Export Credit

Screen Title
Objectives
Screen Text
On completion of this module, you will be able to:
Describe the need for export
List the advantages of Export over FDI
Capitalise on the advantages of export finance

Explanation
This module introduces you to the basics of export finance and the need for export
finance for our country. It also familiarises you with the benefits of export finance for
the Bank and for the exporter.
Screen Title
India and World Trade Organisation
Screen Text
In response to the continuous pressure from the World Trade Organisation (WTO) to
further liberalise trade across countries, India has:
Progressively been bringing down the barriers to the inflow of goods (imports)
To gear up in terms of technology and efficiency, to exploit emerging

opportunities in the world markets
Thus, the country has to increase exports while maintaining imports at a healthy
level.
TIPS
India became a member of WTO in 1995.
Explanation
In adherence to World Trade Organisation, India liberalised its import policies. At the
same time, being a member nation it can take advantages to increase exports and
subsequently the forex reserves. That in turn calls for various regulatory and
facilitating institutions to promote exports from India.
Screen Title
India and World Trade
Screen Text
India's position in world trade is as follows:
In 2005, Indias market share stood at 1.1%.
The current share of service in Gross Domestic Product (GDP) is over 50% .
Thus, the country has to increase exports while maintaining import at a healthy level.
Explanation
As per the report given by Goldman Sachs, the export trends of Brazil, Russia, India
and China (BRIC) show that they will be the leading countries of the world by 2050.
Screen Title
Advantages of Export over FDI
Screen Text
At present, India has around $170 billion reserves.
A country can build and bank on its own savings only through exports. A significant
portion of country's reserve is:
Either borrowed at a high cost, or
Short Term Foreign Institutional Investment (FII)

In the form of Foreign Direct Investment (FDI), of relatively longer duration.
Though the forex reserve of the country is large, it is quite modest when compared to
the reserves held by some of the other Asian nations.
TIPS
Countries like Japan, Taiwan, have taken the export route and built significant
reserves, bulk of which, therefore, is earned and not borrowed.
Explanation
Though the forex reserve of the country is large, it is quite modest when compared to
the reserves held by some of the other Asian nations.
Screen Title
Need to Export
Screen Text
India needs to increase exports to:
Bring down the trade deficit

Increase its share in world trade
Make more Indian companies into global players to get a profitable return on the
surplus goods and services produced in the country.
Explanation
Importing oil and technology is a high priority of the country, for which forex reserve
is needed more through earnings than borrowed funds. Promoting exports provides
job opportunities to the qualified and skilled manpower.
Screen Title
Need to Export
Screen Text
The country's policy makers have realised the importance of exports and taken
appropriate measures to make exports competitive by providing incentives and
finance.
These incentives and subsidies:
Compensate for the losses occurring on account of the country's
infrastructural deficiencies
Counter the competitive advantages enjoyed by overseas competitors on
account of access to better technology, work practices, low-cost capital and
borrowed funds
TIPS
The refinance provided by the RBI to commercial banks is on certain terms and
conditions and up to certain limits.
Explanation
It is a regulatory requirement that commercial banks like SBI support export activity
by providing subsidised finance to the deserving exporters. In turn the Reserve Bank
of India provides refinance to such banks at concessional rates to compensate for the
cost incurred on account of subsidised lending.
Screen Title
Bank's Growth in Export Credit
Screen Text
The Bank's export credit is not keeping pace with the country's exports growth. Some
data for the same:
RBI's benchmark for commercial banks for export credit is 12% of net bank
credit whereas SBI's relative figures for export credit dispensed stood at
8.70% in March 2005 and 8.95% in March 2006.
Country's current exports growth is 20% and growing, while Bank's ratio of
Export Credit to Net Bank Credit is less than 12%.
To increase market share new budgets for export credit has been given to the
functionaries of the Bank.
TIPS
RBI's directive is to have need based finance to the export sector that the Bank
needs to utilise.
Explanation
The Bank's export credit is not keeping pace with the country's exports growth.
Therefore, there is a lot of potential which the Bank has to tap. If the Bank increases
export credit it will have enough funds for country's infrastructure development and
purchase of capital goods to make exports more competitive in international market
besides earning a handsome remuneration for itself.
Screen Title
Dimensions of Export Finance
Screen Text
Four dimensions of export finance are:
Credit
FEX
Insurance
Regulatory
Credit
Credit to be given to the exporter as the working capital limits to be sanctioned i.e.
how much loan to be given to the exporter.
FEX
Foreign Exchange or exchange control aspects of export are given by RBI and
supplemented by State Bank.
Insurance
The commercial and political risks associated with exports and its mitigation i.e. how
to reduce the risk. Marine (transit) risk is also to be covered.
Regulatory
The trade policy i.e. whether the exports are as per the trade policy of
the country.
Explanation
An understanding of export finance requires the study of issues relating to the
functional areas of credit, forex and insurance on one hand and regulatory matters
that concern trade control and management of foreign exchange on the other. Listed
on the screen are the dimensions of export finance. Click on the bulleted text to learn
more.
Screen Title
Characteristics of Export Finance
Screen Text
The characteristics of export finance are:
Self liquidation
Export order/Letters of Credit (LC)

Monitoring of End use
Country Risk
Correspondent Bank Risk
Importing Country Regulations
Adherence to time and quality
Price Competitiveness
Opinion Reports on buyer
Coverage of political and commercial risks
Explanation
Listed on the screen are the characteristics of export finance. Let us take a look at
each one, click on the next button to begin.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
Domestic credit is not self-liquidating but export finance can be liquidated by
discounting/purchasing the shipment documents by the exporter related to the
export credit. Click on the 'Next' button to continue
Screen Title
Screen Text
Self liquidation

Country Risk

Explanation
LC is more common in export finance than domestic credit. Click on the 'Next' button
to continue.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
As the credit is given at a concessional rate, the bank has to look into the usage of
credit to check whether it is used for the purpose it is taken for (the way end-user
uses funds). Click on the 'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
Countries are placed in/removed from the caution list by the Bank from time to time
due to changing risk perceptions. Click on the 'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
SBI deals with its own branch abroad or through a correspondent bank. Click on the
'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
The exporter needs to be clear that the product he exports is allowed to be imported
in the respective country. Also, as the USA is our major trading partner the exporter
needs to be aware of the US import regulations before exporting, that has gained
significance after 11th September 2001. The exporter needs to be sure that he is not
dealing with persons and organisations that are banned. The Bank circulates list of
persons and banned organisations.Click on the 'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Country Risk

Explanation
Time and quality is to be maintained, failing which, the entire consignment can be
rejected or the order may be cancelled. Export Inspection Council of India certifies
the goods/services fit for export. Click on the 'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
Opinion reports give opinion on the buyer's (importer's) credentials, bona fide reports
stating the credit worthiness of the buyer. It also gives information whether the
company exists abroad, its constitution and its payment records, etc. Click on the
'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Country Risk
Explanation
An outbreak of war, a civil war, a coup or an insurrection may block or delay payment for
goods exported. Economic difficulties or balance of payment problems may lead a
country to impose restrictions on either import of certain goods or on transfer of
payments for goods imported. In addition, the exporters have to face commercial risks of
insolvency or protracted default of buyers. The commercial risks of a foreign buyer going
bankrupt or losing his capacity to pay are aggravated due to the political and economic
uncertainties. Click on the Next button for the advantages of export finance.
Screen Title
Advantages of Export Finance
Screen Text
For the Bank, Export Finance has the advantages of:
Self liquidation
Profit through foreign exchange

Income from other related business
Refinance from RBI
Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

Explanation
Listed on the screen are the advantages of export finance over other credit and
advance facilities. Let us look at each one of them.
Screen Title
Screen Text
Self liquidation

Refinance from RBI
Explanation
I am back to explain the various advantage of Export Finance, so lets start ... Export
credit is liquidated by discounting/purchasing the shipment documents related to the
export credit, submitted by the exporter. Click on the 'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Refinance from RBI

Explanation
While converting export proceeds into rupees, the profit margin is built into the
exchange rate i.e. it is lower than the usual market rate. Click on the 'Next' button to
continue.
Screen Title
Screen Text
Self liquidation

Refinance from RBI

Explanation
Besides interest income on export finance and commission on export bills on income
can be derived from related business like import of raw material, machines, etc.,
which add value to the export product and issue of bank guarantees. Click on the
Next button to continue.
Screen Title
Screen Text
Self liquidation

Refinance from RBI

Explanation
As an incentive, RBI refinances the Bank with whatever the Bank has financed to the
exporter. Click on the 'Next' button to continue.
Screen Title
Screen Text
Self liquidation

Refinance from RBI

Explanation
ECGC covers the risk of exporters and financing bankers. It gives policies for exporters
and
guarantees
to
banks.
Bank can be liberal with regard to obtaining collateral , in case the export credit is
covered by ECGC.
Thats the end of my discussion on the advantages of export finance. Click on the Next
button to continue
Screen Title
State Bank of India's Loan Policy (July 2004) on Export Credit
Screen Text
The Bank's Loan Policy on Export Credit states that:
Export sector has been recognised as a thrust area considering the
importance and contribution of this sector to the economy. Therefore, the
sector is being presently extended finance at concessional rates, with
flexibility in financing norms.
No formula to determine quantum of finance under this policy. The guiding
principle is need-based finance, depending upon the exporter's requirement.
The period for which the Bank gives export credit under this policy depends
upon the manufacturing/trade cycle or specific requirement of the individual
export, normally not exceeding 180 days.
Explanation
Listed on the screen are State Bank of India's Loan policy decisions on export credit.
There is a lot of potential which the Bank has to tap so as to increase its market
share.
Screen Title
Facilities for Exporters
Screen Text
In export finance, the facilities given to exporter are as follows:
Pre-shipment finance in rupees
Post-shipment finance in rupees

Pre-shipment credit in foreign currency (PCFC)
Export Bills Rediscounting (EBR)
SBI Exporters Gold Card Scheme
Execution of Bid Bonds
Advance Payments Bank Guarantee
Performance Guarantees
Establishment of Letters of Credit
Arranging lines of credit in foreign countries

Export Credit to AEZ units
Trade Information Services
Forex Advisory Services
Explanation
Listed on the screen are the facilities that SBI provides for exporters. Each one is
discussed in subsequent modules.
Screen Title
Why Should the Bank Finance Exports?
Screen Text
Reasons why Bank should provide finance to exports are:
The increase of components like bill financing, export negotiations, demand
loans etc. in the Bank's asset portfolio improves the Bank's ability to manage
Asset-Liability mismatches more efficiently.
Increased opportunities become available at the branch level to earn interest
and other income through negotiation of bills, advising incoming LCs etc.
With inherent short term and time-bounded nature of export finance, one can
learn of possible defaults earlier than in the normal Cash Credit type of
advances.
Explanation
The promotion of export finance that is maturity-driven is in sync with the general
industry consensus to move gradually towards loan model of financing, which imparts
better discipline on the borrower and is also relatively easier to supervise and control.
Screen Title
Branches that Handle Export-Related Transactions
Screen Text
Branches equipped to handle the entire range of export related transactions are:
All the A and B category branches
Trade Finance CPCs

Explanation
Apart from A and B category branches, non-IB branches that are credit intensive (in
either network) may also handle the pre-shipment credit for their customers,
provided they have the resources and formalised arrangement with an A or B
category branch to handle the range of post-shipment transactions and connected
regulatory formalities.
Screen Title
Summary
Screen Text
Having completed the module, you should be able to:
Describe the need for export
List the advantages of Export over FDI
Capitalise on the advantages of export finance

Explanation
This module introduced you to the basics of export finance, the need for export
finance for our country and the benefits of export finance available to the Bank and
the exporter.
Institutional Framework for Delivering Export

Finance
Screen Title
Objectives
Screen Text
Classify institutions as regulatory and facilitating

List all regulatory institutions
Describe the function of both regulatory and facilitating institutions
Explanation
This module introduces you to different institutions connected with export finance,
and their functions.
Screen Title
Types of Institutions
Screen Text
The conduct of the country's export activity is regulated, monitored, promoted and
financed by various institutional arrangements having distinct functions to perform.
These institutions have been classified into:
Regulatory institutions
Facilitating Institutions
Explanation
The regulatory and facilitating institutions together provide the enabling environment
to carry out export and its related activities. This classification of institutions is based
on the exact nature of role performed by such institutions.
Screen Title
Regulatory Institutions
Screen Text
The export activity of the country is regulated by the various provisions issued by:
Government of India (Ministry of Finance)

Reserve Bank of India (RBI)
Director General of Foreign Trade (DGFT) under the Ministry of Commerce.
Foreign Exchange Dealers Association of India (FEDAI)
Explanation
Listed on the screen are institutions that regulate the export activity in the country.
The subsequent screens discuss each one in detail.
Screen Title
Regulatory Institutions - Government of India (Ministry of Finance)
Screen Text

Director General of Foreign Trade (DGFT) under the Ministry of Commerce.
Explanation
The customs, on behalf of Govt. of India (ministry of Finance), clears the export
consignments. Click on the 'Next' button to continue.
Screen Title
Screen Text

Director General of Foreign Trade (DGFT) under the Ministry of
Commerce.
Explanation
Foreign Exchange Management Act, 1999 authorises RBI to frame rules for the
conduct of the foreign exchange business. The RBI's directions to the Authorised
Dealers (ADs), on the conduct of Export activity are contained in AP (DIR) circulars
issued from time to time. These are also summarised in "Master circulars" available
at their site - www.rbi.org.in. Click on the 'Next' button to continue.
Screen Title
Screen Text

Director General of Foreign Trade (DGFT) under the Ministry of
Commerce.
Explanation
Director General of Foreign Trade (DGFT) implements the Foreign Trade Policy framed
by the Ministry of Commerce of Government of India. Click on the 'Next' button to
continue.
Screen Title
Screen Text

