as otherwise provided by article 38, a credit can
neither be amended nor cancelled without the agreement
of the issuing bank, the confirming bank, if any, and the
beneficiary.
➢ ARTICLE 11: Tele transmitted and Pre-Advised Credits and
Amendments

• Authenticated tele transmission of credit and amendment

deemed to be operative, unless otherwise stated.
• If tele transmission states “full details to follow”(or words of
similar effect), issuing bank must then issue the operative
credit or amendment in terms not inconsistent with the tele
transmission
• Preliminary advice of issuance of a credit or amendment
obligates the issuing bank to issue the operative credit or
amendment.

➢ ARTICLE 12: NOMINATION

• Nomination does not obligate nominated bank to honour.
• By nominating a bank to accept a draft or incur a deferred
payment undertaking, an issuing bank authorizes that
nominated bank to prepay or purchase a draft accepted
or a deferred payment undertaking incurred by that
nominated bank.
➢ ARTICLE 13: Bank-to-Bank Reimbursement Arrangements
• If a credit states that reimbursement is to obtained from a
reimbursing bank, it must state if the reimbursement is
 subject to the ICC rules for bank-to-bank reimbursements in
effect on date of issuance of the credit.
➢ ARTICLE 14 : Standard for Examination of Documents
• Must examine documents on their face to determine
compliance.
• Other than the commercial invoice, description of goods,
services or performance, may be stated in general terms.
• Disregards documents not required by L/C and may be
returned.
• Disregard non-documentary condition
• Documents must not be dated later than date of
presentation.

M Tu W Th Fr Sa S M Tu W

UCP 0 1 2 3 4 X X 5
600
• Max. Max of FIVE banking days following day of
presentation, not curtailed or affected by other events, for
scrutiny of documents.
• Presentation including an original transport documents
must be made not later than 21 calendar days after date
of shipment.
➢ ARTICLE 15: COMPLYING PRESENTATION
Issuing bank determines a It must honour and release
presentation is complying documents to the applicant
without delay

Confirming Bank determines a It must honour or negotiate and

presentation is complying forward documents to issuing bank
without delay

Nominated Bank determines a It must forward documents to

presentation is complying, and confirming bank or issuing bank
honours or negotiates without delay.

➢ ARTICLE 16: DISCREPANT DOCUMENTS, WAIVER AND NOTICE :

• Nominated/Confirming/Issuing bank may refuse to honour
or negotiate discrepant documents.
• Issuing Bank, in its sole judgement approach applicant for
waiver.
 • Notice of refusal must be given not later than close of fifth
bank days following day of presentation.
• After providing notice of refusal :
✓ The bank may return documents to presenter at any
time.
✓ Issuing Bank or confirming bank may claim refund for
any reimbursement made, with interest.
• IMPORTANT TIMELINES:
Document Examination: Max. 5 banking days
following the day of presentation.
Complying Presentation: When an issuing bank
determines that a presentation is complying, it must
honour.
Refusal: Notice of refusal by the close of the fifth
banking day following the day of presentation.

➢ ARTICLE 17: ORIGINAL DOCUMENTS AND COPIES

• At least one original must be presented
• L/C requires copies of documents, either original or copies
is acceptable.
• Documents “in duplicate”, “in two fold” or “in two copies”,
presentation of at least one original and remaining number
in copies is acceptable.
➢ ARTICLE 18: COMMERCIAL INVOICE
• Issued by beneficiary, made out in the name of applicant,
and need not be signed.
• Description of goods, services or performance must
correspond with L/C description.
• Invoice amount in excess of L/C –May be accepted by the
nominated bank, but must not be honoured or negotiated
in excess of L/C amount.
➢ ARTICLE 19: TRANSPORT DOCUMENTS COVERING AT LEAST TWO
DIFFERENT MODES OF TRANSPORT
➢ ARTICLE 20: BILL OF LADING
➢ ARTICLE 21: NON-NEGOTIABLE SEA WAYBILL
➢ ARTICLE 22: CHARTER BILL OF LADING
➢ ARTICLE 23: AIR TRANSPORT DOCUMENTS
➢ ARTICLE 24: ROAD, RAIL OR INLAND WATERWAY TRANSPORT
DOCUMENTS
➢ ARTICLE 25: COURIER RECEIPT, POST RECEIPT OR CERTIFICATE OF
POSTING
➢ ARTICLE 26: On Deck", "Shipper's Load and Count", "Said by
Shipper to Contain" and Charges Additional to Freight

• A transport document must not indicate that the goods are

or will be loaded on deck. A clause on a transport
document stating that the goods may be loaded on deck
is acceptable.
• A transport document bearing a clause such as "shipper's
load and count" and "said by shipper to contain" is
acceptable
• A transport document may bear a reference, by stamp or
otherwise, to charges additional to the freight.

➢ ARTICLE 27: CLEAN TRANSPORT DOCUMENTS

• A bank will only accept a clean transport document. A
clean transport document is one bearing no clause or
notation expressly declaring a defective condition of the
goods or their packaging. The word "clean" need not
appear on a transport document, even if a credit has a
requirement for that transport document to be "clean on
board".
➢ ARTICLE 28: INSURANCE DOCUMENTS AND COVERAGE
• Insurance Document means- Insurance Policy, Insurance
Certificate or declaration under open cover.
• It should be issued and signed by Insurance Company,
underwriter or their agents or their proxies.
• Signature by agent or proxy indicated as being for or on
behalf of Insurance Company or underwriter.
• It should be issued not later that shipment date, or it appears
from the document that cover is effective from a date not
later than shipment date.
• Min. 110% of CIF or CIP value, if L/C does not indicate
insurance coverage required.
• If CIF or CIP value cannot be determined from documents-
take the greater of the following :
 ✓ Amount for which honour or negotiation is requested;
or
✓ Gross Invoice value of goods.
➢ ARTICLE 29 : Extension of Expiry Date or Last Day of Presentation
• If the expiry date of a credit or the last day for presentation
falls on a day when the bank to which presentation is to be
made is closed for reasons other than those referred to in
article 36, the expiry date or the last day for presentation, as
the case may be, will be extended to the first following
banking day.
• If presentation is made on the first following banking day, a
nominated bank must provide the issuing bank or
confirming bank with a statement on its covering schedule
that the presentation was made within the time limits
extended in accordance with sub-article 29 (a).
• The latest date for shipment will not be extended as a result
of sub-article 29 (a).

➢ ARTICLE 30: Tolerance in Credit Amount, Quantity and Unit Prices

• The words "about" or "approximately" used in connection
with the amount of the credit or the quantity or the unit
price stated in the credit are to be construed as allowing a
tolerance not to exceed 10% more or 10% less than the
amount, the quantity or the unit price to which they refer.
• A tolerance not to exceed 5% more or 5% less than the
quantity of the goods is allowed, provided the credit does
not state the quantity in terms of a stipulated number of
packing units or individual items and the total amount of the
drawings does not exceed the amount of the credit.
• Even when partial shipments are not allowed, a tolerance
not to exceed 5% less than the amount of the credit is
allowed, provided that the quantity of the goods, if stated
in the credit, is shipped in full and a unit price, if stated in the
credit, is not reduced or that sub-article 30 (b) is not
applicable. This tolerance does not apply when the credit
stipulates a specific tolerance or uses the expressions
referred to in sub-article 30(a).
➢ ARTICLE 31: PARTIAL DRAWING OR SHIPMENTS:
• Partial drawing or shipment are allowed.
• Presentation of multiple sets of transport documents
evidencing on the same means or conveyance (e.g. vessel,
 aircraft) from different ports/places on different dates and
for the same journey to the same destination is not partial
shipment.
➢ ARTICLE 32: INSTALMENT DRAWING OR SHIPMENTS
• If a drawing or shipment by instalments within given periods
is stipulated in the credit and any instalment is not drawn or
shipped within the period allowed for that instalment, the
credit ceases to be available for that and any subsequent
instalment
➢ ARTILCE 33: HOURS OF PRESENTATION:
• A bank has no obligation to accept a presentation outside
of its banking hours
➢ ARTICLE 34: Disclaimer on Effectiveness of Documents
• A bank assumes no liability or responsibility for the form,
sufficiency, accuracy, genuineness, falsification or legal
effect of any document, or for the general or particular
conditions stipulated in a document or superimposed
thereon; nor does it assume any liability or responsibility for
the description, quantity, weight, quality, condition,
packing, delivery, value or existence of the goods, services
or other performance represented by any document, or for
the good faith or acts or omissions, solvency, performance
or standing of the consignor, the carrier, the forwarder, the
consignee or the insurer of the goods or any other person.

