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Export Finance: Group 5
Export Finance: Group 5
Group 5
AGENDA
1) Definition of Export Finance.
4) Eg. Products with (A) SBI and (B) ICICI and their Terms and
Conditions.
Receivables
Goods in process
Finished goods
Regulators
1) Ministry of Commerce
– DGFT
– ECGC
– Foreign Trade Policy
2) Ministry of Finance
– FEMA, 1999
RBI Norms
• Appraise to be the bank’s customer.
• Appraise should have the Exim code number allotted by the Director
General of Foreign Trade.
• Party’s name should not appear under the caution list of the RBI.
• Goods must be freely exportable i.e. not falling under the negative list.
If it falls under the negative list, then a valid license should be there
which allows the goods to be exported.
• Country with whom the Appraise wants to trade should not be under
trade barrier.
Types of Export Finance
• Pre-Shipment Finance
– Rupee Packing Credit
– Packing Credit in Foreign Currency
• Post-Shipment Finance
– Advance against Export bill purchased
– Advance against Export bill collection
– Advance against duty drawback
– Advance against consignment export
Documents Required
• If the goods to be exported are not under OGL (Open General Licence), the
exporter should have the required license /quota permit to export.
• Firm order or irrevocable L/C or original cable / fax / telex message exchange
between the exporter and the buyer.
• The confirmed order received from the overseas buyer should reveal the
information about the full name and address of the overseas buyer,
description quantity and value of goods (FOB or CIF), destination port and the
last date of payment.
Pre-Shipment Credit Stages
• Appraisal and Sanction of Limits: Banks Check Exporter profile, Product profile, political and
economic details about country, and the exporters license/ permit
• Disbursement of Packing Credit Advance: Normally allowed when all the documents are
properly executed. The quantum of finance depend on the FOB value of contract /LC or the
domestic values of goods, whichever is found to be lower. Normally insurance and freight
charged are also considered.
• Follow up of Packing Credit Advance: Exporter needs to submit stock statement giving all the
necessary information about the stocks. It is then used by the banks as a guarantee for
securing the packing credit in advance.
• Liquidation of Packing Credit Advance: Packing Credit Advance needs to be liquidated out of
the export proceeds of the relevant shipment, thereby converting pre-shipment credit into
post-shipment credit. In case the export does not take place then the entire advance can also
be recovered at a certain interest rate.
• Overdue Packing: Bank considers packing credit as an overdue, if the borrower fails to
liquidate the packing credit on the due date. And, if the condition persists then the bank
takes the necessary step to recover its dues as per normal recovery procedure.
Rupee Packing Credit
Packing Credit in Foreign Currency
Common discrepancies observed while granting PC
• To pay towards such expenses regarding participation in exhibitions and trade fairs in
India and abroad.
• Period : Can be short terms or long term, depending on the payment terms offered
by the exporter to the importer. Six months in case of cash exports.
Types of Post Shipment Finance
1.Export Bills Purchased/ Discounted:
•Export bills (Non LC Bills) is used in terms of sale contract/ order may be discounted
or purchased by the banks.
•It is used in indisputable export transactions and the proper limit has to be
sanctioned to the exporter .
• The State Bank Group, with over 16,000 branches, has the largest
banking branch network in India.
• SBI has Export Bill Rediscounting (EBR) for post shipment finance at
international rates of interest for a maximum period of 180 days.
Products with SBI
Pre-Shipment Finance
i. Packing Credit in Foreign currency
ii. Rupee Packing Credit
Post-Shipment Finance
i. To get export bills purchased /discounted / negotiated.
ii. To get advances against bills for collection.
iii. To receive advances against duty drawback receivable from the
Govt.
What are the special advantages in availing
PCFC & EBR from SBI?
• Vast network of designated branches to handle the schemes and also a well laid
out system of customers of non designated branches availing the schemes at the
nearest designated branches.
• No minimum amount is prescribed for drawals under PCFC and EBR schemes
• No withholding tax need be paid by the exporters, as the lines of credit for
funding PCFC and EBR are drawn by SBI from its own foreign offices.
• Competitive rates of interest for customers with good credit rating and high value
business.
The bank also has a network of 2,016 branches and about 5,219
ATMs in India.
Post-Shipment Finance
i. Available in the form of Export Bill Negotiation
To get export bills purchased /discounted / negotiated.
ii. To get advances against bills for collection.
iii. To receive advances against duty drawback receivable from the Govt.
Export Finance with ICICI Bank
Pre – Shipment Finance
- Usage:
1. Purchase / Import of Raw Materials
2. Processing of Goods
3. Packing for Export