Director General of Foreign Trade (DGFT) under
the
Ministry
of
Commerce.
TIPS
With liberalisation and upon the recommendation of Sodhani committee, the role of
FEDAI has been reconfigured, with members getting the freedom to determine their
service charges, etc. Other than this, the rules of FEDAI continue to govern various
forex activities including conduct of Derivative business by Banks.
Explanation
Foreign Exchange Dealers Association of India FEDAI is a association of all
authorised dealers such as Public Sector Undertaking (PSU) banks, foreign banks,
private sector banks, cooperative banks, and financial institutions. It lays down the
ground rules, based on RBI's directions, for the day-to-day conduct of foreign
exchange activity by ADs. It acts as facilitator between member banks and the RBI,
Export Organisations/ Chambers of Commerce and other bodies and also among the
members.
Now that you have learnt about the regulatory institutions, click on the 'Next' button
to check your understanding on regulatory institutions.
Screen Title
Facilitating Institutions
Screen Text
Various institutions that facilitate export activity in the country are:
EXIM Bank
Export Credit Guarantee Corporation
General Insurance Corporations (GIC)
Export Promotion Councils (EPC)
International Chamber of Commerce (ICC)
Dun and Bradstreet
Federation of India Exporters Organisation (FIEO)
Confederation of Indian Industry (CII)
Federation of Indian Chamber of Commerce and Industry (FICCI)
Explanation
Listed on the screen are institutions that facilitate the export activity in the country.
The subsequent screens discuss each one in detail.
Screen Title
Facilitating Institutions - EXIM Bank
Screen Text
EXIM Bank
Dun and Bradstreet
TIPS
Government of India established EXIM Bank in 1982.
Explanation
EXIM Bank promotes and facilitates foreign trade for India. It coordinates work of
various agencies engaged in financing exports and imports. It provides finance to
foreign governments, financial institutions and companies.
For commercial banks, it rediscounts short-term export bills and refinances Indian
companies on deferred payment terms. It also issues guarantees such as Advance
Payment Guarantees, Performance Guarantees, Guarantee for borrowings etc. Click
on the 'Next' button to proceed.
Screen Title
Facilitating Institutions - Export Credit Guarantee Corporation
Screen Text
EXIM Bank
Dun and Bradstreet
TIPS
The Government of India set up the Export Risks Insurance Corporation (ERIC) in July
1957. It was transformed into Export Credit & Guarantee Corporation Limited (ECGC)
in 1964. To bring the Indian identity into sharper focus, the Corporation's name was
once again changed to the present Export Credit Guarantee Corporation of India
Limited in 1983. ECGC is the fifth largest credit insurer of the world in terms of
coverage of national exports. The present paid up capital of the company is Rs.50040
Crores, which is expected to be enhanced to Rs.800 crores by the year 2005.
Explanation
Export Credit Guarantee Corporation of India Limited (ECGC) functions under the
administrative control of the Ministry of Commerce and is managed by a Board of
Directors representing Government, Banking, Insurance, Trade, Industry, etc. It
covers risks of exporters and financing bankers.
Screen Title
Facilitating Institutions - GIC
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
General Insurance Corporations provide the transit insurance cover to exporters. It is
commonly known as marine insurance cover. Click on the 'Next' button to proceed.
Screen Title
Facilitating Institutions - EPC
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
Ministry of Commerce set up Export Promotion Councils to promote exports of
different commodities. Export Promotion Councils help to interface with the ministry
on matters affecting their members and also represent their viewpoints to help
formulate policies and the country's response at international trade forums. It is
compulsory for every exporter to be a member of a council concerning his commodity
of export. Click on the 'Next' button to continue.
Screen Title
Facilitating Institutions - ICC
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
International Chamber of Commerce frames Uniform Rules for Collection (URC) for
handling Bills under Collection i.e. other than those under Letters of Credit. It frames
Uniform Rules for bank-to-bank Reimbursement (URR) for reimbursements between
banks for payments made under letters of credit.
It also frames Uniform Customs and Practices on Documentary Credits that are
guidelines to settle payments through the Documentary Credit. The current practices
are as per the publication numbered ICC 500. The RBI's rules issued under Foreign
Exchange Management Act (FEMA) have provided specifically that Letters of Credit
are to be issued under the provision of UCPDC 500. Click on the 'Next' button to
continue.
Screen Title
Facilitating Institutions - Dun and Bradstreet
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
Dun and Bradstreet is an international agency with whom SBI has a strategic alliance
to provide its branches with opinion reports on request, on foreign buyers.
The obtention of such reports is preferred if the bills are not drawn under Letters of
Credit. Such reports are also required to be taken for all high value LCs. Click on the
'Next' button to proceed.
Screen Title
Facilitating Institutions - FIEO
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
FIEO is the leading exporter's umbrella group in the country representing their
interests. It is also the apex body for all Export Promotion Councils. It also provides
trade information services to exporters and helps the member exporters in expanding
export volumes.
Screen Title
Facilitating Institutions CII
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
Confederation of Indian Industry (CII) is the apex body for Indian industry supporting
Indian business. Click on the 'Next' button to proceed.
Screen Title
Facilitating Institutions - FICCI
Screen Text
EXIM Bank
Dun and Bradstreet
Explanation
Federation of Indian Chamber of Commerce and Industry (FICCI) is a national
organisation that represents and aggregates multiple chambers of commerce.
Screen Title
Summary
Screen Text
Classify institutions as regulatory and facilitating

List all regulatory institutions
Describe the function of both regulatory and facilitating institutions
Explanation
This module introduced you to different institutions connected with export finance,
and their functions.
Foreign Trade Policy
Screen Title
Objectives
Screen Text
List the features and objectives of Foreign Trade Policy

Categorise goods and services
Apply duty exemption/remission schemes to imported goods based on the

purpose for which they are imported
Explanation
This module introduces you to various features and objectives of Foreign Trade Policy.
Screen Title
Foreign Trade Policy
Screen Text
Foreign Trade Policy is India's international trade policy. Foreign Trade Policy:
Is formulated by Director General of Foreign Trade, under Ministry of

Commerce and Industry, Government of India
Is given for a period of 5 years (2004 to 2009) for its broad guidelines
Requires that all exporters and importers have an 'Importer Exporter Code
Number.' (IEC No.), that are allotted by the DGFT. All IEC No. holders need to
declare their turnover for the previous year online to DGFT
Explanation
Foreign Trade Policy is notified in Gazette of India and amendments to the policy are
also given by means of Public Notices, orders and rules that are also notified in the
Gazette. The policy is fine-tuned every year to respond effectively to developments
and opportunities.
Screen Title
Objectives of Foreign Trade Policy
Screen Text
The objectives of the Foreign Trade Policy are:
To double Banks percentage share of global merchandise trade within the next
five years
To act as an effective instrument of economic growth by giving a thrust to
employment generation)
To double Banks percentage share of global merchandise trade within the next five
years
Presently India's share is 0.8%. Among the leading developing countries:
China's share is 5.9%

Singapore's share is 2.0%
Korea's share is 2.6%
To act as an effective instrument of economic growth by giving a thrust to

employment generation)
As a large portion of the exports are contributed by the small scale and cottage
industries sector, promotion of exports will provided a fillip to economic growth and
employment creation
Explanation
Listed on the screen are the objectives of Foreign Trade Policy. Click on the bulleted
text to learn more.
Screen Title
Categorisation of Goods and Services
Screen Text
Goods and Services are categorised as:
Free
Restricted
Canalised
Banned
Explanation
Listed on the screen are the categories of goods and services. Each one is discussed
in subsequent screens.
Screen Title
Screen Text
Free
Restricted
Canalised
Banned
Explanation
Goods and services that come under the 'Free' category are freely exported or
imported without any restriction. Click on the 'Next' button to continue.
Screen Title
Screen Text
Free
Restricted
Canalised
Banned
Explanation
Goods and services that come under the 'Restricted' category are exported or
imported only against license. Click on the 'Next' button to continue.
Screen Title
Screen Text
Free
Restricted
Canalised
Banned
Explanation
Goods and services that come under the 'Canalised' category are exported or
imported only through a canalising agency. For instance, petroleum products through
M/s. Indian Oil Corporation Limited (IOCL). Click on the 'Next' button to continue.
Screen Title
Screen Text
Free
Restricted
Canalised
Banned
Explanation
Goods and services under the 'Banned' category cannot be exported or imported.
Click on the 'Next' button to check your understanding on categories of goods and
services.
Screen Title
India Trade Classification (Harmonised System)
Screen Text
Instead of ITC (HS)'s published book one can get the same information from the
http://www.dgft.delhi.nic.in website.
Each list of Item of goods and services under Foreign Trade Policy have four columns
as mentioned below:
ITC(HS) Code
Item Description
Policy
Conditions(if any)
ITC(HS) Code
A eight digit code number of the ITC (HS) listed item.
Item Description
Description of the ITC (HS) listed item.
Policy
Category of the ITC (HS) listed item i.e. 'Free' or 'Restricted' or 'Canalized' or
'Banned'.
Conditions(if any)
Any special condition for the ITC (HS) listed item. Example - Actual user i.e. the
person who is importing the items should actually use the items for himself/herself.
This column is blank for most of the items of the ITC (HS).
Explanation
The categorized items of goods and services under EXIM Policy are listed in ITC (HS)
i.e. India Trade Classification (Harmonized System). Click on the 'Accessing the
Website' button to see a demo, as to how to make a query for a particular item of
goods and services under Foreign Trade Policy.
Screen Title
Duty Exemption/Remission Schemes
Screen Text
Advance License
DFRC
DEPB
EPCG
Advance Authorisation Scheme:

The Advance Authorisation Scheme:
Is issued for duty free import of inputs which are used for exports
Has an actual User Condition attached to it
Is non-transferable
DFIAS
The Duty Free Import Authorisation (DFIAS) scheme:
Is issued for import of inputs used in manufacture of goods; without payment

of customs duty
Has a minimum Value Addition (VA) of 25% condition attached to it
Value Addition i.e. the difference between the Value of Export
and Import should
be greater than or equal to 25%.
i.e. Export Value - Import value x
10025%
Export Value
Is valid till the end of the Foreign Trade Policy

Is freely transferable
DEPB
The Duty Entitlement Passbook Scheme (DEPB) scheme is:
Issued to neutralise the incidence of customs duty on the import content of

the export product i.e. whatever custom duty was paid on the export is
reimbursed by the way of a credit made
Freely transferable
Currently extended up to March 2007 and not beyond as it is WTO
incompatible
EPCG
The Export Promotion Capital Goods Scheme (EPCG) scheme:
Enables the exporter to import capital goods at only 5% customs duty as

compared to 12.5% regular custom duty
Has the Export Obligation attached to this i.e. the exporter has to export 8
times the duty saved within a period of 8 years (12.5% - 5% = 7.5%)
Is applicable for imports of second hand goods
Explanation
Under the incentive schemes provided in Foreign Trade Policy for the exporters, the
exporter either gets exemption or remission of custom duty on imported items used
for export purpose. Click on the tabs to learn more about the schemes.
Screen Title
Summary
Screen Text
Having completed this module, you should be able to:
List the features and objectives of Foreign Trade Policy

Categorise goods and services
Apply Duty Exemption/Remission Schemes to imported goods based on the

purpose for which they are imported
Explanation
This module introduced you to various features and objectives of Foreign Trade
Policy.
Export Finance - Pre-shipment Credit
Screen Title
Objectives
Screen Text
Classify pre-shipment credit into three categories

Categorise exporters eligible for packing credit
Assess Export Packing Credit (EPC) requirements
Monitor and control packing credit loans to ensure proper end use of the
amounts
Grant pre-shipment credit in foreign currency based on various criteria
Explanation
This module introduces you to pre-shipment finance and its types. It also introduces
you to various criteria for granting such advances to exporters.
Screen Title
Types of Export Finance
Screen Text
Export finance as administered by the Bank, is by and large based on RBI directives/
guidelines. Exporters obtain financial assistance from the bank at:
Pre-shipment stage (Export Packing Credit) and/or

Post-shipment stage
TIPS
Pre-shipment finance is also referred to as Export Packing Credit (EPC) or simply as
Packing Credit.
Explanation
Listed on the screen are the stages at which the exporters can obtain financial
assistance from the Bank. Each one is discussed in detail in subsequent screen.
Screen Title
Screen Text
Post-shipment stage
Explanation
Pre-shipment finance is extended as working capital for purchase of raw materials,
processing, packing, transportation, warehousing etc., of goods meant for exports.
This module introduces you to the types of pre-shipment credit and the Bank's
procedures to obtain it in detail.
Screen Title
Screen Text
Post-shipment stage
Explanation
Post-shipment finance is extended after shipment to bridge the time lag between the
shipment of goods and the realisation of proceeds. We will discuss post-shipment in
the next module.
Screen Title
Types of Pre-shipment Credit
Screen Text
Pre-shipment credit is classified as:
Packing Credit
Advance against Duty Drawback entitlements
Pre-shipment Credit in Foreign Currency (PCFC)
Explanation
Listed on the screen are pre-shipment credit extended to exporters. The subsequent
screens discuss each one in detail. Let us first look at packing credit facility.
Screen Title
Packing Credit - Categories of Exporters
Screen Text
The categories of exporters who are generally eligible for packing credit are:
These incentives and subsidies:
Manufacturer Exporter
Merchant Exporter
Star Export House
Manufacturer Exporter
Manufacturer exporter is an exporter who actually manufactures the goods and
exports in his own name.
Merchant Exporter
Merchant exporter is a trader (intermediary) who does not manufacture the goods
himself but buys the same from another supplier (domestic or foreign) who is the
actual manufacturer, and exports the same in his name. The exporter in such cases is
also called the Export Order Holder (EOH).
Star Export House

Export House is a manufacturer exporter or a merchant exporter with minimum
export turnover prescribed under the prevailing trade policy.
Explanation
Listed on the screen are categories of exporters to whom packing credit is granted as
a general rule. Click on the bulleted text to learn more.
Screen Title
Assessment of Export Packing Credit (EPC) - Basic Considerations
Screen Text
Export Packing Credit (EPC) is basically working capital finance. To appraise/assess a
packing credit proposal, the points to be kept in view are:
Integrity and creditworthiness of the borrower