➢ ARTICLE 35: DISCLAIMER ON TRANSMISSION AND TRANSLATION:

• A bank assumes no liability or responsibility for the

consequences arising out of delay, loss in transit, mutilation
or other errors arising in the transmission of any messages or
delivery of letters or documents, when such messages,
letters or documents are transmitted or sent according to
the requirements stated in the credit, or when the bank may
have taken the initiative in the choice of the delivery service
in the absence of such instructions in the credit.
• If a nominated bank determines that a presentation is
complying and forwards the documents to the issuing bank
or confirming bank, whether or not the nominated bank has
honoured or negotiated, an issuing bank or confirming bank
must honour or negotiate, or reimburse that nominated
bank, even when the documents have been lost in transit
 between the nominated bank and the issuing bank or
confirming bank, or between the confirming bank and the
issuing bank.
• A bank assumes no liability or responsibility for errors in
translation or interpretation of technical terms andmay
transmit credit terms without translating them
➢ ARTICLE 36: FORCE MAJEURE:
• A bank assumes no liability or responsibility for the
consequences arising out of the interruption of its business
by Acts of God, riots, civil commotions, insurrections, wars,
acts of terrorism, or by any strikes or lockouts or any other
causes beyond its control.
• A bank will not, upon resumption of its business, honour or
negotiates under a credit that expired during such
interruption of its business.

➢ ARTICLE 37: DISCLAIMER FOR ACTS OF AN INSTRUCTED PARTY

• When act in accordance with instruction or on own
initiative, banks are not liable or responsible for any loss in
transit, mutilation or other errors arising in the transmission of
any message or delivery of letters of documents.
• Complying documents lost in transit, between:
✓ Nominated Bank and Issuing Bank/Confirming
Bank,or
✓ Confirming Bank and Issuing Bank
Issuing/Confirming bank must honour or negotiate, or
reimburse.
• Banks are not obligated to translate and may transmit
credit terms without translating them.
➢ ARTICLE 38: TRANSFERABLE CREDIT
• Transferable credit means a credit that specifically states it
is "transferable". A transferable credit may be made
available in whole or in part to another beneficiary ("second
beneficiary") at the request of the beneficiary ("first
beneficiary").
• A transferred credit cannot be transferred at the request of
a second beneficiary to any subsequent beneficiary. The
first beneficiary is not considered to be a subsequent
beneficiary
 • If a credit is transferred to more than one second
beneficiary, rejection of an amendment by one or more
second beneficiary does not invalidate the acceptance by
any other second beneficiary, with respect to which the
transferred credit will be amended accordingly. For any
second beneficiary that rejected the amendment, the
transferred credit will remain unamended.

➢ ARTICLE 39: ASSIGNMENT OF PROCEEDS

The fact that a credit is not stated to be transferable shall not affect the right
of the beneficiary to assign any proceeds to which it may be or may become
entitled under the credit, in accordance with the provisions of applicable
law. This article relates only to the assignment of proceeds and not to the
assignment of the right to perform under the credit
 INCOTERMS
Rule for any mode or modes of Rules for sea and Inland Waterway
transport Transport
EXW Ex Works FAS Free Alongside Ship
FCA Free Carrier FOB Free On Board
CPT Carriage Paid to CFR Cost and Freight
CIP Carriage and Insurance CIF Cost Insurance and Freight
Paid to
DPU Delivered at place
unloaded
DAP Delivered at Place-New
DDP Delivered Duty Paid

➢ EXW – EXWORKS: This term represents the seller’s minimum

obligation, since he only has to place the goods at the disposal of
the buyer. The buyer must carry out all tasks of export & import
clearance. Carriage and insurance is to be arranged by the
buyer.

➢ FCA – FREE CARRIER (…NAMED PLACE): This term means that the
seller delivers the goods, cleared for export, to the carrier
nominated by the buyer at the named place. Seller pays for
carriage to the named place.

➢ FAS – FREE ALONGSIDE SHIP (…NAMED PORT OF SHIPMENT): This

term means that the seller delivers when the goods are placed
alongside the vessel at the named port of shipment. The seller is
required to clear the goods for export. The buyer has to bear all
costs and risks of loss or damage to the goods from that moment.
This term can be used for sea transport only.

➢ FOB – FREE ON BOARD (…NAMED PORT OF SHIPMENT):This term

means that the seller delivers when the goods pass the ship’s rail
at the named port of shipment. This means the buyer has to bear
all costs and risks to the goods from that point. The seller must clear
the goods for export. This term can only be used for sea transport.
If the parties do not intend to deliver the goods across the ship’s
rail, the FCA term should be used.

➢ CFR – COST & FREIGHT (…NAMED PORT OF DESTINATION): This term

means the seller delivers when the goods pass the ship’s rail in port
of shipment. Seller must pay the costs and freight necessary to
bring the goods to the named port of destination, BUT the risks of
 loss or damage, as well as any additional costs due to events
occurring after the time of delivery, are transferred from seller to
buyer. Seller must clear goods for export. This term can only be
used for sea transport.

➢ CIF – COST, INSURANCE & FREIGHT (…NAMED PORT OF

DESTINATION):The seller delivers when the goods pass the ship’s rail
in the port of shipment. Seller must pay the cost and freight
necessary to bring goods to named port of destination. Risk of loss
and damage are the same as CFR. Seller also has to procure
marine insurance against buyer’s risk of loss/damage during the
carriage. Seller must clear the goods for export. This term can only
be used for sea transport.

➢ CPT – CARRIAGE PAID TO (…NAMED PORT OF DESTINATION): This

term means that the seller delivers the goods to the carrier
nominated by him but the seller must in addition pay the cost of
carriage necessary to bring the goods to the named destination.
The buyer bears all costs occurring after the goods have been so
delivered. The seller must clear the goods for export. This term may
be used irrespective of the mode of transport (including
multimodal).

➢ CIP – CARRIAGE & INSURANCE PAID TO (…NAMED PLACE

OFDESTINATION: This term is the same as CPT with the exception
that the seller also has to procure any mode of transportation.

➢ DPU– Delivered at Place Unloaded (…INSERT NAMED PLACE OF

DESTINATION): This terms means that the seller delivers the goods
and transfer risk to Buyer, when the goods once unloaded from
the arriving means of transport are placed at the disposal of the
Buyer & at the named place or destination or at an agreed point
within that place, if any point has been agreed. The contract of
carriage must be arranged by the Seller upto the agreed point of
delivery of destination. The seller is liable to unload the good from
the means of transportation. DPU requires the Seller to clear the
goods for export however the seller is under no obligation to clear
the goods for import or transit through third countries. Buyer must
arrange for Import customs clearance and customs duties.