Export performance for the last 2 to 3 years (where applicable)
Period for packing credit which is based on the trade/manufacturing
cycle should normally not exceed 180 days
Percentage of margin to be decided keeping in view the RBI guidelines for
liberal finance to export sector and also the various incentives received by the
exporter
TIPS
The assessment of EPC is to be made exactly on the lines of assessment done for
normal working capital advances i.e.on the basis of operating cycle, turnover or
projected balance sheet method as applicable. (I am sending a e-mail attachment to
illustrate how EPC is calculated. Please insert it here or elsewhere as appropriate)
Explanation
The concept of need-based finance is the guiding principle to decide the quantum of
finance to be granted to the exporter. The period for packing credit depends upon the
manufacturing cycle or specific requirements of the export, normally not exceeding
180 days. The percentage of margin is dependent on the nature of order, commodity
and capability of exporter.
Screen Title
Screen Text
The basic consideration in the assessment of EPC are:
Undertaking
Confirmed export order
preliminary information of contract
Packing credit for a sub-supplier
Security documents
Undertaking
The exporter should provide an undertaking that advance would be utilised for the
specific purpose of procuring/manufacturing/shipping, etc., the goods are meant for
export only as stated in the relative confirmed export order/LC.
Confirmed export order

The exporter should provide confirmed export order/contract or LC, etc. in original.
Preliminary information of contract

If the customer wants to avail packing credit advance against preliminary information
of contract whereby at a later stage the contract or LC, as the case may be, will be
received by him, an undertaking to the effect that the same will be produced to the
Bank within a reasonable time(say,within a month) for verification and endorsement.
If need is of a recurring nature, we may extend running account facility to

those
exporters with good track record
Packing credit for a sub-supplier

If the customer asking for packing credit is a sub-supplier and wants to supply the
goods to the Export House or Merchant Exporter, an undertaking from Export
House/Merchant Exporter stating that they have not/will not avail of packing credit
facility against the same transaction for the same purpose till the original packing is
liquidated.
Security documents
Examples of security documents are D.P. Note, packing credit agreement, letter of
guarantee where there is a guarantor or any other specified documents as stated in
the sanction advice of the Bank for the purpose.
Explanation
The eligible limit/loan amount is determined against the LC/firm order, after the
application from the borrower is checked for its completeness and is signed by the
authorised signatory of the firm/company. At the time of processing such proposals
certain documents need to be obtained from the applicant. Click on the tabs to learn
more about the documents.
Screen Title
Screen Text
Branches can make advances to exporters (suppliers) who do not have letters of
credit or firm orders in their own name and are routing their exports through the
Export Houses, if the branches can obtain:
A letter from the export house

Inland letter of credit in favour of the supplier
Bills drawn on the export house
A certificate from the export house
An undertaking
A letter of disclaimer from Star Export House
Explanation
credit or firm orders in their own name and are routing their exports through Export
Houses or agencies like the State Trading Corporation/ Minerals and Metals Trading
Corporation. To provide such advances the export house or the exporters fulfil the
criteria listed on the screen. Click on the 'Next' to continue.
Screen Title
Screen Text

An undertaking
Explanation
Branches should obtain from the export house a letter setting out the details of the
export order and the portion thereof to be executed by the supplier. Branches should
obtain a certificate that the export house has not obtained and will not ask for
packing credit facility from any bank in respect of such portion of the export order as
is to be executed by the supplier, till the sub-exporter is paid by them in full towards
value of such order. Click on the 'Next' to continue.
Screen Title
Screen Text

An undertaking
Explanation
The export house should open inland letter of credit in favour of the supplier giving
relevant particulars of the export letters of credit/orders and the outstandings in the
packing credit account should be extinguished by negotiation of bills under such
inland letters of credit. Click on the 'Next' to continue.
Screen Title
Screen Text

An undertaking
Explanation
If it is inconvenient for the export house to open such inland letters of credit in favour
of the supplier, the latter should be allowed to draw bills on the export house in
respect of the goods supplied for export and adjust packing credit advances from the
proceeds of such bills. Click on the 'Next' to continue.
Screen Title
Screen Text

An undertaking
Explanation
In case, the bills drawn are not accompanied by bills of lading or other export
documents, branches should obtain a certificate from the export house at the end of
every quarter that the goods supplied under this arrangement have in fact been
exported. This certificate should have particulars of bill date, bill amount and name of
the bank through which the bills have been negotiated. Click on the 'Next' to
continue.
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Screen Text

An undertaking
Explanation
In case, the bills drawn are not accompanied by bills of lading or other export
documents, branches should obtain from the supplier an undertaking that the
advance payment, if any, received from the export house against the export order
would be credited to the packing credit account. Now that you have gone through the
basic considerations in the assessment of Export Packing Credit, click on the 'Next'
for a quick recall. This is an interactive exercise for you to attempt. Type the
correct answer in the blank space provided for all and click the 'Submit' button.
Screen Title
Monitor and Control
Screen Text
Branches should monitor and control packing credit loans to ensure proper end use of
the amounts. This is done by disbursing advances:
In a phased manner
Directly through pay orders/drafts to suppliers
To borrower's account
In a phased manner
Advances should not be disbursed in lump sum amounts; instead they should be
disbursed in parts taking into account purpose and needs of the exporter, shipment
schedules, production cycles and other aspects. Also the progress made by exporters
in timely execution of export orders needs to be monitored.
Directly through pay orders/drafts to suppliers

To ensure, the end-use of funds, loan amount should be disbursed directly through
issue of pay orders/drafts to the suppliers by taking necessary authorisation letter
from the borrower. There are certain exceptions like few agricultural or marine
products that demand cash payments. In such cases, the sanction accorded by the
Sanctioning Authority should provide for it.
To borrower's account
Where direct disbursals are not possible, the proceeds are credited to borrower's
account and disbursals are supervised therefrom. If loan proceeds are credited to the
current account or cash credit account, cash withdrawals for small payments/labour
payments may be allowed.
Explanation
Branches should ensure proper end use of the amounts disbursed by the exporters,
since packing credit loans are granted at concessional rates of interest and specific
purpose oriented advances. Click on the bulleted text to learn more.
Screen Title
Monitor and Control
Screen Text
The borrowers should strictly adhere to all the instructions contained in the sanction
letter for the limit. They should also comply with rules regarding submission of stock
statement and insurance.
When disbursement is to be made in stages (depending upon the needs of the

exporter), the schedule of disbursement may be called for before granting the
advance.
Due date diary should be maintained showing the due dates of repayments and it
should be ensured that documents are received well in time or proper extension
applications are obtained from the exporter wherever necessary
Where stipulated, separate periodic stock statements for export stocks should be
obtained and stocks inspected.
ECGC premium should be paid at the prescribed periodicity. Wherever applicable, it

should be checked whether notification to ECGC/ ECGC approval is on record in cases
of:
Reporting of defaults
Nursing of accounts
Exports to restricted cover countries
If export takes place and the bill is purchased/ negotiated/discounted etc. such export
proceeds or any advance remittance received covering the relative export order
should be adjusted through the packing credit account and the relative packing credit
account should be closed. In this regard, if the exporter makes a request to adjust the
proceeds otherwise, it should not be granted.
For a proper control over the pre-shipment credit granted to exporters, branches
need to:
Maintain separate accounts in respect of each packing credit granted to an

exporter except for those with 'running account' basis
Liquidate the pre-shipment credit from the proceeds of the relative export bill
when purchased, negotiated or discounted
If the export order against which the advance is obtained is cancelled, then the
exporter will be unable to tender export documents for adjustment/ liquidation of the
advance by the relative export proceeds. As a result, the outstanding advance is
adjusted against the export bill drawn on some other importer either in the same
country or in any other country, provided the relative export bill is in respect of the
same goods for which pre-shipment credit was originally granted.
In certain cases of exports of ready-made garments, fabrics, etc, production of a

letter of credit is not the sole criterion to grant packing credit as it is based on Quota
Certificate/ allotment by Apparel Export Promotion Council (AEPC).Branches should:
Insist on exporters' to obtain Quota Certificates from the appropriate Export

Promotion Council within a reasonable time of permitting drawals
Insist on exporters' to obtain Quota Certificates from the appropriate Export
Promotion Council within a reasonable time of permitting drawals
Ensure that drawals are not availed entirely in anticipation of Quota
Ensure that the outstandings are liquidated from the export proceeds out of
the Quota in the presence of Quota restrictions
However, this restriction will no longer hold from 1/1/2005 after the quota
regime expires as part of WTO's Agreement on Textile and Clothing(ATC) to
which India is a signatory.
Explanation
Click on the images provided to learn more about monitoring controls used by
branches.
Screen Title
Security
Screen Text
As a general rule, export packing credit advances should be secured by pledge or
hypothecation of stocks. It may not be feasible for manufacturer-exporters having
extensive domestic operations and export business to segregate stocks meant for
export and pledge/hypothecate them separately to the Bank. In such cases, it is
adequate if it is ensured that the aggregate outstandings in domestic cash credit
account(s) and export packing credit account are fully covered by the advance value
of the stocks pledged/hypothecated to the Bank.
Explanation
In general, there should be no difficulty to obtain pledge or hypothecation of stocks
to the extent of bulk of the finance normally required to procure raw materials and
process them into finished goods or to purchase goods for export.
Screen Title
Collateral Security
Screen Text
Branches may obtain collateral security by means of third party guarantee/equitable
mortgage of immovable property. Branches should assess export credits on the
condition that:
It is need-based and not directly linked to the availability of collateral security
So long as the requirement is justified, it is not denied merely on the grounds

of non-availability of collateral security
Explanation
Collateral security is not mandatory. The branches may grant advance to exporters
with good performance and track record even in the absence of collateral security if
the requirement of credit limit is justified.
Screen Title
Guarantees and Policies of the ECGC
Screen Text
Bank has opted out of the 'Whole Turnover Packing Credit Guarantee' of ECGC with
effect from 1/7/2003 which earlier covered all packing credit advances. The bank
should now obtain Individual Packing Credit Guarantee(IPCG) on a case-to-case basis
if the obtention of such a guarantee from ECGC is part of the terms of sanction of the
packing credit. Remember that, ECGC policy/guarantee mitigates the credit risk for
the Bank and sometimes obviates the need for collateral secuiry
TIPS
Such guarantees are not needed for advances granted to public sector corporations
sponsored by the Central Government.
Explanation
The details of various types of guarantees and policies that are periodically issued by
ECGC are contained in Foreign Department circulars issued. Branches should be
guided by the instructions contained therein.
Screen Title
Period for Liquidation of Pre-shipment Advances
Screen Text
The Bank decides the period of packing credit advance depending upon the time
required to:
Procure
Manufacture or process (where necessary) and
Ship the relative goods
However, limiting the period of packing credit to what has been prescribed in the relative
LC or firm order.
Explanation
The Bank primarily decides period for which the packing credit advance may be given
keeping in view various relevant circumstances and at the same time ensuring that
the time is sufficient to enable the exporter to ship the goods. Normally, this period
should not exceed 180 days.
Screen Title
Extension of Time Limit for Liquidation of Pre-shipment Credit
Screen Text
In case of extensions of time limit for liquidation of pre-shipment credit, branches
should:
Monitor the progress made by exporters in timely fulfillment of export orders

so that the period of credit does not exceed the actual requirement the
borrower and
The pre-shipment credit does not remain locked up for unnecessarily long
period
Explanation
Extensions in the period for liquidation are to be allowed only to genuine cases and
for valid reasons. These extensions are subject to certain conditions discussed in the
next screen.
Screen Title
Extension of Time Limit for Liquidation of Pre-shipment Credit
Screen Text
Branches may extend time to liquidate pre-shipment credit subject to conditions. The
conditions for extension are:
Reasons for Extension

Production Cycle
Deferred Exports
Reasons for Extension

Extension of pre-shipment credit for period beyond 180 days up to 270 days (further
period of 90 days) is granted provided the reasons for extension are due to
circumstances beyond the control of the exporter.
Production Cycle
Pre-shipment credit up to 270 days ab initio is granted on account of:
Longer production cycle

Seasonality of the availability of raw material
Time normally taken for shipment
Deferred Exports
Deferred exports are those for which realisation exceed 180. For such exports:
Normal lending rate based on the credit rating of the borrower may be
charged.
EXIM Bank refinance is available against at concessional rates so that the
benefit is passed on to the exporters.
All deferred exports are subject to regulatory guidelines contained in Project Export
Manual (PEM) published by RBI.
Screen Title
Adjustment of Pre-shipment Credit
Screen Text
The table below shows adjustment of pre-shipment credit not adjusted.
Pre-shipment Advances not Adjusted by

Submission of Export Documents
Basis for Charging Interest Rate for

Advance Granted
Within 180 days
Higher interest rate for the period

exceeding 180 days up to 270 days
Shipment takes place after 360 days

from the date of advance
Advance ceases to qualify for

concessive rate of interest ab initio
Interest rate applicable to 'Export

Credit Not Otherwise Specified' to be
charged from the date of advance
Exports do not materialise at all
Charge on the relative packing credit =

domestic lending rate + penal interest
not exceeding 2% per annum (from the
date of advance)
Screen Title
Running Account Facility - Conditions
Screen Text
Branches may extend pre-shipment credit on "Running Account" basis subject to the
following conditions.
Need for such facility

Satisfactory track record
Letter of Credit/Confirmed order
Marked off export bills
Amount of pre-shipment credit exceeds the value of export order
Reserve Bank refinance
Frequent Review of drawals
Running Account Facility

In a running account basis, the first debit in the account is adjusted/repaid against
the first credit to the account. This is irrespective of the fact, that the packing credit
loan pertaining to the first debit may not relate to the export order under which the
export bill is submitted for negotiation/ purchase/ discount, etc.
Explanation
Branches may extend pre-shipment credit on "Running Account" basis for any
commodity subject to a few conditions listed on the screen. Let us look at each one in
detail. Click on the 'Next' to continue
Screen Title
Screen Text

Explanation
The exporter ascertains the need for such facility to the satisfaction of the branch
concerned. Click on the 'Next' to continue.
Screen Title
Screen Text

Frequent Review of drawal
Explanation
The facility is made available only to those exporters whose track record has been
satisfactory/good. A exporter of good track record is one whose overdue(i.e. unpaid)
export bills does not exceed 5% of the average annual export realisation of the
preceding three calendar years.This status can be certified by a Chartered
Accountant and needs to be obtained every year. Click on the 'Next' to continue.
Screen Title
Screen Text

Explanation
The exporter should submit relative Letter of Credit/Confirmed order in a reasonable
time after availing pre-shipment finance. In case the commodity in question is
covered by the selective credit control, it is necessary that the production of such
letter/ order be within one month from the date of availment. Click on the 'Next' to
continue.
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Screen Text


Explanation
he individual export bills should be marked off, whenever they are received for
negotiation and collection, against the earliest outstanding pre-shipment credit on
"First-in-First-out" basis. In any case, concessional credit should not be permitted to
exceed the prescribed period of 180 days. Click on the 'Next' to continue.
Screen Title
Screen Text

Explanation
There are instances wherein the amount of pre-shipment credit exceeds the value of
export order. For instance, to procure the raw materials required to execute the
export order as in the case of HPS ground nuts, de-oiled cakes etc. Then the excess
amount should be adjusted either in cash or by sale of non-exportable by-products,
within a period of 30 days from the date of advance. Click on 'Next' button to
continue.
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Screen Text

Explanation
Reserve Bank refinance is available only for the export finance not exceeding 180
days.
Screen Title
Screen Text

Explanation
Branches should constantly review the drawals in the account vis--vis the export
bills tendered for negotiation/collection to adjust the pre-shipment credit and ensure
that the exporter does not misuse the facility by drawing funds in excess of their
genuine requirement for inventory build-up/other purposes. The facility should be
withdrawn immediately if it is mis-used and branches should insist on production of
firm order/ LC before granting further pre-shipment advances.
Screen Title
Packing Credit for Export Consultancy Services and Computer Software
Screen Text
In case of consultancy services and computer software the pre-shipment finance at
concessional rate of interest is extended to exporters to enable them to undertake
preliminary arrangements such as:
Mobilising technical and other staff

Training staff or
For purchase of any materials required
Explanation
Exports may not involve actual movement of goods in case of consultancy services
and computer software. While deciding about the pre-shipment facilities, branches
must take into account the advance payments received against the contract.
Screen Title
Finance Against Goods for Exhibition and Sale Abroad
Screen Text
Branches may provide finance against goods for exhibition and sale abroad in the
normal course at pre-shipment stage and after the sale is completed.
Explanation
Branches thus allow the benefit of concessional rate of interest on such advances
both at the pre-shipment stage and the post-shipment stage, up to the stipulated
period, by way of rebate.
Screen Title
Packing Credit to Sub-suppliers
Screen Text
The facility of concessional export finance can be shared with sub-supplier or a
supporting manufacturer if a merchant exporter or an export house having received a
confirmed order or LC, needs to procure goods and get the same processed/
manufactured by another supplier or manufacturer. In such a case, the
manufacturer/sub-supplier normally avails the export packing credit and supplies
goods to the merchant exporter/export house against payment or against an inland
LC or any other similar arrangement.
Explanation
The facility of sharing concessional export finance with supporting manufacturer/subsupplier is subject to normal exchange control regulations relating to exports. Click
on the 'Next' button for broad details and guidelines to grant packing credit to subsuppliers.
Screen Title
Screen Text
Packing credit granted to sub-suppliers covers the LC or export order received in

favour of Export House/Trading House/Star Trading House etc. or manufacturer
exporters only.
Explanation
Packing credit advance is granted to exporters with good track record.
Screen Title
Screen Text
When the packing credit is granted, branches should ensure that:
There is no double financing of the export order and the relative Letter of
Credit under the arrangement
The total finance associated to the execution of the export order and the
period of export packing credit is shared between the manufacturer (supplier)
and the export house/merchant exporter (EOH)
Any advance payment made by the EOH to the manufacturer/ sub-supplier is
taken into account to assess the working capital requirements of the
manufacturer/ sub-supplier
Explanation
To share the facility of packing credit, the EOH has to give a disclaimer letter to the
effect that he would not avail any export packing credit to the extent availed by the
manufacturer/ supplier.
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Screen Text
Running Account facility should not be given to the sub-supplier or a supporting
manufacturer.
Explanation
Content needed from SME
Screen Title
Screen Text
With the approval of banker/leader of consortium of banks of EOH, the EOH can open
any number of LCs for components required within the overall value limit of the
order/LC received by him. The LC opening bank fixes the minimum amount for
opening such LCs taking into account the operational convenience.
Example
If a sub-supplier avails packing credit to manufacture goods and again the merchant
exporter avails finance to further process/ pack/ ship the same goods, the Bank
should ensure that total period for which both parties avail packing credit does not
exceed the maximum period permitted for concessional finance. The total period is
computed from the date of first drawal of packing credit by any one of the subsuppliers to the date of submission of export documents by EOH.
Explanation
The total period of packing credit availed by one or many sub-supplier(s) and the
EOH should be within normal cycle of production required to export goods. Click on
the 'Example' button to learn more.
Screen Title
Screen Text
The packing credit scheme granted covers only rupee packing credit. The finance
given to both the sub-supplier(s) and EOH attracts interest.
Explanation
The interest rates for finance given to both the sub-supplier(s) and EOH are as per
RBI's directives on the rates of interest for packing credit for the specified period as
announced from time to time.
Screen Title
Screen Text
The LC opening charges are generally borne by the EOH
Explanation
The LC opening charges are normally sustained by the EOH. He may recover the
same from his sub-suppliers depending on their terms of sale.
Screen Title
Screen Text
It is the responsibility of EOH to export the goods as per export order/LC. Any delay in
the process will subjects him to the penal provisions issued from time to time.
Explanation
After the sub-supplier has made available the goods as per terms of inland LC to the
EOH, his obligation of performance under the scheme is treated as complied with. In
such circumstances penal provisions are not applicable to him for delay by EOH, if
any.
Screen Title
Screen Text
The packing credit scheme to sub-suppliers covers only the first stage of production
cycle. The scheme does not cover the suppliers of raw materials, components, etc. to
such immediate suppliers.
Explanation
First stage of production cycle is where the manufacturer exporter is allowed to open
inland LC in favour of his immediate suppliers of raw materials, components, etc.
required for manufacture of exportable goods. In case, the EOH is merely a trading
house, the facility is available commencing from the manufacturer to whom the order
has been passed on by the trading house.
Screen Title
Screen Text
A supplier who wants to avail pre-shipment advance/packing credit against the
export contract or LC received in the name of an Export House or any Merchant
Exporter should submit to the Bank a letter from the Export House/ Merchant
Exporter:
Incorporating details of the goods to be supplied

Confirming that he has not availed any packing credit from any other
bank/source against the same contract/LC.
Repayment
Such advance should be repaid:
Against the proceeds of the bill drawn under Inland LC (Back-to-Back LC)
opened by the Export House/Merchant Exporter in favour of the sub-supplier.
In case it is not feasible to open Back-to-Back-LC, sub- supplier can draw bills
on the Export House/ Merchant Exporter and adjust the advance from the
proceeds of such bills.
If the bill is not accompanied by a Bill of Lading indicating that the export is
effected, a certificate should be obtained from the Export House/ Merchant
Exporter stating that the goods have actually been exported.
Explanation
Supplier should submit to the Bank a letter from the Export House/ Merchant Exporter
incorporating details of the goods to be supplied and confirming that he has not
availed any packing credit against the same contract/LC from any other source. Click
on the 'Repayment' button to learn more.
Screen Title
Screen Text
The credit extended under the system is treated as export credit from the date of
advance to the sub-supplier:
To the date of liquidation by EOH under the inland export LC system and
To the date of liquidation of packing credit by shipment of goods by EOH
Explanation
When credit is extended under this system, refinance from RBI to the respective
banks is made available for appropriate periods. It is necessary to ensure that no
double financing of the same transaction is involved.
Screen Title
Screen Text
The scheme does not envisage extending credit by a sub-supplier to the
EOH/manufacturer and thus the payment to sub-suppliers has to be made against
submission of documents by LC opening bank treating the payment as packing credit
of the EOH. Export Oriented Units/ Export Processing Zones (EOUs/EPZ) units
supplying goods to other EOU/EPZ unit for export purposes are also eligible for rupee
packing credit under this scheme.
Explanation
EOUs/EPZ units supplying goods to other EOU/EPZ unit for export purposes are also
eligible for rupee packing credit provided the supplier EOU/EPZ unit will not be
eligible for any post shipment facility as the scheme does not cover sale of goods on
credit terms.
Screen Title
Screen Text
Packing Credit
Explanation
Let us now look at Advance against Duty Drawback entitlements. Click on the 'Next'
to continue.
Screen Title
Advance Against Duty Drawback Entitlements
Screen Text
Export credit can be given at pre-shipment level for an amount in excess of export
order. The excess that represents duty drawback receivable is eligible for interest at
concessionary rate. If Export Production Finance Guarantee of ECGC covers the
transaction, the amount of duty drawback can be:
Recovered from appropriate authorities

Liquidated from Duty Drawback received
TIPS
The packing credit that is made available to the manufacturer may be higher than
the export value of the order.
Explanation
The inland LC in favour of sub-supplier can be issued for an amount higher than the
relative export order or the LC from abroad as the export documents are in the name
of the exporter who alone is entitled to duty drawbacks recoverable from appropriate
authorities. This is to ensure that the manufacturer gets packing credit to cover full
manufacturing cost.
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Screen Text
Overdraft/cash credit limits sanctioned to exporters to finance their receivables on

account of duty drawbacks should be secured by hypothecation of duty drawback
entitlements.
Explanation
Letters of authority/powers of attorney should be obtained from the borrowers and
registered with the disbursing agencies concerned, if such agencies are prepared to
accept such letters in favour of the Bank and agree to pay to the Bank direct of
claims lodged by the exporter. A suitable margin may be retained on the duty
drawback receivables financed depending on the credit risks.
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Screen Text
Overdraft/cash credit limits sanctioned to exporters to finance their receivables on
account of duty drawbacks should be secured by hypothecation of duty drawback

entitlements.
Explanation
Letters of authority/powers of attorney should be obtained from the borrowers and
registered with the disbursing agencies concerned, if such agencies are prepared to
accept such letters in favour of the Bank and agree to pay to the Bank direct of
claims lodged by the exporter. A suitable margin may be retained on the duty
drawback receivables financed depending on the credit risks.
Screen Title
Screen Text
Packing Credit
Explanation
Let us now look at Pre-shipment Credit in Foreign Currency. Click on 'Next' to continue
Screen Title
Screen Text
The scheme of Pre-Shipment Credit in Foreign Currency (PCFC) enables the exporters
to avail packing credit at international interest rates through Authorised Persons. The
Scheme covers the cost of both domestic and imported inputs of exported goods.
Explanation
In the subsequent screen, you will learn about the extant guidelines to be followed by
the branches. Click on the 'Next' to continue.
Screen Title
Pre-shipment Credit in Foreign Currency - Designated Branches
Screen Text
The scheme is operated only at the designated branches as advised from time to
time by the International Division (Planning), IBG Corporate Centre. Exportercustomers of non-designated branches (NDBS) can avail the facility at the nearest
designated branch (DB).
Explanation
The scheme of PCFC can be operated only through designated branches.
Screen Title
Pre-shipment Credit in Foreign Currency - Eligibility
Screen Text
For existing customers availing PCFC:
It can be carved out of the EPC limits available to them subject to the
outstandings under both the rupee and foreign currency facilities (converted
at the prescribed notional rate) not exceeding the limits sanctioned.
There is no need for sanction of a separate sub-limit for PCFC.
Export Packing Credit (EPC) in Rupees in part and PCFC in part can be
granted against the same export order.
Explanation
All exporters, having firm export orders/irrevocable letters of credit are normally
eligible for PCFC, provided they satisfy other credit norms. Exporters who want to
avail PCFC are obligated to discount the export bills under Export Bills Rediscounting
Abroad Scheme (EBR).
Screen Title
Pre-shipment Credit in Foreign Currency - Running Account Facility
Screen Text
Running Account facility is permitted to exporters with good track record. In cases
where running account facility has been extended to exporters:
LC or firm order need not be insisted.
LC or firm order need not be physically deposited.
LC or firm order need not be insisted.

In cases where running account facility has been extended, LC or firm order need not
be insisted upon initially for disbursement of PCFC. As and when the exporter
receives relative LC or firm order, the particulars thereof should be noted in the
registers.
LC or firm order need not be physically deposited.

The LC or firm order need not be physically deposited with the Bank. However,
statement of holding of the LCs / firm orders from the borrower covering the
outstandings in PCFC should be obtained at monthly intervals. The branches need to
introduce a suitable system to closely monitor the submission and meticulous
scrutiny of statement of holding of LCs/ firm orders and also arrange for physical
scrutiny of the LCs/firm orders, whenever considered necessary.
Explanation
Exporters whose overdues do not exceed 5% of the average annual export
realisations during the preceding three calendar years may be considered as
exporters with good track record. But this facility is not automatically given to their
sister/associate/group concerns. Click on the bulleted text to know more.
Screen Title
Pre-shipment Credit in Foreign Currency - Running Account Facility
Screen Text
Liquidation of PCFC can be done with:
First in - first out method
The proceeds of the bill relating to another contract
First in - first out method

In this method a single PCFC account is opened in the name of the exporter. While
allowing repayments into the PCFC account, order-to-order application of repayments

may not be necessary. But order-to-order monitoring through drawing power register
is essential to ensure proper end use of funds and repayment of a particular PCFC
advance within the stipulated period.
The proceeds of the bill relating to another contract

The PCFC availed against a particular contract can be liquidated with the proceeds of
the bill relating to another contract for which no packing credit has been availed of or
by advance remittances in respect of export orders for which no PCFC drawal has
been granted. Before allowing this facility, it should be ensured that the exporter has
not availed PCFC/EBR with any other bank in respect of the export bill in question.
Explanation
In case PCFC drawn for export purposes is not utilised for the purpose, the running
account facilities for the exporter concerned should be withdrawn with immediate
effect along with the prescribed penalties. The drawals already made under Rupee
Running Account facility earlier should not be converted into PCFC advances.
Screen Title
Pre-shipment Credit in Foreign Currency - Type of Account
Screen Text
PCFC is made available by way of cash credit account. Before any disbursal is made
under PCFC, branches should ensure that:
The total outstandings under EPC and the rupee equivalent of outstandings
under PCFC (arrived at the fixed notional rate) is within the overall EPC limit of
the exporter
The proposed disbursal falls within the limit
Explanation
The drawing power register should provide for columns to reflect PCFC and EPC
outstandings and the total thereof, to monitor the total outstandings at any point of
time.
Screen Title
PCFC - Substitution of Orders and Commodities
Screen Text
Repayment of packing credit may be allowed with export documents relating to any
other order covering the same or any other commodity exported by the exporter. The
relaxation is allowed subject to the following conditions.
It is necessary and unavoidable
It is not by its sister/associate/group concerns
Declaration from the exporter
Bank may mark off the order
Liquidation of PCFC under Running Account facility
It is necessary and unavoidable