➢ DAP – DELIVERED AT PLACE (…NAMED PLACE OF DESTINATION): This

rule may be used regardless of the mode of transport and may
also be used where more than one mode of transport is utilized.
 DAP means the seller delivers when the goods are placed at the
disposal of the buyer on the arriving means of carriage ready for
unloading at the names place of destination. The seller bears all
risks involved in bring the goods to the named place.

➢ DDP – DELIVERED DUTY PAID (…NAMED PORT OF DESTINATION): This

term represents maximum obligation to the seller. This term should
not be used if the seller is unable to directly or indirectly obtain the
import license. This term means the same as the DAP term with the
exception that the seller also will bear all costs and risks of carrying
out customs formalities including the payment of duties, taxes and
customs fees.
 LIBERALISED REMITTANCE SCHEME
➢ Under the Liberalized Remittance Scheme, Authorized Dealers may
freely allow remittances by resident individuals up to USD 2,50,000 per
Financial Year (April- March) for any permitted current or capital
account transaction or a combination of both. The Scheme is not
available to corporate, partnership firms, HUF, Trusts, etc.

➢ The Scheme is available to all resident individuals including minors. In

case of remitter being a minor, the Form A2 must be countersigned by
the minor’s natural guardian.

➢ Remittance under the scheme can be consolidated in respect of family

members subject to individual family members complying with its terms
and conditions. However, clubbing is not permitted by other family
members for capital account transactions such as opening a bank
account/ investment.

➢ In terms of RBI directions, it is mandatory for the resident individual to

provide his/her Permanent Account Number (PAN) to make remittance
under the Scheme.

➢ The permissible capital account transactions by an individual under LRS

are:

• opening of foreign currency account abroad with a bank;

• Acquisition of immovable property abroad, Overseas Direct

Investment (ODI) and Overseas Portfolio Investment (OPI), in
accordance with the provisions contained in Foreign Exchange
Management (Overseas Investment) Rules, 2022, Foreign
Exchange Management (Overseas Investment Regulations, 2022
and Foreign Exchange Management (Overseas Investment)
Directions, 2022.

• extending loans including loans in Indian Rupees to Non-resident

Indians (NRIs) who are relatives as defined in Companies Act,2013.

➢ The limit of USD 2,50,000 per Financial Year (FY) under the Scheme also
includes/subsumes remittances for current account transactions (viz.
private visit; gift/donation; going abroad on employment; emigration;
maintenance of close relatives abroad; business trip; medical treatment
abroad; studies abroad) available to resident individuals.
➢ Release of foreign exchange exceeding USD 2,50,000 requires prior
permission from the Reserve Bank of India.

➢ Private Visit: For private visits abroad, other than to Nepal and Bhutan,
any resident individual can obtain foreign exchange up to an
aggregate amount of USD 2,50,000 from an Authorised Dealer or FFMC,
in any one financial year, irrespective of the number of visits undertaken
during the year.

➢ Gift/Donation: Any resident individual may remit up-to USD 2,50,000 in

one FY as gift to a person residing outside India or as donation to an
organization outside India.

➢ Going Abroad on Employment: A person going abroad for employment

can draw foreign exchange up to USD 2,50,000 per FY from any
Authorized Dealer in India.

➢ Medical Treatment Abroad: Authorized Dealers may release foreign

exchange up to an amount of USD 2,50,000 or its equivalent per FY
without insisting on any estimate from a hospital/doctor. For amount
exceeding the above limit, Authorized Dealers may release foreign
exchange under general permission based on the estimate from the
doctor in India or hospital/ doctor abroad. In addition to the above, an
amount up to USD 250,000 per financial year is allowed to a person for
accompanying as attendant to a patient going abroad for medical
treatment/check-up.

➢ Facilities available to student for pursuing their studies abroad: - Foreign

exchange up to USD 2,50,000 or its equivalent to resident individuals for
studies abroad without insisting on any estimate from the foreign
University.

➢ The Scheme is not available for capital account remittances to countries

identified by Financial Action Task Force (FATF) as non-co-operative
countries and territories as available on FATF website www.fatf-gafi.org
or as notified by the Reserve Bank.

➢ Documentation by the remitter: The individual will have to designate a

branch of an AD through which all the remittances under the Scheme
will be made. The resident individual seeking to make the remittance
should furnish form A2 (Revised) for purchase of foreign exchange under
LRS. The Authorized Dealers may also prepare and keep on record
dummy Form A2, in respect of remittances less than USD 25,000.
➢ It is mandatory for resident individual to provide his/her PAN to make
remittances under LRS.

➢ Facility to grant loan in rupees to NRI/PIO close relative under the

scheme: Resident individual is permitted to lend to a Non-resident Indian
(NRI)/ Person of Indian Origin (PIO) close relative by way of crossed
cheque/ electronic transfer subject to the following conditions:

• The loan is free of interest and the minimum maturity of the loan is
one year;

• The loan amount should be within the overall limit under the
Liberalised Remittance Scheme of USD 2,50,000 per financial year.

• The loan shall be utilized for meeting the borrower’s personal

requirements or for his own business purposes in India. The loan is
prohibited not to be utilized, either singly or in association with other
person, namely in:

✓ The business of chit fund, or

✓ Nidhi Company, or

✓ Agricultural or plantation activities or in real estate business,

or

✓ construction of farm houses, or

✓ Trading in Transferable Development Rights (TDRs).

• The loan amount should be credited to the NRO a/c of the NRI / PIO.
Credit of such loan amount may be treated as an eligible credit to NRO
a/c;

• the loan amount shall not be remitted outside India; and

• Repayment of loan shall be made by way of inward remittances

through normal banking channels or by debit to the Non-resident
Ordinary (NRO) / Non-resident External (NRE) / Foreign Currency Non-
resident (FCNR) account or out of the sale proceeds of the shares or
securities or immovable property against which such loan was granted.

➢ A resident individual can make a rupee gift to a NRI/PIO who is a relative

of the resident individual by way of crossed cheque /electronic transfer.
The amount should be credited to the Non-Resident (Ordinary) Rupee
Account (NRO) a/c of the NRI /PIO.
➢ The applicants should have maintained the bank account with the bank
for a minimum period of one year prior to the remittances for capital
account transactions. If the applicant seeking to make the remittances
is a new customer of the bank, Authorised Dealers should carry out due
diligence on the opening, operation and maintenance of the account.
Further, the Authorised Dealers should obtain bank statement for the
previous year from the applicant to satisfy themselves regarding the
source of funds. If such a bank statement is not available, copies of the
latest Income Tax Assessment Order or Return filed by the applicant may
be obtained.

➢ The remittances made under this Scheme will be reported in FETERS in

the normal course.

➢ Remittances under LRS to IFSC (International Financial Service Centre):

( vide. RBI cir. RBI/2023-24/45 A.P. (DIR Series) Circular No. 06 dt June 22,
2023)
Presently, remittances to IFSCs under LRS can be made only for making
investments in securities in terms of A.P. (DIR Series) Circular No. 11 dated
February 16, 2021. In view of the gazette notification no. SO 2374(E)
dated May 23, 2022 issued by the Central Government, it is directed that
Authorised Persons may facilitate remittances by resident individuals
under purpose ‘studies abroad’ as mentioned in Schedule III of Foreign
Exchange Management (Current Account Transactions) Rules, 2000 for
payment of fees to foreign universities or foreign institutions in IFSCs for
pursuing courses mentioned in the gazette notification ibid.
 Foreign Trade Policy (FTP) – 2023 HIGHLIGHTS
➢ The Foreign Trade Policy 2023 being announced to provide the
policy (FTP 2015-20) continuity and a responsive framework.