The facility of substitution of order / commodity is allowed when it is considered that
the substitution is commercially necessary and unavoidable.
It is not by its sister/associate/group concerns

The documents substituted should also pertain to shipment made by the exporting
unit and not by its sister/associate/group concerns.
Declaration from the exporter

Repayment of PCFC/Running Account facility is allowed from export proceeds of
documents or advance remittances in respect of export orders against which such
facility has not been availed. A declaration from the exporter may be obtained to the
effect that he has not availed /will not avail PCFC from any bank against such orders/
documents.
Bank may mark off the order

The Bank may mark off the order representing the advance against PCFC drawals, if
any left unmarked.
Liquidation of PCFC under Running Account facility

In case of liquidation of PCFC under Running Account facility by advance remittances,
Branches should restrict such adjustments to PCFC drawals that are not outstanding
for more than 360 days from the date of drawal.
Explanation
Substitution of orders and commodities may be allowed during the repayment of
packing credit subject to the condition that there is no change in the terms and
conditions as applicable for pre-shipment and post-shipment credit with reference to
period and rate of interest. Click on the bulleted text to learn more.
Screen Title
Pre-shipment Credit in Foreign Currency - Period of Credit
Screen Text
The following need to be considered for PCFC:
Undertaking
Extension
Extension
Undertaking
PCFC is available for a maximum period of 180 days from the date of first
disbursement.
Extension
Any extension of the credit will be subject to the same terms and conditions
as applicable for extension of Rupee Packing Credit.
It will entail an interest cost of 2% plus the original spread (charged initially)
above 6 months LIBOR prevailing at the time of extension for the extended
period.
No Export
If no export takes place even within 360 days, PCFC is adjusted at the ruling
T.T. selling rate for the currency concerned.
Interest right from the date of disbursement till the date of payment, should
be recovered at 2% over the interest rate applicable for the cash credit of the
exporter and the interest earlier recovered at LIBOR related rates should be
adjusted therefrom.
Remittance of foreign exchange for repayment of principal with interest does not
require RBI's prior approval in such cases.
Screen Title
Pre-shipment Credit in Foreign Currency - Currency
Screen Text
PCFC can be availed in
US dollar ($)
Pound sterling ()
EURO
Japanese Yen
Explanation
Currencies in which PCFC can be availed are as listed on the screen.
Screen Title
Pre-shipment Credit in Foreign Currency - Rate of Interest
Screen Text
The rate of interest to be charged on the account is 100 basis points (bps), above 6
months LIBOR / EUROLIBOR / EURIBOR rate as on the date of disbursement.
Managing Director (MD) of the Network is authorised to quote concessional rate of
interest.
TIPS
Six-month LIBOR/EUROLIBOR/EURIBOR rate for $, EURO, , and Yen is indicated by
SBI, New York in its special page on the Reuter Monitor used for EEFC Deposit rates,
on a daily basis. The branches not having Reuter Monitor facility should ascertain the
rates from the nearest branches having Reuter Monitor facility.
Explanation
Branches should ascertain the applicable rate of interest from their respective LHOs
or International Division, IBG, Corporate Centre.
Screen Title
Pre-shipment Credit in Foreign Currency - Rate of Interest
Screen Text
Other features of PCFC are:
Transaction Charges
Funding
Accounting
ECGC Cover
Withholding Tax
Forward Contracts
Transaction Charges
Prescribed transaction charges should be levied for each PCFC disbursal. The
International Division (Planning), International Banking Group, Corporate Centre fixes
this charge along with other charges from time to time. Branches should ascertain
these charges and recover the same.
Funding
Foreign Department acts as the nodal centre to raise/ deploy the offshore and
onshore funds to lend under PCFC. It maintains PCFC loan Nostro A/cs to raise funds
and route the PCFC repayments at the macro level with the Bank's Nassau (US$),
Frankfurt (Euro), London (), and Tokyo (Yen).
Accounting
Only designated Branches have to open a General Ledger Account styled "Cash
Credit Foreign Currency Account" to route all transactions under PCFC. The rupee
balances in this account is merged with cash credit balances in the Weekly Abstract
under the head "Loans and Cash Credits".
ECGC Cover
ECGC cover is available in respect of PCFC Advances on individual basis as in the
case of Rupee Packing Credit
Withholding Tax
In terms of a clarification given by the Bank's Law Department, no withholding tax is
payable, if interest on the foreign currency line is remitted to the Bank's own foreign
office. As it is intended to avail lines of credit only from the Bank's foreign offices, and
use our own FCNB corpus for funding PCFC the exporters need not pay withholding
tax.
Forward Contracts
Forward Contracts can be booked in respect of future PCFC drawals, if they are to be
converted to Indian rupees for purchase of domestic raw materials. Cross currency
forward contracts can also be availed in any of the permitted currencies against the
invoiced currency in which PCFC is availed the minimum amount being USD 250,000.
TIPS
Six-month LIBOR/EUROLIBOR/EURIBOR rate for $, EURO, , and Yen is indicated by
SBI, New York in its special page on the Reuter Monitor used for EEFC Deposit rates,
on a daily basis. The branches not having Reuter Monitor facility should ascertain the
rates from the nearest branches having Reuter Monitor facility.
Screen Title
PCFC: Reporting of Transactions to Foreign Department, Kolkata
Screen Text
RBI envisages the application of interest rates linked to LIBOR rates prevailing at the
time of PCFC disbursals. Hence, it is crucial to raise the foreign currency funds
through the Bank's foreign offices on the same day in respect of the disbursals made
at the branches. The success and profitability of the scheme depends on:
Prompt and accurate reporting of the disbursals and repayments to FD

Calcutta by Fax/Telex before 3 P.M. on each day
Provision of maturity profile of PCFC disbursal and repayment in the relative

format
The approximate date of shipment from the exporter to compile the maturity
profile of PCFC
Explanation
If any branch fails to report the day's disbursements to FD for the purpose of funding,
FD will charge the differential between the LIBOR linked rate and average rate for
rupee funds for the period involved to the branch concerned.
Screen Title
PCFC - Interest Application
Screen Text
The following are the points to be notes for interest application to PCFC account:
Interest in foreign currency is applied to the individual PCFC Account at

monthly intervals.
The rate of interest to be charged on the account is 100 bps (basis points;
100 bps is 1%), above six-month LIBOR/ EUROLIBOR/ EURIBOR rate as on the
date of disbursement applicable for each PCFC drawal.
The rupee equivalent of the interest amount is debited to the exporter's cash
credit account or current account at the ruling TT selling rate and the same is
credited to Branch Interest Account.
Explanation
Interest in foreign currency is applied to the individual PCFC Account on the last
working day of every month. Listed on the screen are the points to be kept in view to
apply interest on PCFC accounts.
Screen Title
PCFC - Cross Currency Drawals
Screen Text
PCFC drawals in cross currencies may be permitted subject to the exporter bearing
the risk of fluctuation in currency rates. Any shortfall in the foreign currency proceeds
of the bill to be applied for liquidation of PCFC can be met by sale of the foreign
currency (of PCFC) against Rupees. The minimum amount of drawal for cross
currency PCFC should be US $250000 or equivalent.
Explanation
To cover the shortfall and margins as considered necessary, say 10% minimum may
be retained on the drawal at the PCFC disbursement stage itself. This is not
necessary if the exporter enters into a cross currency forward contract to match PCFC
amount while availing cross currency PCFC.
Screen Title
PCFC - Reporting Transactions
Screen Text
The transactions are reported in:
Weekly Abstract
P-Report
R-Returns:
Weekly Abstract
The balances in "Cash Credit (Foreign Currency)" Account in the General Ledger
should be merged with the cash credit rupee balances in the weekly abstract.
P-Report
The disbursals of PCFC for purchase of domestic raw materials that involve
conversion into Indian Rupees are purchase transactions and should be
included in the total purchases for the purpose of P-Report.
When the export bill is discounted under EBR to liquidate the underlying
PCFC, any surplus portion that is converted into Indian Rupees for credit to the
exporter's account should be treated as a purchase transaction and should be
included in the total purchases for the purpose of P-Report.
R-Returns:
The purchase transactions are same as in P-Reports.
The disbursals of PCFC for purchase of domestic raw materials that involve
conversion into Indian Rupees are purchase transactions and should be
included in the total purchases for the purpose of R-Returns.
When the export bill is discounted under EBR to liquidate the underlying
PCFC, any surplus portion that is converted into Indian Rupees for credit to the
exporter's account should be treated as a purchase transaction and should be
included in the total purchases for the purpose of R-Returns.
Screen Title
PCFC - Other Provisions
Screen Text
Other provisions relating to PCFC are:
PCFC for Deemed Exports
PCFC sharing between EOH and manufacturer supplier
PCFC sharing between two EOU/EPZ Units
Liquidation of PCFC by Payment in Foreign Exchange
EPC Outstandings
Exporter Availing Suppliers Credit
Compliance with Normal Credit Discipline
ACU Mechanism
Discounting under EBR Scheme
PCFC and EBR Nostro Loan Accounts
EBR Scheme
PCFC for Deemed Exports

PCFC can also be granted for deemed exports covering supplies to projects financed
by multilateral /bilateral agencies / funds. The PCFC granted for deemed exports
should be liquidated by EBR within a maximum period of 30 days or up to the date of
payment by project authorities whichever is earlier, subject to compliance with other
conditions relating to deemed exports.
PCFC sharing between EOH and manufacturer supplier

PCFC granted to:
A manufacturer supplier against the LC or export order received by the EOH

on the basis of the disclaimer from the EOH through his banker.
The manufacturer can be repaid by transfer of foreign currency from the

EOH by availing of PCFC or discounting of bills under EBR.
It should be ensured that there is no double financing involved in the transaction and
the total period of packing credit is limited to the actual cycle of production of the
exported goods.
PCFC sharing between two EOU/EPZ Units

PCFC can also be made available to both the supplier EOU/EPZ unit and the receiver
EOU/ EPZ unit. PCFC for:
Supplier EOU/ EPZ unit is for supply of raw material / components of goods,
that is further, processed and finally exported by receiver EOU/EPZ unit.
Supplier EOU/EPZ unit has to be liquidated by receipt of foreign exchange

from the receiver EOU/EPZ unit, for which purpose, the receiver EOU/EPZ unit
can avail of PCFC.
Liquidation of PCFC by Payment in Foreign Exchange

Transfer of foreign exchange from the banker of the receiver EOU/EPZ unit to the
banker of supplier EOU/EPZ unit meets the stipulation regarding liquidation of PCFC
by payment in foreign exchange. Thus, there will not normally be any post-shipment
credit in the transaction from the supplier EOU/EPZ unit's point of view. In all these
cases, it has to be ensured that there is no double financing for the same transaction.
The PCFC granted to receiver EOU/EPZ unit will be liquidated by discounting of export
bills.
EPC Outstandings
Existing EPC outstandings of the exporters in Rupees cannot be converted into PCFC
advances.
Exporter Availing Suppliers Credit

In case the Exporter avails Suppliers credit in respect of his imports, he will be
eligible for PCFC only for purchase of domestic inputs.
Compliance with Normal Credit Discipline

The PCFC amounts are taken into account for the purpose of compliance with normal
credit discipline like total assessed limits etc.
ACU Mechanism
PCFC can be granted in respect of exports under ACU mechanism.
Discounted under EBR Scheme

Before granting PCFC, it should be made clear to the exporters that:
The LCs should not be restricted to other banks
The bills should be invariably discounted with the Bank under EBR scheme
Exporters availing PCFC at the Bank's branches should not be allowed to book
forward/cross currency forward contracts with any other bank in respect of the
relative bills.
PCFC and EBR Nostro Loan Accounts
Designated branches should not send any messages relating to debits/credits in the
PCFC and EBR Nostro Loan accounts of FD, to the foreign offices concerned directly.
The foreign offices act only on the instructions of FD (nodal centre) and ignore the
messages relating to PCFC and EBR transactions, received from the domestic offices.
EBR Scheme
EBR scheme can be availed by exporters who:
Have not availed PCFC / EPC
Availed EPC
Exporters who availed PCFC have to necessarily avail EBR and cannot avail Rupee
post-shipment finance for discounting the relative bills.( EBR will be dealt in more
detail in the Post-Shipment Export Credit Module).
Explanation
Listed on the screen are other provisions pertaining to PCFC. Click on the bulleted
text to learn more.
Screen Title
Export Credit - Simplification of Procedures
Screen Text
The credit facilities sanctioned to exporters should be renewed annually. In case of

delay in renewal, the sanctioned limit may be allowed to continue uninterrupted and
urgent requirement of the exporters should be met on ad hoc basis. Therefore, export
finance should not be withheld for reasons of delay in renewal or non-renewal of
limits. Wherever warranted, ad hoc limits may be considered for sanction ensuring
that renewal exercise is completed expeditiously.
Explanation
In case of export of seasonal commodities, agro-based products sanction may be
accorded for peak/non-peak credit facilities to exporters as per extant guidelines. A
Stand-by Line of Credit to meet genuine contingency needs of exporters may be
sanctioned along with regular credit limits as a separate limit.
Screen Title
Screen Text
The following are the simplification of procedures in export credit: Since the goods
have already been valued and cleared by the customs authorities submission of
original sales contract, confirmed order, proforma invoice countersigned by overseas
buyer and the indent from authorised agent of overseas buyer need not be insisted
Explanation
The only exception is in the case of transactions with Letters of Credit where the
terms of LC require submission of the sale contract and other alternative documents.
Screen Title
Screen Text
A mechanism for quick initial scrutiny

information/clarification are present at:
of
At special branches and
Branches having significant export business
appraisal
RBI Time Norms
RBI time norms for disposal of export credit proposals

are:
and
for
additional
Fresh/ enhancement in credit limits
45 days
Renewal of existing credit limits
30 days
Sanction of adhoc credit facilities
15 days
Explanation
The Circle Management Committee may finalise the mechanism by designating a
suitable official with adequate skills and experience taking into consideration the
special features obtaining at each centre. The export credit proposals should be
disposed of within the specified time limit. Click on the 'RBI Time Norms' button to
see RBI's time norms for disposal of export credit proposals.
Screen Title
Screen Text
Packing Credit
Explanation
You have just seen the types of pre-shipment credit. Click on 'Next' button to learn
more about other credit facilities extended by the Bank.
Screen Title
Execution of Bid Bond/Tender Guarantees:
Screen Text
Bid bonds/tender guarantees are issued in favour of overseas buyers in lieu of

earnest money.
Explanation
The exporters have to submit bid bonds or tender guarantees at the time of
participation in tenders for the supply of goods or services abroad.
Screen Title
Issue of Guarantees in Respect of Advance Payments
Screen Text
Bank guarantees are issued in favour of overseas buyers in respect of advance

payments to be made by them.
Explanation
Such advance payments are a common feature in contracts pertaining to export of
capital goods or turnkey jobs.
Screen Title
Establishment of Letters of Credit
Screen Text
Letters of credit are issued at the request of exporters in favour of suppliers of:
Raw materials
Components
Services
Explanation
Back-to-back letters of credit are issued at the request of export houses and
merchant-exporters in favour of domestic manufacturing units for the supply of
goods contracted for export.
Screen Title
Arranging Lines of Credit in Foreign Countries
Screen Text
The facility of arranging lines of credit in foreign countries is usually required where
the execution of an export contract involves work to be done in the buyer's country.
Explanation
The local costs may be financed by arranging a line of credit from a foreign branch or
a correspondent bank against the Bank's guarantee, wherever necessary.
Screen Title
Execution of Performance Guarantees
Screen Text
At the request of exporters, the Bank issues guarantees for the performance of
machinery, equipment, etc. supplied by them.
Explanation
Performance guarantees are generally stipulated in contracts pertaining to the export
of capital goods or turnkey jobs. Guarantees are also issued in lieu of retention
money.
Screen Title
Export Credit to Exporters of Agricultural Products
Screen Text
To maintain the desired quality in the commodity to be exported, exporters of