➢ The schemes sanctioned under the policy will be honoured for the
tenure for which they are sanctioned even if the schemes are
foreclosed.
➢ Subsequent revision of the policy not linked to any date and shall
be done as and when required.
➢ Incorporating feedback from Trade and Industry to streamline
processes and update FTP, from time to time.

➢ Introduction of Duty Remission Schemes:

Scheme for Remission of Duties and Taxes on Exported

Products (RoDETP) and Remission of State and Central Taxes and
Levies (RoSCTL) notified with the objective to remit the taxes paid
on the notified goods exported – based on the global taxation
“taxes/ duties should not be exported”.

➢ Continuation of Duty Exemption Schemes

Duty Free input/ raw material from Overseas Supplier or

through domestic supplier being ensured through Advanced
Authorisation / DFIA scheme. Technological upgradation through
duty free import or indigenous sourcing of capital goods under
Export Promotion Capital Goods (EPCG) Scheme.

➢ EASE OF DOING BUSINESS

• Digitization of Applications pertaining to FTP: Export promotion

schemes processes for managing the lifecycle of AA/ EPCG/
DFIA/ Import/ Export licensing made completely paperless and
online.

• Automatic System- Based Approval of FTP Applications

• Process Re-engineering undertaken for streamlining as well as

automatic processes.

➢ EXPORT PROMOTION INITIATIVES

• Internationalization of Trade in Rupees

 International Trade Settlement in INR allowed, and changes
introduced in the FTP for grant of export benefits & fulfilment of
Export Obligation for export realizations in INR as per RBI.

• Merchanting Trade Reform

✓ Provisions for merchanting trade to be introduced under FTP

✓ To boost merchanting activities from India–where goods do not

touch Indian border. The merchant buys from one country and
supplies to another country while based in India

✓ Expected to facilitate merchanting trade from India making

India a trade hub

EXPORT PROMOTION INTIATIVES: Four new Towns of Export

Excellence (TEE) are being declared in addition to the already
existing 39 towns of export excellence.

➢ TOWN OF EXPORT EXCELLENCE: Objective being Development

and growth of Export Production Centers. A number of towns have
emerged as dynamic industrial clusters contributing handsomely
to India’s export. It is necessary to grant recognition to these
industrial clusters with a view to maximize their potential and
enable them to move up the value chain and also to tap new
markets.

➢ Selected towns producing goods of Rs. 750 Crore or more may be

notified as TEE based on potential for growth in exports. However,
for TEE in Handloom, Handicraft, Agriculture and Fisheries sector,
threshold limit would be Rs.150 Crore.

➢ District Export Promotion Committees - Institutional Mechanism at

District Level to be developed. The District Export Action Plan
(DEAP) may be prepared for each district. 2-3 high potential
products/services from the districts may be prioritised and
comprehensive plan for their export growth may be prepared. It
may include the support required by the local industry in boosting
their manufacturing and exports with impetus on supporting the
industry from the production stage to the exporting stage. The
 DEAPs may also include specific quantifiable targets to be
achieved in the short term and long term.

➢ Indian Trade Classification (Harmonized System)[ITC (HS)] : ITC (HS)

is a compilation of codes for all merchandise / goods for export/
import. Goods are classified based on their group or sub-group at
2/4/6/8 digits. ITC (HS) is aligned at 6 digit level with international
Harmonized System goods nomenclature maintained by World
Customs Organization (http://www.wcoomd.org). However, India
maintains national Harmonized System of goods at 8 digit level
which may be viewed by clicking on ‘Downloads’ at
http://dgft.gov.in.

➢ An IEC(Importer and Exporter Code) is a 10-character alpha-

numeric number allotted to a person that is mandatory for
undertaking any export/import activities. With a view to maintain
the unique identity of an entity (firm/company/LLP etc.),
consequent upon introduction / implementation of GST, IEC will
be equal to PAN and will be separately issued by DGFT based on
an application. Application for obtaining IEC may be filed online
in ANF 2A with applicable fees and submitted with digital
signature.

➢ STEPS TO BOOST MANUFACTURING

• Prime Minister Mega Integrated Textile Region and Apparel Parks

(PMMITRA) scheme has been added as an additional scheme
eligible to claim benefits under CSP (Common Service Provider)
Scheme of Export Promotion Capital Goods Scheme (EPCG).
• Dairy sector to be exempted from maintaining Average Export
Obligation – to support dairy sector to upgrade the technology
• Battery Electric Vehicles (BEV) of all types, Vertical Farming
equipment, Waste-water Treatment and Recycling, Rainwater
harvesting system and Rainwater Filters, and Green Hydrogen are
added to Green Technology products–will now be eligible for
reduced Export Obligation requirement under EPCG Scheme
• Special Advance Authorization Scheme extended for Apparel
and Clothing sector to facilitate prompt execution of export
orders – Norms would be fixed within fixed timeframe.
• Benefits of Self-Ratification Scheme for fixation of Input-Output
Norms extended to 2 star and above status holders in addition to
Authorised Economic Operators at present.
 • Fruits and Vegetables exporters are being included for double
weightage for counting export performance under eligibility
criteria for Status House certification. This is in addition to existing
MSME sector who also get double weightage.

➢ STREAMLINING SCOMET PILICY

Policy for export of dual items under Special Chemicals, Organisms,

Materials, Equipment and Technologies (SCOMET) consolidated at
one place for ease of understanding and compliance by Industry.

➢ AMNESTY SCHEME

Amnesty scheme for one time settlement of default in export

obligation by Advance Authorization and EPCG authorization
holders being introduced.
All pending cases of the default in meeting Export Obligation (EO)
of authorizations mentioned can be regularized by the
authorization holder on payment of all customs duties that were
exempted in proportion to unfulfilled Export Obligation and interest
at the rate of 100% of such duties exempted. However, no interest
is payable on the portion of Additional Customs Duty and Special
Additional Customs Duty.

➢ STATUS CATEGORY (RECOGNITION TO EXPORTERS): -

Status Category Export Performance FOB/FOR (as

converted) Value (In US $ million)

One Star Export House 3

Two Star Export House 15

Three Star Export House 50

Four Star Export House 200

Five Star Export House 800

*
➢ Grant of Double Weightage: The exports by IEC holders under the
following categories shall be granted double weightage for
calculation of export performance for grant of status.
 • Micro, Small & Medium Enterprises (MSME) as defined in
Micro, Small & Medium Enterprises Development (MSMED)
Act 2006.

• Manufacturing units having ISO/BIS.

• Units located in North Eastern States including Sikkim and

Jammu & Kashmir.

• Units located in Agri Export Zones.

➢ Double Weightage shall be available for grant of One Star Export

House Status category only. Such benefit of double weightage
shall not be admissible for grant of status recognition of other
categories namely Two Star Export House, Three Star Export House,
Four Star export House and Five Star Export House.

➢ Privileges of Status Holder: A Status Holder shall be eligible for

privileges as under:

• Authorisation and Customs Clearances for both imports and

exports may be granted on self-declaration basis;

• Input-Output norms may be fixed on priority within 60 days

by the Norms Committee ;Special scheme in respect of
Input Output Norms to be notified by DGFT from time to
time, for specified status holder.