Agricultural products / Agri-Export Oriented Units (processing) may procure and
supply quality inputs to the farmers. Branches may treat such inputs to farmers as
raw material and sanction export credit to cover the cost of such inputs.Branches
may extend the facility in case of:
Tie-up arrangements
Arrangement with the overseas buyer
Contract with the farmers
Tie-up arrangements
Tie-up arrangements are considered feasible and the project would take off within a
reasonable period of time.
Arrangement with the overseas buyer

The exporter has made the required arrangement with the overseas buyer in respect
of the product to be exported.
Contract with the farmers

The exporter has entered into a contract with the farmers in respect of crops to be
purchased.
Monitor and Control

In cases where the facility is granted, it is necessary for the branches to ensure:
End-use of funds, viz., distribution of the inputs such as quality seeds,

permissible pesticides and fertilizer to the farmers for raising the crops as per
arrangement made by the exporter/processing units.
The finished product is subjected to the required inspection and the quality
of the goods certified as good for export.
The final products are exported as per the terms and conditions of sanction
in order to liquidate the pre-shipment credit.
Tips
Exporters of agricultural products/Agri-Export Oriented Units (processing) located
both outside as well as in the Agri-Export Zones may be considered for the facility.
Explanation
Performance guarantees are generally stipulated in contracts pertaining to the export
of capital goods or turnkey jobs. Guarantees are also issued in lieu of retention
money.
Screen Title
Special Financial Package for Large Value Exports
Screen Text
The RBI has introduced a special financial package for Large Value Exports. While
extending export credit facilities, branches should be governed by:
The internal guidelines
Reserve Bank of India (DBOD/IECD/ECD) guidelines
The rules of the Foreign Exchange Dealers' Association of India (FEDAI)
The Trade Control and provisions of FEMA
Codes of the International Chamber of Commerce viz., UCPDC, URC etc.
Explanation
Branches are guided by the detailed guidelines covering concessional interest, the
list of eligible products exported under the special package and the validity period of
its implementation.
Screen Title
Screen Text
"SBI Exporters Gold Card Scheme" was started by the bank as a facility after EXIM
Policy's proposal and RBI's announcement.
Explanation
"SBI Exporters Gold Card Scheme" will be covered in detail in Module 7.
Screen Title
Screen Text
"SBI Exporters Gold Card Scheme" was started by the bank as a facility after EXIM
Policy's proposal and RBI's announcement.
Explanation
"SBI Exporters Gold Card Scheme" will be covered in detail in Module 7.
Screen Title
Summary
Screen Text
Classify pre-shipment credit into three categories
Categorise exporters eligible for packing credit
Assess Export Packing Credit (EPC)
Monitor and control packing credit loans to ensure proper end use of the
amounts
Grant pre-shipment credit in foreign currency based on various criteria
Explanation
This module introduced you to pre-shipment finance and its types. It also introduced
you to various criteria for granting such advances to exporters
Export Finance - Post-shipment Credit
Screen Title
Objectives
Screen Text
List guidelines that branches need to keep in view while extending post
shipment finance
Classify post-shipment finance
Examine the documents under letters of credit to grant advance
Grant advance against shipping documents keeping in view the different
requirements for bills drawn under LC, non-credit bills and credit against duty
drawback
Explanation
This module introduces you to post-shipment finance and its types. It also introduces
Screen Title
What is Post-shipment Finance?
Screen Text
Exporters who sell goods abroad have to wait for a long time before payment is
received from overseas buyers. The period of waiting depends upon the terms of
payment. To tide over this period, exporters need post-shipment finance.
Explanation
Post-shipment credit is any loan or advance granted or any other credit provided by
the Bank to an exporter of goods from India from the date of extending the credit
after shipment of the goods till the date of realisation of the export proceeds i.e. till
the bank's nostro account is credited abroad.
Screen Title
What is Post-shipment Finance?
Screen Text
Post shipment finance can be extended up to 100% of the invoice value of goods.
Depending upon the payment terms offered by Indian exporters to overseas buyers,
post-shipment finance can be:
Short-term finance or
Long-term finance
The maximum period usually allowed for realisation of export proceeds is six months
from the date of shipment.
Explanation
Export business may also take place without the support of documentary letters of
credit and the Bank normally purchases the bills drawn by exporters on foreign
buyers to finance them.
Screen Title
Basic Considerations for Post-shipment
Screen Text
While purchasing the bill drawn by exporters on foreign buyers, the Bank takes into
consideration:
The track record of the exporter

Country risk
Nature of merchandise
Terms of payment
Payment record of the drawee
Explanation
Listed on the screen are a few considerations that the Bank needs to take into
account while purchasing bills. The subsequent screens have a few more guidelines
that branches should keep in view while extending post shipment finance.
Screen Title
Guidelines for Post-shipment
Screen Text
Few more guidelines that branches should keep in view while extending post
shipment finance are:
Eligibility
Evidence of shipment
Discount / purchase of documentary bills
Letter of Credit
Documents against acceptance
Nature of goods
ECGC cover
Margin
Limits to be sanctioned
Interchangeability between pre-shipment and post-shipment finance
Compliance with RBI's exchange control regulations
Explanation
Hi! I am back. This screen lists a few more guidelines that the branches should keep
in view while extending post shipment finance. Let us look at each one in detail. Click
on 'Next' button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
Post shipment finance should always be extended
exported the goods, an exporter in whose name
transferred and suppliers of goods who supply goods
case of deemed exports.Click on the 'Next' button to
to actual exporter who has

the exports documents are
to the designated agencies in
continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
Post shipment finance should always be extended against evidence of shipment of
exports goods or supplies made. Click on the 'Next' to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
In case of discount / purchase of documentary bills, the credit-worthiness of

the drawee of the bills should be ascertained. Status reports (i.e. opinion
reports from Dun and Bradstreet) on the overseas drawees should be
obtained and carefully studied.
A notice of the Banks interest in the goods covered by the bill of lading has
to be sent on form COS 329 to the shipping company concerned by the
negotiating branch. This serves as a cross check ensuring genuineness of the
bill
of
lading.
Click on the 'Next' buttin to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
The standing of LC opening bank should be verified before negotiating bills under LC.
Click on the 'Next' button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
In case of documents against acceptance, the control over goods should be retained
until the relevant export bills are accepted by the drawee. On acceptance of the
claim by the drawee, the documents are released to the drawee, hence the advance
becomes a clean one. It is therefore important to ascertain the credit-worthiness and
integrity of the drawer and drawee of the bill. Click on the 'Next' button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
If the documents cover goods of perishable nature, the bills should preferably be
drawn at sight, especially in the case of new exporter client. Click on the 'Next'
button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
ECGC covers political and commercial risks. Where required, ECGC post shipment
policy cover duly assigned to the Bank should be stipulated as a condition of
sanction, especially If the post-shipment finance is not backed by an LC. It should
also be stipulated that the exporter should authorise the branch to debit his account
with the amount of premium payable under IPSG(Individual Post Shipment
Guarantee) of ECGC. Click on the 'Next' button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
In case of post-shipment finance, other than bill negotiation / purchase / discount, the
margin may be stipulated depending upon the merits of each proposal and type of
security that is; LC, firm order, or collateral and ECGC cover. Click on the Next
button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
Separate limits should preferably be sanctioned for bills drawn under letters of credit
and bills drawn without letters of credit. Limits for negotiation of bills under letters of
credit of foreign offices/correspondents of the Bank can be fixed outside the Assessed
Bank Finance and in such cases, branch mangers of the specified branches have
unlimited powers to fix limits for negotiation of bills. Click on 'Next' button to
continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
Need-based inter-changeability between pre-shipment and post-shipment facilities
may be permitted to take care of bunched export orders or physical exports.
Branches should comply with the instruction in respect of
The authority to permit such interchangeability and
The extent to which such interchangeability can be permitted
Click on the 'Next' button to continue.
Screen Title
Screen Text
Eligibility
Letter of Credit
Nature of goods
ECGC cover
Margin
Explanation
Documents must be scrutinised from the standpoint of their compliance with RBI's
exchange regulations. Branches must be conversant with the relevant provisions of
the FEMA. This is an interactive exercise for you to attempt. Type the correct
answer in the blank space provided for all and click the 'Submit' button.
Screen Title
Documents for Post-shipment Finance
Screen Text
At the post-shipment stage, the Bank basically finances against:
Shipping documents and
Duty drawback entitlements
Explanation
At the post-shipment stage, the Bank basically finances against shipping documents
and against duty drawback entitlements. Let us take a look at shipping documents in
the next screen.
Screen Title
Shipping Documents
Screen Text
Advances against shipping documents may be grouped as under:
Bills drawn under LC - Negotiation of bill, whether sight or usance

Non-credit bills that include:
o Purchasing of sight bill not under LC
o Discounting of usance bill not under LC
o Advances against bills sent on collection basis
o Advances against consignment exports
o Advances against undrawn balances/retention money
Explanation
Listed on the screen are two categories of shipping documents against which the
Bank grants post-shipment finance. You will learn about sight and usance bills in the
subsequent screens.
Screen Title
Classification of Post-shipment Finance
Screen Text
Post-shipment finance can be classified as:
Negotiation/Payment/Acceptance of export documents under Letters of Credit

(LC)
Purchase/Discount of export documents under confirmed orders/export
contracts
Advances against bills sent on collection basis
Advances against exports on consignment basis
Advances against Duty Drawback entitlements
Advances against undrawn balances/retention money
Explanation
Listed on the screen are classifications of post-shipment finance.
Screen Title
Documents under Letters of Credit
Screen Text
The operations under Letters of Credit are governed by Uniform Customs & Practice
for Documentary Credits (UCPDC) (1993 Revision - the International Chamber of
Commerce Brochure No. 500), and UCP 600 from 1 July, 2007 as well as ISBP.
The cardinal principles of UCPDC are:
The doctrine of strict compliance and
In credit operations, banks deal only in documents
Explanation
Exporters need to submit documents for negotiation strictly in compliance with the
terms and conditions of the LC. It is equally necessary for the negotiating branch to
check this compliance with reference to the documents submitted vis--vis the LC. It
should be ensured that documents are 100% credit compliant.
Screen Title
Screen Text
The examination of documents generally covers whether:
All the documents called for are submitted and in the requisite number.
Each document is issued as per the stipulations in the LC and their content
satisfies the provisions of UCPDC and the LC.
The description of goods in invoice and documents corresponds to that in the
LC.
There are any inter se contradictions among documents.
Shipment is made before stipulated date
Documents are presented before expiry of LC and within the period from
shipment date as stipulated in LC/UCPDC.
Explanation
The documents under Letters of Credit are generally examined as listed on the
screen. Click on the 'Next' button to continue
Screen Title
Screen Text
The examination of documents generally covers whether:
Insurance policy covers the risks as stipulated in the LC and is for adequate
amount.
The amount of bill is within the LC value.
The conditions about shipment, partial shipments, trans-shipment are
complied with.
Full set of clean On Board Bill of Lading is submitted and the Bill of Lading is
issued or endorsed in favour of LC opening bank or, as stipulated in the LC.
Stamps and alterations, if any, on any of the documents are duly
authenticated.
All export bills are exempted from stamp duty.
Word of Caution
Some of the exporters affix on the original of the usance bill a part of the stamp for
the stamp duty eligible on the bill and the balance on the duplicate of the bill. Such a
practice is fraught with grave risks as it may be contended in the court of law that
the bill has not been adequately stamped. Bills of Exchange that are inadequately
stamped, are inadmissible in the court of law as evidence. In the circumstances, it
should be noted that stamps for the full duty exigible are affixed on the original bill of
exchange itself. No stamps need be affixed on the duplicate of the bill of exchange.
Explanation
Listed on the screen are few more points that the Bank should consider when
examining the documents under Letters of Credit. Click on the 'Word of Caution'
button to learn more.
Screen Title
Against Non-credit Bills
Screen Text
In case of non-credit bills, points are considered relevant are:
A satisfactory status or opinion report on the importer