• Exemption from furnishing of Bank Guarantee for Schemes

under FTP, unless specified otherwise anywhere in FTP or
HBP;

• Exemption from compulsory negotiation of documents

through banks. Remittance / receipts, however, would be
received through banking channels;

• Two star and above Export houses shall be permitted to

establish Export Warehouses as per Department of Revenue
guidelines.

• Three Star and above Export House shall be entitled to get

benefit of Accredited Clients Programme (ACP) as per the
guidelines of CBEC (website: http://cbec.gov.in).
 • The status holders would be entitled to preferential
treatment and priority in handling of their consignments by
the concerned agencies.

• Manufacturers who are also status holders (Three Star/Four

Star/Five Star) will be enabled to self-certify their
manufactured goods (as per their IEM/IL/LOI) as originating
from India with a view to qualify for preferential treatment
under different preferential trading agreements (PTA), Free
Trade Agreements (FTAs), Comprehensive Economic
Cooperation Agreements (CECA) and Comprehensive
Economic Partnership Agreements (CEPA). Subsequently,
the scheme may be extended to remaining Status Holders.

• Manufacturer exporters who are also Status Holders shall be

eligible to self-certify their goods as originating from India as
per Para 2.108 (d) of Hand Book of Procedures.

• Status holders shall be entitled to export freely exportable

items (excluding Gems and Jewellery, Articles of Gold and
precious metals) on free of cost basis for export promotion
subject to an annual limit of Rupees One Crore or 2% of
average annual export realization during preceding three
licensing years, whichever is lower. For export of pharma
products by pharmaceutical companies, the annual limit
would be 2% of the average annual export realisation
during preceding three licensing years. In case of supplies
of pharmaceutical products, vaccines and lifesaving drugs
to health programmes of international agencies such as UN,
WHO-PAHO and Government health programmes, the
annual limit shall be upto 8% of the average annual export
realisation during preceding three licensing years. Such free
of cost supplies shall not be entitled to Duty Drawback or
any other export incentive under any export promotion
scheme.

➢ Export Promotion Capital Goods Scheme(EPCG) EPCG Scheme

allows import of capital goods (except those specified in negative
list in Appendix 5 F) for pre-production, production and post-
production at zero customs duty Capital goods imported under
EPCG Authorisation for physical exports are also exempt from IGST
and Compensation Cess, leviable thereon under the
subsection(7) and subsection (9) respectively, of section 3 of the
 Customs Tariff Act, 1975 (51 of 1975), as provided in the notification
issued by Department of Revenue. Alternatively, the Authorisation
holder may also procure Capital Goods from indigenous sources
in accordance with provisions of FTP.

➢ “Deemed Exports” for the purpose of this FTP refer to those

transactions in which goods supplied do not leave country, and
payment for such supplies is received either in Indian rupees or in
free foreign exchange. Supply of goods as specified in Paragraph
7.02 of FTP 2023 shall be regarded as “Deemed Exports” provided
goods are manufactured in India.

➢ "Counter Trade" means any arrangement under which

exports/imports from /to India are balanced either by direct
imports/exports from importing/exporting country or through a
third country under a Trade Agreement or otherwise.
Exports/Imports under Counter Trade may be carried out through
Escrow Account, Buy Back arrangements, Barter trade or any
similar arrangement. Balancing of exports and imports could
wholly or partly be in cash, goods and/or services.

➢ "Domestic Tariff Area (DTA)" means area within India which is

outside SEZs and EOU/ EHTP/STP/BTP.

➢ ITC (HS) refers to Indian Trade Classification (Harmonized System)

at 8 digits.

➢ "Jobbing" means processing or working upon of raw materials or

semi-finished goods supplied to job worker, so as to complete a
part of process resulting in manufacture or finishing of an article or
any operation which is essential for aforesaid process.

➢ Registration-Cum-Membership Certificate"(RCMC) means

certificate of registration and membership granted by an Export
Promotion Council/Commodity Board/Development Authority or
other competent authority as prescribed in FTP or Handbook of
Procedure.

➢ "SION" means Standard Input Output Norms notified by DGFT.

 EXPORT CREDIT
PRE SHIPMENT/PACKING CREDIT RUPEE EXPORT CREDIT:

➢ 'Pre-shipment / Packing 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 / working capital expenses towards
rendering of services 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 /
services from India or any other evidence of an order for export
from India having been placed on the exporter or some other
person, unless lodgement of export orders or letter of credit with
the bank has been waived.
➢ If pre-shipment advances are not adjusted by submission of export
documents within 360 days from the date of advance, the
advances will cease to qualify for prescribed rate of interest for
export credit to the exporter ab initio.
➢ The maximum permissible period of pre-shipment and post-
shipment export credit sanctioned by banks from one year to 15
months, for disbursements made upto July 31,2020 during the
Covid 19 period.
➢ Liquidation of Packing Credit:
• The packing credit / pre-shipment credit granted to an
exporter may be liquidated out of proceeds of bills purchased,
discounted etc., thereby converting pre-shipment credit into
post-shipment credit. It can also be repaid / prepaid out of
balances in Exchange Earners Foreign Currency A/c (EEFC A/c)
as also from rupee resources of the exporter to the extent exports
have actually taken place.
• This could be with export documents relating to any other
order covering the same or any other commodity exported by
the exporter, after ensuring by banks that it is commercially
necessary and unavoidable.
• The existing packing credit may also be marked-off with
proceeds of export documents against which no packing credit
has been drawn by the exporter.
• These relaxations should not be extended to transactions of
sister / associate / group concerns.
 ➢ ‘Running Account’ facility in respect of any commodity, without
insisting on prior lodgment of letters of credit / firm export orders,
depending on the bank’s judgement regarding the need to
extend such a facility and subject to the following conditions:
(a) Banks may extend the ‘Running Account’ facility only to those
exporters whose track record has been good as also to Export
Oriented Units (EOUs)/ Units in Free Trade Zones / Export
Processing Zones (EPZs) and Special Economic Zones (SEZs)

(b) In all cases where Pre-Shipment Credit ‘Running Account’

facility has been extended, letters of credit / firm orders should
be produced within a reasonable period of time to be
decided by the banks.

(c) Banks should mark off individual export bills, as and when they
are received for negotiation / collection, against the earliest
outstanding pre-shipment credit on 'First in First Out' (FIFO)
basis. Needless to add that, while marking off the pre-
shipment credit in the manner indicated above, banks should
ensure that export credit available in respect of individual pre-
shipment credit does not go beyond the period of sanction or
360 days from the date of advance, whichever is earlier.

(d) Packing credit can also be marked-off with proceeds of

export documents against which no packing credit has been
drawn by the exporter.
(e) Running account facility should not be granted to sub-
suppliers.

POST SHIPMENT/BILL’s LIMIT RUPEE EXPORT CREDIT :-

➢ 'Post-shipment Credit' means any loan or advance granted or any
other credit provided by a bank to an exporter of goods / services
from India from the date of extending credit after shipment of
goods / rendering of services to the date of realization of export
proceeds. , and includes any loan or advance granted to an
exporter, in consideration of, or on the security of any duty
drawback allowed by the Government from time to time.

➢ The period of realization of export proceeds is determined by FED,

banks are advised to adhere to the direction issued under Foreign
Exchange Management Act, 1999, as amended from time to
time.
➢ Types of Post-Shipment Credits: Post-shipment advance can
mainly take the form of:
i. Export bills purchased/discounted/negotiated.
ii. Advances against bills for collection.
iii. Advances against duty drawback receivable from
Government.

➢ Liquidation of Post Shipment Credit : Post-shipment credit is to be

liquidated by:
✓ The proceeds of export bills received from abroad in
respect of goods exported / services rendered.
✓ It can also be repaid / prepaid out of balances in
Exchange Earners Foreign Currency Account (EEFC A/C.
✓ From proceeds of any other unfinanced (collection) bills.
✓ In order to reduce the cost to exporters (i.e. interest cost on
overdue export bills), exporters with overdue export bills
may also extinguish their overdue post shipment rupee
export credit from their rupee resources. However, the
corresponding GR form will remain outstanding and the
amount will be shown outstanding in XOS statement. The
exporter’s liability for realisation would continue till the
export bill is realised.
➢ PERIOD:
• In the case of demand bills, the period of advance shall be
the Normal Transit Period (NTP) as specified by FEDAI.
• In case of usance bills, credit can be granted for a
maximum duration of 365 days from date of shipment
inclusive of Normal Transit Period (NTP) and grace period, if
any.
• It is obligatory on the part of the exporter to realize and repatriate
the full value of goods / software / services to India within a
stipulated period from the date of export, as under:

• For all exporters including Units in Special Economic Zones (SEZs),

Status Holder Exporters, Export Oriented Units (EOUs), Units in
Electronic Hardware Technology Parks (EHTPs), Software
Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further
notice, it shall be nine months. For Warehouses realised outside
India, It is 15 months.

• The maximum permissible period of pre-shipment and post-

shipment export credit sanctioned by banks from nine
 months to 15 months, for disbursements made upto July
31,2020 during Covid 19 period.
• 'Normal transit period' means the average period normally
involved from the date of negotiation / purchase / discount
till the receipt of bill proceeds in the Nostro account of the
bank concerned, as prescribed by FEDAI from time to time.
It is not to be confused with the time taken for the arrival of
goods at overseas destination.
➢ Overdue Bill :
• in the case of a demand bill, is a bill which is not paid before
the expiry of the normal transit period, plus grace period
and
• in the case of a usance bill, is a bill which is not paid on the
due date

➢ Advance against undrawn Balances of Export Bills : In respect of

export of certain commodities where exporters are required to
draw the bills on the overseas buyer upto 90 to 98 percent of the
FOB value of the contract, the residuary amount being 'undrawn
balance' is payable by the overseas buyer after satisfying himself
about the quality/ quantity of goods. Payment of undrawn
balance is contingent in nature. Banks may consider granting
advances against undrawn balances based on their commercial
judgement and the track record of the buyer.
➢ Post shipment advance against Duty Drawback Entitlements:
Banks may grant post-shipment advances to exporters against
their duty drawback entitlements and covered by ECGC
guarantee as provisionally certified by Customs Authorities
pending final sanction and payment.
• The advance against duty drawback receivables can also
be made available to exporters against export promotion
copy of the shipping bill containing the EGM Number issued
by the Customs Department. Where necessary, the
financing bank may have its lien noted with the designated
bank and arrangements may be made with the designated
bank to transfer funds to the financing bank as and when
duty drawback is credited by the Customs.

➢ ECGC Whole Turnover Post-Shipment Guarantee Scheme: The

Whole Turnover Post-Shipment Guarantee Scheme of the (ECGC)
Ltd provides protection to banks against non-payment of post-
 shipment credit by exporters. The salient features of the scheme
may be obtained from ECGC Ltd.
• As the post-shipment guarantee is mainly intended to
benefit the banks, the cost of premium in respect of the
Whole Turnover Post-Shipment Guarantee born by banks,
whereas pre-shipment guarantee premium born by
Exporter.

➢ Deemed Exports-Rupee Export Credit:-“Deemed Exports” for the

purpose of this FTP (Foreign Trade Policy) refer to those
transactions in which goods supplied do not leave country, and
payment for such supplies is received either in Indian rupees or in
free foreign exchange.
• Banks are permitted to extend rupee pre-shipment and
post-shipment rupee export credit.
• Banks may also extend rupee: -
(i) Pre-shipment credit, and

(ii) Post-supply credit (for a maximum period of 30 days

or upto the actual date of payment by the receiver
of goods, whichever is earlier)
• The post-supply advances would be treated as overdue
after the period of 30 days. In cases where such overdue
credits are not liquidated within a period of 180 days from
the notional due date (i.e. before 210 days (180+30) from
the date of advance), the banks are required to charge, for
such extended period, interest prescribed for the category
'ECNOS' (Export Credit Not Classified Else Where) at post-
shipment stage. If the bills are not paid within the aforesaid
period of 210 days, banks should charge from the date of
advance, the rate prescribed for 'ECNOS'-post-shipment.

EXPORT CREDIT IN FOREIGN CURRENCY:-

PRE-SHIPMENT IN FOREIGN CURRENCY (PCFC): Authorized dealers have

been permitted to extend pre-shipment Credit in Foreign Currency
(PCFC) to exporters for domestic and imported inputs of exported goods
at Overnight Alternate Reference Rate (ARR) related rates of interest.

➢ The exporter will have the following options to avail of export

finance:
a. to avail of pre-shipment credit in rupees and then the post-
shipment credit either in rupees or discounting/ rediscounting of
 export bills under EBR (Rediscounting of Export Bills Abroad)
Scheme.
b. to avail of pre-shipment credit in foreign currency and discount/
rediscounting of the export bills in foreign currency under EBR
Scheme.
c. to avail of pre-shipment credit in rupees and then convert
drawals into PCFC at the discretion of the bank.

➢ SOURCES OF FUNDS FOR BANKS :-

• Foreign currency balances available with the bank in
Exchange Earners Foreign Currency (EEFC) Accounts,
Resident Foreign Currency Accounts RFC(D) and Foreign
Currency (Non-Resident) Accounts could be utilised for
financing the pre-shipment credit in foreign currency.
• Foreign currency balances available under Escrow
Accounts and Exporters Foreign Currency Accounts for the
purpose,

➢ Period of Credit :
• The PCFC will be available for a maximum period of 360
days.
• The maximum permissible realization period of post-
shipment export credit sanctioned by banks from nine
months to 15 months, for disbursements made upto July
31,2020 during Covid 19 period
• If no export takes place within 360 days, the PCFC will be
adjusted at T.T. selling rate for the currency concerned.
• For extension of PCFC within 180 days, banks are free to
determine the interest rates.

POST SHIPMENT EXPORT CREDIT IN FOREIGN CURRENCY:

REDISCOUNTING OF EXPORT BILL ABROAD SCHEME (EBR):-

➢ Banks may utilize the foreign exchange available in Exchange

Earners Foreign Currency Accounts (EEFC), Resident Foreign
Currency Accounts (RFC), Foreign Currency (Non-Resident)
Accounts (Banks) Scheme, to discount usance bills and retain
them in their portfolio without resorting to rediscounting. Banks are
also allowed to rediscount export bills abroad at rates linked to
international interest rates at post-shipment stage.
➢ Banks may arrange a "Bankers Acceptance Facility" (BAF) for
rediscounting the export bills without any margin and duly
covered by collateralised documents.

➢ ELIGIBILITY CRITERIA :-
• The Scheme will cover mainly export bills with usance period
upto 180 days from the date of shipment (inclusive of
normal transit period and grace period, if any).
• In case borrower is eligible to draw usance bills for periods
exceeding 180 days as per the extant instructions of FED,
Post-shipment Credit under the EBR may be provided
beyond 180 days.