ECCC has fixed the credit limit on the buyer(Buyer wise limit) and the
exposure is within that limit
The exporter should obtain the Contracts / Shipments (Comprehensive) Risks
Policy of the ECGC
For bills are not covered under LC, it should be ensured that the documents are in
accordance with firm order/sales contract. The shipping documents are to be
drawn/endorsed/consigned to bank and not allow title to the goods to be passed on
to the buyer directly.
Explanation
In case of non-credit bills, various factors that should guide branches are credit
worthiness of the exporter, status report on the drawee (importer), past experience
and whether ECGC guarantee cover is available.
Screen Title
Bills Drawn under LC
Screen Text
Bills drawn under LC are:
Sight Bills
Usance Bills
Sight Bills
The
following
are
the
conditions
for
determiing
the
period
extending concessionary rate of interest under post-shipment finance:
for
A concessionary rate of interest is for a maximum period of Normal Transit

Period (NTP) stipulated for the concerned bill as per FEDAI rules. NTP is 25
days for all bills denominated in foreign currency. Only in the case of exports
to Iraq, the NTP is 120 days.
It has to be charged up to the actual date of realisation of export proceeds or
NTP stipulated for the bill, whichever is earlier.
The date of realisation of demand bills for this purpose would be the date on
which the proceeds get credited to the Bank's Nostro Account abroad.
Where interest for the entire NTP has been collected at the time of
negotiation/purchase/discount of bills, the excess interest collected for the
period from the date of realisation to the last date of the NTP should be
refunded to the borrowers.
Usance Bills
The following are the conditions of concessionary rate:
Concessional rate of interest up to notional due date comprises NTP + usance period + plus grace period (if any). (If the due date is known in
advance, then no NTP is allowed).
Total period in such cases is not to exceed 6 months from date of shipment
Explanation
Depending on the nature of bills, post shipment finance carries concessionary rates
of interest for a period. Click on the tabs to learn more.
Screen Title
Bills Drawn under LC
Screen Text
Interest chargeable for the overdue period will be as applicable to "Export Credit Not
Otherwise Specified", if the proceeds of export bills are not realised within:
The normal transit period or date of realisation in the case of demand bills
Notional due date (NTP + usance) in any case to be less than 180 days (No
NTP if due date is fixed) in the case of usance bills
Explanation
Interest should be recovered at the time of giving advance by deducting the same
from the amount to be disbursed. In case there is early realisation, proportionate
interest should be refunded. However in such cases, early delivery charges, as
advised by FD, Kolkata should be recovered.
Screen Title
Advance Against Bills Sent on Collection Basis
Screen Text
Branches may also sometimes grant advances against bills sent on collection basis.
The need to resort to this arrangement normally arises:
When the accommodation available under the Foreign Bills Purchased Limit is
exhausted
When some export bills drawn under LC have discrepancies
Where it is the Customary practice in the particular line of trade
In the case of exports to countries where there are problems of
externalisation(i.e. countries unwilling or unable to permit remittance in a
convertible currency outside the country).
Explanation
Listed on the screen are a few conditions when branches may grant advances against
bills sent on collection basis. Click on the 'Next' screen to learn more.
Screen Title
Advance Against Bills Sent on Collection Basis
Screen Text
In a situation where advance is granted against bills sent on collection basis,
branches may send the export bill on collection basis and finance the exporter after
retaining a suitable margin out of the total bill amount and debit such advances to an
account styled "Advances against bills sent on collection basis" (rupee advance).
Advances against bills sent on collection basis may be sanctioned as cash

credit or overdraft.
Explanation
The advance should be liquidated out of the realisation of export proceeds. The
advances against bills sent on collection basis would attract interest rate as
applicable for post-shipment credit i.e., according to the tenure of the bill. The EPC
should not be continued till realisation of export proceeds
Screen Title
Advances Against Goods Sent on Consignment Basis
Screen Text
When goods exported on consignment basis, branches should:
Instruct the Bank's overseas branch/correspondent while forwarding shipping

documents to deliver the documents only against Trust Receipt / Undertaking
to deliver the sale proceeds by a specified date within the time prescribed for
realisation of export proceeds.
Retain appropriate margin while granting advance against such exports
Explanation
The branches may finance goods exported on consignment basis at the risk of the
exporter for sale and eventual remittance of sale proceeds to him by the agent /
consignee subject to the customer enjoying specific limit for that purpose.
Screen Title
Advances Against Duty Drawback Entitlements
Screen Text
Government of India has formulated a Duty Drawback Credit Scheme under which
banks are allowed to grant advances to exporters against their entitlements of duty
drawback on export of goods.
Explanation
The period of such advances is up to a maximum of 90 days beyond which the Bank
may not allow the advances or may charge normal interest applicable to export
credit. Advance against duty drawback at post-shipment stage should be covered
under Export Finance Guarantee of ECGC. Click on the 'Next' button to learn more
about other conditions to be fulfilled while granting such advances.
Screen Title
Advances Against Duty Drawback Entitlements
Screen Text
Other conditions to be fulfilled while granting loans against duty drawback
entitlements are:
Declaration from the exporter to be obtained on the export promotion copy of

the shipping bill containing the EGM number (Export General Manifest Number
issued by customs department) mentioning the amount of duty drawback
eligible.
The amount of claim thus declared should be supported by a certificate from a
Chartered Accountant authenticating the amount of claim on the basis of
Trade Policy/Customs Rules.
A lien for the amount of advance to be noted with the designated bank's
branch conducting the account of the custom department under EDI
(Electronic Data Interchange) scheme.

The financing branch should also make necessary arrangement with the
designated bank's branch for transfer of funds as and when duty drawback
claim is credited by the customs through electronic fund transfer system.
Branches may stipulate a margin between the amount of duty drawback
provisionally certified and the advance to be granted.
Screen Title
Advances Against Undrawn Balances/ Retention Money
Screen Text
In certain lines of exports, it is the practice of exporters not to draw bills for the full
invoice value of the goods. In such cases, branches may allow advance against the
undrawn portion, provided:
Undrawn balance is in conformity with the normal level of balance left

undrawn in the particular line of export subject to a maximum of 10% of the
full export value, and
The exporter provides an undertaking that within six months from the date of
shipment of goods he will repatriate balance proceeds of the shipment
Retention Money
Similarly under certain contracts, foreign buyers retain a small portion of the bill
amount up to an agreed period to enable themselves to be satisfied about the quality
of the items supplied. Advance against such retention money can be allowed to the
exporters provided the retention money is repatriated to India within 360 days from
the date of export. Such advance carries interest at concessive rate up to a
maximum of 90 days.
Explanation
Exporters leave a small part undrawn, for payment after adjustments due to
differences in weight, quality, etc. ascertained after arrival and inspection of the
goods. Branches are permitted to grant advances against such balances at
concessional rate of interest till the receipt of remittances from abroad, subject to a
maximum of 90 days.
Screen Title
ECGC Cover
Screen Text
As regards post-shipment credit not supported by letter of credit, post-shipment
guarantee cover of ECGC is generally obtained against commercial and political risks
Explanation
These guarantees provide credit enhancement to the Bank by insuring that a good
portion of the Bank's loss arising from the exporter not discharging his liabilities could
be made good by ECGC.
Screen Title
Rediscounting of Export Bills Abroad (EBR Scheme)
Screen Text
RBI formulated the scheme of 'Rediscounting of Export Bills Abroad' by authorised
dealers to make available to the exporters post shipment finance at international
rates of interest. Under the scheme, exporter's bills are discounted at the post
shipment stage and simultaneously rediscounted abroad by the Bank to raise foreign
currency funds that are applied to liquidate the underlying PCFC loan. Both sight and
usance bills are discounted under EBR scheme.
Explanation
The other features of the Scheme are advised from time to time by the International
Division (Planning), IBG, Corporate Centre. Subsequently you will learn more about
the extant instructions on the Scheme. Click on the 'Next'button to continue.
Screen Title
Screen Text
The Scheme of rediscounting export bills abroad is operative at only the designated
branches.
Explanation
Exporter customers of non-designated branches can avail the EBR facility at the
nearest designated branch.
Screen Title
Rediscounting of Export Bills Abroad (EBR Scheme) - Eligibility
Screen Text
All exporters are eligible to cover their bills drawn under LCs, non-credit bills under
sanctioned limits under the Scheme. Exporters availing PCFC should invariably avail
EBR facility to discount the relative export bills. Refinance from RBI
Both demand and usance bills are eligible for coverage. EBR facility is normally
available for a maximum period of 180 days. If the bills discounted are not paid on
the 180th day, extension can be permitted only with prior approval of RBI.
Explanation
Export bills under EBR can be drawn for a maximum period of 180 days. If an
exporter does not avail PCFC or rupee EPC, he can avail EBR facility. Also, exporters
availing rupee EPC can avail EBR facility.
Screen Title
Rediscounting of Export Bills Abroad (EBR Scheme) - Currency
Screen Text
The Scheme is currently restricted to four major currencies. They are:
US dollar
Pound Sterling
Euro
Japanese Yen
Example
For instance, exporters having LC or export order in Swiss Francs or Italian Lira can
also avail PCFC and EBR in any of the four designated currencies. For cross currency
disbursements, both PCFC and EBR should be availed in the same designated
currency. The exchange risk in cross currency disbursements is to be borne by the
exporters.
Explanation
The Scheme is currently restricted to US dollar, Pound Sterling, Euro and Japanese
Yen. Cross currency availment is also permitted. Click on the 'Example button to learn
more.
Screen Title
Screen Text
Branches should ascertain interest rates from their LHOs. The rate of interest on
demand bills and usance bills is presently 1% (max) over six months LIBOR.
FD Kolkata advises the six-month LIBOR rate for the designated currencies that is US
Dollars, Euro, Pound Sterling and Japanese Yen. MD of Network can quote finer
interest rates in Circles on a highly selective basis with a minimum spread charged
over six months LIBOR of 1%.
Explanation
The six-month LIBOR rate advised by SBI New York is displayed on a daily basis on
the page showing EEFC and PCFC interest rates on Reuters Monitor Screen. The
facility of finer rates can be extended to high value customers from whom the overall
income for the Bank is substantial.
Screen Title
Screen Text
Few more extant instructions on the Scheme are:
Funding
Forward Contracts
Accounting Procedure
Return of Export Bills Unpaid
Withholding Tax
Funding
Foreign Department is designated as the nodal centre to raise offshore funds and use
onshore funds to fund the rediscounting portfolio. It maintains rediscounting line
Nostro accounts to arrange for necessary funds with the Bank's:
Nassau office for U.S. Dollars

Frankfurt office for Euro
London office for Pound Sterling
Tokyo office for Japanese Yen
Forward Contracts
Forward contracts can be booked for the surplus portion of EBR bill that is to
be converted in to Indian rupees for credit to the exporter's account after
adjustment of its foreign currency portion to the PCFC
Accounting Procedure
For details of accounting procedure, branches should refer to the guidelines issued
from time to time by FD, Calcutta.
Return of Export Bills Unpaid

The EBR advance that is a foreign currency loan is closed when the overseas buyer
pays the bill and the export proceeds are realised. But if any export bill discounted
under EBR Scheme is returned unpaid, a sale entry is to be put through at the
prevailing T.T. selling rate.
Withholding Tax
In terms of a clarification received from the Bank's Law Department, no withholding
tax is payable, if interest on the foreign currency line is remitted to the Bank's own
foreign offices. As lines of credit availed for this purpose is only from the Bank's
foreign offices, the exporters may not withholding tax.
Screen Title
Rediscounting of Export Bills Abroad - Direct Discounting
Screen Text
Exporters can arrange for themselves, a line of credit with an overseas bank or any
other agency (including a factoring agency) through a bank in India directly to
discount their export bills. The following points are to be noted:
This is subject to the condition that discounting of export bills is routed

through the designated bank/authorised dealers from whom the packing
credit facility has been availed.
Branches should charge a discount of 1% present rate as specified by ID
(Planning), IBG, Corporate Centre for themselves apart from recovering the
usual transaction charges, commission etc.
Explanation
If the bills are routed through any other bank/authorised dealer, the latter will first
arrange to adjust the amount outstanding under packing credit with the concerned
bank out of the proceeds of the rediscounted bills.
Screen Title
Rediscounting of Export Bills Abroad - Reporting of balances
Screen Text
Following are the points to be noted when reporting balances in Export Bills
Discounted Account:
The balances in 'Export Bills Discounted Account' in the General Ledger are
shown in the same style under 'Bills Discounted and Purchased' column in the
Weekly Abstract.
The outstandings under EBD are not eligible for refinance and need not be
reported in the 'Supplementary Information' in the Weekly Abstract.
The designated Branches should report the EBD outstandings to the Assistant
General Manager (C & IBP) of the Circle on each reporting Friday in the
specified format.
Restoration of Bill Limits should be done only on realisation of Export
proceeds.
Explanation
The rupee equivalent of rediscounted bills will have to be held distinct from the
existing post shipment credit accounts. Listed on the screen are the points to be
noted when reporting balances in Export Bills Discounted Account.
Screen Title
Importance of GR Form
Screen Text
GR (it is an export declaration form)
place .i.e. it is evidence of export.
countersigned by the customers)
undertaking to realise and repatriate
is important as it is proof that export has taken

It is a declaration made by the exporter (and
regarding the value of the export and his
the proceeds to India within six months.
Where EDI(Electronic Data Interchange) in vogue, GR has been replaced by

SDF(Statutory Declaration Form).
Submission of GR Form is exempted for exports not exceeding US $ 25,000.
However, the exporters shall be liable to realise and repatriate export
proceeds.
Explanation
GR form is the MOST important export document. Listed on screen are instances
where GR Form is exempted from submission.
Screen Title
"Write Off" of Unrealised Export Bills & Extension in Time Limit to Realise Export
Proceeds
Screen Text
An exporter who has not been able to realise the outstanding export dues, may
approach an authorised dealer, with a request for write off of the unrealised portion.
Authorised dealers may agree to such requests subject to different conditions, out of
which mostly applicable conditions are:
The relevant amount has remained outstanding for one year or more.
The aggregate amount of write off allowed by the authorised dealer during a
calendar year does not exceed 10% of the total export proceeds due during
calendar year.
Satisfactory documentary evidence is furnished in support of the exporter
having made all efforts to realise the dues.
If invoice value does not exceed US$100,000, authorised dealer can extend
realization of export proceeds beyond six months for 3 months at a time. If
extended beyond 1 year, it should be ensured that the outstandings of the
exporter is not more than 10% of average export realisation during preceding
3 calendar years.
If invoice value does not exceed US$1,000,000, authorised dealer can extend
realization of export proceeds beyond six months for 3 months at a time. If
extended beyond 1 year, it should be ensured that the outstandings of the
exporter is not more than 10% of average export realisation during preceding
3 calendar years.
Explanation
An exporter who has not been able to realise the outstanding export dues may
approach the authorised dealer, who had handled the relevant shipping documents
with appropriate supporting documentary evidence to write off the unrealised
portion. Listed on the screen are applicable conditions for "write off" of unrealised
export bills and extension in time limit to realise export proceeds.
Screen Title
Summary
Screen Text
List guidelines that branches need to keep in view while extending post
shipment finance
Classify post-shipment finance
Examine the documents under letters of credit to grant advance
Grant advance against shipping documents keeping in view the different
requirements for bills drawn under LC, non-credit bills and credit against duty
drawback
Explanation
This module introduced you to post-shipment finance and its types. It also introduced
SBI Exporters Gold Card