➢ CUSTOMER SERVICE AND SIMPLIFICATION OF PROCEDURES:-

➢ Gold Card Scheme for Exporters :
• All creditworthy exporters, including those in small and
medium sectors, with good track record would be eligible
for issue of Gold Card by individual banks as per the criteria
to be laid down by the latter.
• Gold Card under the Scheme may be issued to all eligible
exporters including those in the small and medium sectors
who satisfy the laid down conditions
• The scheme will not be applicable for exporters blacklisted
by ECGC or having overdue bills in excess of 10% of the
previous year’s turnover
• Gold Card holder exporters, depending on their track
record and credit worthiness, will be granted better terms of
credit including rates of interest than those extended to
other exporters by the banks.
• Applications for credit will be processed at norms simpler
and under a process faster than for other exporters.
• In-principle' limits will be sanctioned for a period of 3 years
with a provision for automatic renewal subject to fulfillment
of the terms and conditions of sanction.
• A stand-by limit of not less than 20 per cent of the assessed
limit may be additionally made available to facilitate
urgent credit needs for executing sudden orders. In the
case of exporters of seasonal commodities, the peak and
off-peak levels may be appropriately specified.
• Requests from card holders would be processed quickly by
banks within 25 days / 15 days and 7 days for fresh
 applications / renewal of limits and ad hoc limits,
respectively.
• Gold Card holders would be given preference in the matter
of granting of packing credit in foreign currency.
• Banks would consider waiver of collaterals and exemption
from ECGC guarantee schemes on the basis of card
holder's creditworthiness and track record.
• The facility of further value addition to their cards through
supplementary services like ATM, Internet banking,
International debit / credit cards may be decided by the
issuing banks.
• Gold Card holders, on the basis of their track record of
timely realization of export bills, will be considered for
issuance of foreign currency credit cards for meeting urgent
payment obligations, etc.
• Banks may ensure that the PCFC requirements of the Gold
Card holders are met by giving them priority over non-
export borrowers with regard to granting loans out of their
FCNR (B) funds, etc.

TIME LIMIT FOR SANCTION OF EXPORT CREDIT PROPOSAL:

➢ The sanction of fresh/enhanced export credit limits should be
made within 45 days from the date of receipt of credit limit
application with the required details/information supported by
requisite financial/operating statements. In case of renewal of
limits and sanction of ad hoc credit facilities, the time taken by
banks should not exceed 30 days and 15 days respectively, other
than for Gold Card holders.
➢ No additional interest is to be charged in respect of ad hoc limits
granted by way of pre-shipment/post-shipment export credit.
➢ All rejections of export credit proposals should be brought to the
notice of the Chief Executive of the bank explaining the reasons
for rejection.
➢ The export credit limits should be excluded for bifurcation of the
working capital limit into loan and cash credit components.
➢ It is necessary to submit a review note at quarterly intervals to the
Board on the position of sanction of credit limits to exporters. The
note may cover among other things, number of applications (with
quantum of credit) sanctioned within the prescribed time-frame,
number of cases sanctioned with delay and pending sanction
explaining reasons therefor
 ➢ Banks provide 'Line of Credit' normally for one year which is
reviewed annually. In case of delay in renewal, the sanctioned
limits should be allowed to continue uninterrupted and urgent
requirements of exporters should be met on ad hoc basis
➢ In case of established exporters having satisfactory track record,
banks should consider sanctioning a 'Line of Credit' for a longer
period, say, 3 years, with in-built flexibility to step-up/step-down
the quantum of limits within the overall outer limits assessed.
➢ In case of export of seasonal commodities, agro-based products,
etc., banks should sanction Peak/Non-peak credit facilities to
exporters.
➢ Banks should permit interchangeability of pre-shipment and post-
shipment credit limits.
➢ Term Loan requirements for expansion of capacity, modernization
of machinery and up gradation of technology should also be met
by banks at their normal rate of interest.
➢ Banks should not insist on submission of export order or LC for every
disbursement of pre-shipment credit, from exporters with
consistently good track-record. Instead, a system of periodical
submission of a statement of LCs or export orders in hand should
be introduced.
➢ Banks should consider reducing at least some of the intervening
layers in the sanctioning process. It would be desirable to ensure
that the total number of layers involved in decision-making in
regard to export finance does not exceed three.
➢ Exports from India should also be accompanied by the KPC to the
effect that no conflict/ rough diamonds have been used in the
process. The KPCs would be verified/validated in the case of
imports/ exports by the Gem and Jewellery Export Promotion
Council.

(INTEREST EQUALIZATION SCHEME FOR RUPEE EXPORT CREDIT, RBI circular no.
DBR.Dir.BC.No. 62/04.02.001/2015-16 dated 04.12.2015, DBR.Dir.BC.no.
09/04.02.001/2018-19 dated 29.11.2018, DBR.Dir.BC. No. 22/04.02.001/2018-19
dated 11.01.2019 and latest being DOR.STR.REC.93/04.02.001/2001-22 dated
08.03.2022)

➢ The Government has approved the Interest Equalization Scheme for Pre
and Post Shipment Rupee Export Credit with effect from 1st April, 2015 for
5 years.
w.e.f. January 2, 2019, merchant exporters are also included.
➢ The details of the Scheme are as follows:
• The rate of interest equalization @ 3% per annum will be available on
Pre Shipment Rupee Export Credit and Post Shipment Rupee Export
Credit.
• w.e.f. November 02, 2018 Interest Equalization rate is 5% in respect of
exports by the Micro, Small & Medium Enterprises (MSME) sector
manufacturers under the Interest Equalization Scheme on Pre and
Post Shipment Rupee Export Credit.
• Scheme made available to merchant exporters w.e.f. 2nd January
2019 with Interest Equalization at 3%.
• At present scheme is valid upto March 31, 2024 or till further review,
whichever is earlier.
• Banks are required to completely pass on the benefit of interest
equalization, as applicable, to the eligible exporters upfront and
submit the claims to RBI for reimbursement, duly certified by the
external auditor.
➢ Ministry of Commerce and Industry will place funds in advance
with RBI for a requirement of one month and reimbursement would
be made on a monthly basis through a revolving fund system.
➢ Extended scheme, however, not available for beneficiaries of any
Production Linked Incentive (PLI) scheme of the Government.
 TYPE OF LETTER OF CREDIT :
1) Irrevocable Credit : A credit issued subject to the UCPDC, 2007
REVISIONS, ICC publication no. 600 (“UCP”) is irrevocable credit even if
there is no indication to that effect(Article – 2 & 3).

The Irrevocable Credit is a definite undertaking of the issuing Bank and

cannot be amended or cancelled without the agreement of the issuing
bank, confirming bank (if any) and the Beneficiary. (Article – 7 & 8)
2) Payment Credit is a sight credit, which will be paid at sight basis against
presentation of requisite documents to the designated bank. In
payment Credit, Beneficiary may or may not be called upon to draw a
Draft.

3) Deferred Payment Credit is a usance Credit where, payment will be

made by designated bank, on respective due dates, determined in
accordance with stipulations of the credit, without the drawing of Drafts.
In a way, it is an extended payment credit. Under deferred payment
credit, no draft will be called upon to be drawn, but it must specify the
maturity at which payment is to be made and how such maturity is to
be determined.

4) Acceptance Credit is similar to deferred payment credit except for the

fact that in this credit drawing of a usance draft is a must. Under this
credit, Drafts must be drawn on the specified bank/drawee for specified
tenor, and the designated bank will accept the Drafts and honour the
same, by making payment on the due dates.

5) Negotiation Credit can be a sight Credit or a usance Credit. Draft is

usually drawn in a negotiation credit. The Draft can be drawn as per
credit terms. In negotiation Credit, the nomination can be restricted to
a specific bank or it may allow free negotiation in which case it is called
as “Freely Negotiable Credit” whereby any bank who is willing to
negotiate can do so.

6) Transit Credit: In normal credit, the Credit issuing bank would be from the
country of the buyer(Applicant) and the credit will be advised to the
beneficiary in another country through a local bank(i.e. bank in the
beneficiary’s country). But in Transit Credit, the services of a bank in a
third country (i.e., neither the buyer’s country nor seller’s country) would
be utilized. This generally happens when an issuing bank has no
correspondent relations with any bank in the Beneficiary’s country. This
 type of credit may also be issued by small countries whose credits may
not be readily acceptable in another country.

7) Reimbursement Credit: Generally credits issued are denominated in the

currency of either the Applicant’s country or the Beneficiary’s country.
But when a credit is issued in the currency of a third country, it is referred
to as Reimbursement Credit.

8) Transferable Credit: As the name indicates, it is a credit which can be

transferred by the original Beneficiary in favour of a Second Beneficiary
or several Second Beneficiary. As per Article 38 of UCP, Credit can be
transferred only if I is specifically stated as “Transferrable” in the credit.
Further, such Credit can be transferred only once(i.e. from the First
Beneficiary to a second Beneficiary only and not (thereafter) from the
Second Beneficiary to a third beneficiary) and subject only to the
original terms and conditions of the Credit excepting the amount of
credit, unit price, percentage of insurance terms, period of validity and
shipment.

9) Back- To- Back Credit is also called as countervailing Credit. When a

second set of credit is issued on the basis of a parent credit, the second
credit will be termed as ‘back – to – back’ Credit. As the name indicates,
it is a credit issued with the backing or against the security of another
credit. The original credit which is offered as security for issuing a back-
to-back Credit is called as overriding credit/principal credit.

10)Anticipatory Credit: Ordinarily, a Credit provides for payment to

beneficiary at post-shipment stage i.e. against shipping documents. But
in case of anticipatory credits, as the name suggests, payment is made
to beneficiary at pre-shipment stage in anticipation of his actual
shipment and submission of bills at a future date. The payment which is
provided through an anticipatory credit is generally a part or full amount
of credit to be adjusted at the time of submission of final documents. The
credit contains a special clause authorizing the bank to make advances
to the beneficiary which are recovered from the beneficiary out of the
proceeds of bills to be presented under the credit. There are two types
of anticipatory credit, namely :

• Red clause credit: This anticipatory credit contains a clause

providing for payment in advance for purchasing raw
materials/processing and / or packing the goods.
 • Green clause credit : It is an extended version of Red clause credit
in the sense that it not only provides for advance towards
purchase, processing and packing, but also for warehousing and
insurance charges at port when the goods are stored pending
availability of ship/shipping space.

11)Bill of Lading: This is a transport document representing movement of

goods by water (ocean and sea). There are three main functions of Bill
of Lading:-

a) It is an evidence of contract of affreightment

b) It is a receipt for the goods

c) It is a documents of title to goods.

A unique feature of the Bill of Lading is that it belongs to the restricted

class of documents which possess some of the qualities of negotiable
instruments. Hence, it is called a “QUASI NEGOTIABLE” instruments.
Though the title to the goods covered by Bill of Lading can be transferred
by endorsement and delivery of the instruments, it is still not a fully
negotiable instrument like a BOE, the simple reason being that it
represents the title to goods and is governed by Sales of Goods Acr,
whereas BOE represents title to money and is governed by NI Act. As per
sales of good act, when goods are transferred from one person to
another, the transferee gets no better title to the goods than that of the
transferor, whereas under NI Act the transferee gets a better title than
the transferor has, provided he takes it in god faith and for due
consideration. For these reasons a Bill of Lading is terms and “QUASI
NEGOTIABLE” instruments as its negotiation may not be complete and
free from qualifications.
I. Received for Shipment Bill of Lading: It is a Bill of Lading which
merely acknowledges that the goods have been received by
shipowners or their agents for shipment.

II. On Board Bill of Lading: This Bill of Lading acknowledges the

goods having been put on board a ship for shipment. Hence,
this type of Bill of Lading is a safer documents for the importer (
since it is an assurance that the goods are being carried by the
named ship) and is a good delivery under the sale contract for
an exporter. This bill of lading will have a notation “Shipped on
Board” or words to this effect.
 III. Short form Bill of Lading: One of functions of a Bill of Lading is
that it evidences underlying contract of carriage. Thus, a Bill of
Lading should have the terms and conditions of carriage
printed on it. But in case of short form bill of lading such terms
and conditions will not be stated on the Bill of Lading and even
if stated, it may be by reference to other documents or source.
Some of the Credits will specifically prohibits acceptance of
“Short form of bill of lading” or “blank back”.

IV. Clean Bill of Lading: A clean Bill of Lading is one which bears no
super imposed clause or notation which expressly declares the
defective condition of the goods or packaging. This bill of
lading indicates that “the carrier has received the goods in
apparent good order and condition.” Since the carrier acts as
bailee of the goods, by issuing a clean bill of lading, he has to
deliver the goods in the same good order and condition.

V. Claused Bill of Lading : This is also called as a Foul/Dirty/Unclean

Bill of Lading. It is the opposite of a clean bill of lading and
contains super-imposed clauses or reservations expressly
declaring the defective nature of goods, its packing etc.

VI. Through Bill of Lading: A bill of lading issued for the entire
voyage covering several modes of transport and (or)
transshipments is called a through Bill of Lading. This is used
generally when the goods have to take more than one mode
of transport. In this type of Bill of Lading there is no guarantee
of carriers for the safe carriage of goods.

VII. Straight Bill of Lading: A bill of lading which is issued directly in

the name of the consignee is called a straight bill of lading. In
this case the goods will be delivered to the named consignee.
This bill of lading does not require any endorsement either in
blank or otherwise by the shipper. From the banker’s point of
view this type of Bill of Lading is not safe.

VIII. Charter Party Bill of Lading: It is a Bill of Lading which is issued to

charter parties i.e. those parties who have hired the space in
the vessel either in full or in part. Charter Party Bill of Lading are
issued subject to terms and conditions agreed upon by the
hirers of the ship/shipspace and shipowners and is not subject
to Liner Bill of Lading terms and conditions. Charter may be
 (a) Time charter(i.e. for specified time)

(b) Voyage charter(i.e. for one or more voyages) and

(c) Mixed charter(i.e. for specified time and voyage)

IX. LASH BILL OF LADING (LIGHTER ABROAD SHIP B/L): It is a Bill of

Lading issued by operators stating that the goods are received
and put on board a barge to be carried and put on a parent
vessel.

X. House Bill of Lading/Seaway: This type of bill of lading is one

issued by generally an association of forwarding agencies or
non-vessel-owning carriers(shipping people) who combine
their resources to acquire and operate expensive transport
vessels for example, FIATA. Such bill of lading are safe only
when they are issued subject to ICC rules. But his liability of
carriers in this case is limited.

12)CHIPS: Clearing House Inter-Bank Payment System(In Newyork)

13)CHIPS-UID:-Clearing house Inter-bank Payment system-Universal

Identification code.

14)FED-WIRE:-Communication net work of federal reserve of US is FED-WIRE

15)CHAPS: Clearing house automated payment system(UK)

16)CHATS: Clearing house Automated Transfer System(Hongkong)

17) REUTER: Computer based data bank which provides access to real time
data.