Scheme
Screen Title
Objectives
Screen Text
State the features of SBI's Exporters Gold Card Scheme
Acquire skills to market the product effectively highlighting the scheme's

competitive terms
Explanation
This module gives you a basic knowledge about the various features of SBI's
Exporters Gold Card Scheme. It would also help you to acquire skills to market the
scheme effectively.
Screen Title
Introduction
Screen Text
"SBI EXPORTERS GOLD CARD SCHEME" was launched, to meet working capital needs
of exporters after
EXIM Policy 2003-2004 proposed to introduce Gold Card Scheme for

creditworthy exporters with good track record.
Reserve Bank of India announcement a model Scheme on the same lines, to
be implemented by the banks, after due customisation.
TIPS
Reserve Bank of India announcement the model Scheme,
No.IECD/12/04.02.02/Gold Card/2003-04 dated the 18th May 2004.
vide
letter
Explanation
After EXIM Policy's proposal and RBI's announcement the bank decided to launch,
"SBI Exporters Gold Card Scheme" with immediate effect
Screen Title
The Scheme
Screen Text
SBI Exporters Gold Card Scheme is governed by the following aspects:
Eligibility Criteria
ECGC Cover
Assessment of Credit Limit
Rate of Interest
Stand-by Limit
Sanction of Limits, Tenure
Empowerment of Branch Heads
Security
and
Renewal of Credit Limits

Credit facilities in Foreign Currency
Time Norms
Application Form
Service Charges
Additional Facilities
Explanation
The SBI Exporters Gold Card Scheme is customised by the Bank in detailed under the
heads as listed on the screen. Click on the 'Next' button to know more about them
Screen Title
Eligibility Criteria
Screen Text
Criterion for SBI Exporters Gold Cards scheme are:
Accounts classified as 'Standard Asset' for the last three consecutive years.
No irregularities adverse features observed in the conduct of the accounts.
However, occasional over-drawings should not be construed as an adverse
feature.
The exporter is not been blacklisted by ECGC and/or included in RBI
defaulters' / caution list.
The unit has not incurred losses during the last three consecutive years.
Overdue export bills of the unit are not in excess of 10% of the previous year's
turnover.
Greenfield Projects
Greenfield Projects refer to a new project in an existing industry which an
entrepreneur who could be an exporter - endeavours to establish from scratch and
run profitably.
TIPS
In case of take-over of the account the extant take over norms should be complied
with, together with the other eligibility norms listed above.
Explanation
Existing customers and new connections are eligible for SBI Exporters Gold Cards,
who fulfill the criteria as listed on the screen. Greenfield Project may also be
considered under this scheme by the appropriate sanctioning authority on a case-tocase basis. Click on the 'Greenfield Project' button to know more.
Screen Title
Assessment of Credit Limit
Screen Text
Assessment of Credit Limits are performed by different methods under different

circumstances listed as below:Government of India (Ministry of Finance)
Condition
Assessment Method
Manufacturing
Exporters
with
projected export turnover, upto Rs.100
crore or below
Trading Exporters with projected
export turnover, upto Rs.100 crore or
below
Simplified Turnover Based Assessment

method or Nayak Committee method
Units with both export and domestic

sales components
Turnover Based Assessment method
Software Exporters
Cash Budget method, prescribed in

respect
of
software
finance,
irrespective of quantum of turnover.
Units with projected export turnover

above Rs. 100 crore
Projected
Balance
Sheet
(PBS)
method, or Cash Budget method

upto Rs. 100 crore or below and
projected domestic turnover upto Rs.
25 crore or below
Turnover Based Assessment method

for the unit as a whole

upto Rs. 100 crore or below and
projected domestic turnover above Rs.
25 crore
Projected Balance Sheet/Cash Budget

method
TIPS
Non-fund based limits required by the exporters will be assessed as per existing
norms.
Screen Title
Stand-by Limit
Screen Text
Standby limit of 20% may be sanctioned to
Meet credit demands arising out of receipt of sudden orders etc.

All Gold Card holders by the appropriate authority along with sanction of
assessed credit limits.
Exporters will be entitled to avail stand-by limit for a maximum period of 180 days in
one instance.
TIPS
There is no restriction as to the number of times stand-by limit is utilised by the
exporter during the tenure of credit limits sanctioned.
Explanation
To meet credit demands arising out of receipt of sudden orders a Standby limit of
20% may be sanctioned over and above the assessed credit limit i.e. fund based and
non-fund based limit.
Screen Title
Sanction of Limits, Tenure and Empowerment of Branch Heads
Screen Text
Credit limits for the period of three years are sanctioned, on satisfactory fulfilment of
the following conditions:
Projected Sales turnover and order book position justifies increase in credit
facilities.
The unit has earned net profit from export operations in the preceding
financial year.
The unit has submitted its balance sheet (audited balance sheet where it is
mandatory) within four months of close of financial year and no adverse
movement has taken place both in Total Outside Liabilities (TOL) to Tangible
Net Worth (TNW) and Current Ratio.
Explanation
Sanction of credit limits together with Standby limit are granted by the sanctioning
authority empowered to sanction the various types of credit facilities. Credit limits
that are sanctioned are valid for a period of three years. Click on the 'Empowerment
of Branch Heads' button to know more.
Screen Title
Empowerment of Branch Heads
Screen Text
Branch Heads are empowered to review the credit facilities at the end of 1st and 2nd
year and accordingly step up the credit upto 10% for
Fund based
Non-fund based
Stand-by credit facilities
Branch Heads may exercise discretion without reference to the sanctioning authority
provided the various types and the combined credit facilities after step up, fall within
the financial powers of the exisiting sanctioning authority which has sanctioned the
credit limits for the period of three years.
Review Statement
The Branch Heads have to submit the review statement of accounts to the
sanctioning authority against, which credit step up was granted. The sanctioning
authority records the step ups granted by Branch Heads as per the Review
Statement. A uniform format for this purpose will be provided to branches separately.
TIPS
Requests from exporters that are beyond the financial powers of the sanctioning
authority are:
Enhancements above 10% of the credit limit
Combined credit facilities after step up, by upto 10% or less
Enhanced credit facility can only be granted by the appropriate sanctioning authority,
which will be valid for a fresh period of three years from the date of sanction.
Explanation
All Branch Heads are empowered to review the credit facilities at the end of 1st and
2nd year, and accordingly step up the credit upto 10%, without prior reference to the
sanctioning authority, provided the combined credit facilities after step up, falls
within the financial powers of the existing sanctioning authority. Click on the 'Review
Statement' button to know more.
Screen Title
Renewal of Credit Limits
Screen Text
The credit facility is renewed automatically for another three years when the previous
sanctioned credit including standby limit steps up, subject to -
The fulfillment of terms and conditions of sanction

The unit continuing to satisfy the eligibility criterion for the scheme
Renewal Memorandum / Note is also required to be submitted to the existing

sanctioning authority.
Explanation
The credit facilities sanctioned for the period of three years including standby limit
and step ups, if any, granted by Branch Heads under the Scheme will get
automatically renewed for another three years.
Screen Title
Credit facilities in Foreign Currency
Screen Text
Exporters Gold Card holders will be given priority in sanction of PCFC advances. For
foreign currency credit to Indian exporters the
Rates of Interest <= LIBOR + 1 %
If PCFC is made available to Exporters Gold Card holders, by making market

borrowings, an additional service charge at flat rate of 10 basis points i.e. 0.10 % will
be charged. Foreign Department, Kolkata will separately advise the same.
Explanation
As a credit facility in foreign currency the Exporters Gold Card holders will be given
priority in sanction of PCFC advances. The branches should clearly specify that the
borrowing unit is a Gold Card holder, while seeking Funds Angle Clearance (FAC) from
Foreign Deportment, Kolkata.
Screen Title
ECGC Cover
Screen Text
Exemption from ECGC cover / guarantee may be considered by the sanctioning
authority.
Explanation
Exporters Gold Card holders might be exempted from ECGC cover or guarantee on a
case to case basis
Screen Title
Rate of Interest
Screen Text
The interest rates for Pre & Post shipment credit under Gold Card Scheme are as
below:
Interest Rate
Present Effective
Rate
Pre-shipment
credit, up to 180
days
6.50%
3.75% below SBAR
Post-shipment
credit upto 365
days
6.50%
3.75% below SBAR
Explanation
The interest rates for Pre-shipment & Post-shipment credit are as displayed on the
screen.
Screen Title
Security
Screen Text
The security norms for Exporters Gold Card holders will be same as those for existing
advances.
Explanation
There is no separate security norms for SBI's Exporters Gold Card scheme, it is same
as that of the credit advances given under Export Finance .
Screen Title
Time Norms
Screen Text
Under the SBI Exporters Gold Card Scheme the time frame for disposal of
applications received for sanction of credit are as below:
Disposal of fresh applications
25 days
Renewal of limits
15 days
Sanction of adhoc limits
7 days
TIPS
The details of pending proposals should be furnished to the Domestic Offices
(Planning) Section of International Banking Group at the Corporate Centre, every
quarter in Statement A of the "Nation Building" return, in a separate column.
Explanation
The time frame for disposal of applications received for sanction of credit under the
Scheme are as displayed on the screen. The appraisal memoranda should be
accompanied by a date chart to enable the sanctioning authority to monitor
adherence to the time norms.
Screen Title
Application Form
Screen Text
Application Form for Exporters Gold Card Scheme for Exporters is comprised of
Bio-data Form
Application Form for Working Capital Credit Facilities
Details of Existing Fixed Assets & Particulars of Machinery
Projected Balance Sheet
Technical Feasibility
Explanation
The Application Forms will be used irrespective of the size of the credit limit.
Application Forms for SBI Exporters Gold Card Scheme is simplified for easy usage.
Click on the bullet points to see their respective forms.
Screen Title
Service Charges
Screen Text
The applicable service charges for accounts under the SBI's Exporters Gold Card
Scheme are as that of the existing
Bank's schedule charges
Discretion structure
Explanation
Bank's existing schedule of charges, together with the discretion structure, will be
applicable for accounts under the Exporters Gold Card Scheme.
Screen Title
Additional Facilities
Screen Text
Under the SBI Exporters Gold Card Scheme, International Credit/Debit cards and
Internet Banking facilities may be extended to
Promoters
Directors
Senior Executives
Explanation
International Credit/Debit cards and Internet Banking facilities may be extended to
the promoters, directors and senior executives of the borrower units under the
scheme on priority basis.
Screen Title
Marketing Strategies
Screen Text
The marketing strategies for SBI's Exporters Gold Card Scheme are:
Meetings and Seminars with exporters should be organized at forex intensive

centres to explain the salient features of the Scheme
Publicity campaigns should be organised to increase the visibility of the
product
Top non-borrower exporters of the area should be identified from public
domaininformation (directories, trade journals, export promotion councils
etc.) and suitable letters/mailers should be sent to them
Personal visits should be given to prospective non-borrower exporters of the
area
Highlight the scheme's competitive terms, amongst prospective borrowers
Explanation
A suitable marketing strategies for marketing the product effectively should be
adopted with a view to cover maximum number of eligible export clients under the
Scheme. The marketing strategies for SBI's Exporters Gold Card Scheme are as listed
on the screen.
Screen Title
Reporting
Screen Text
The data related to export credit under SBI's Exporters Gold Card scheme is furnished
to the Business Control Section of the Domestic Wing of International Banking Group.
In the quarterly statement on Form - 'C' as on the last reporting Friday of each
quarter additional information is provided regarding
Export credit disbursement
Balances outstanding
Explanation
The data related to export credit granted under this scheme may be furnished to the
Business Control Section of the Domestic Wing of International Banking Group. Click
on the 'Export Credit Data' button to see the format in which the data is furnished.
Screen Title
Summary
Screen Text
Having completed this module, you should now be able to:
State the features of the SBI's Exporters Gold Card Scheme

Acquire skills to market the product effectively highlighting the scheme's
competitive terms
As per the Bank's latest circular instructions dated 7/9/2004, it has now been decided
to extend the benefit of the scheme to all accounts which fall due for renewal up to
31/3/2005. The scheme will be extended to such accounts by the sanctioning
authority on the basis of a brief note.
Explanation
This module has given you a basic knowledge about the various features of the SBI's
Exporters Gold Card Scheme and helped you to market the same more effectively.

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Screen Title

List the advantages of Export over FDI

Capitalise on the advantages of export finance

To gear up in terms of technology and efficiency, to exploit emerging

Short Term Foreign Institutional Investment (FII)

Bring down the trade deficit

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Adherence to time and quality

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Adherence to time and quality

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Export order/Letters of Credit (LC)

Coverage of political and commercial risks

Profit through foreign exchange

Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

Profit through foreign exchange

Profit through foreign exchange

Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

Profit through foreign exchange

Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

Profit through foreign exchange

Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

Profit through foreign exchange

Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

Post-shipment finance in rupees

Arranging lines of credit in foreign countries

All the A and B category branches

Trade Finance CPCs

List the advantages of Export over FDI

Capitalise on the advantages of export finance

Institutional Framework for Delivering Export

Classify institutions as regulatory and facilitating

Describe the function of both regulatory and facilitating institutions

Government of India (Ministry of Finance)

Foreign Exchange Dealers Association of India (FEDAI)

Regulatory Institutions - Government of India (Ministry of Finance)

Government of India (Ministry of Finance)

Foreign Exchange Dealers Association of India (FEDAI)

Regulatory Institutions - Government of India (Ministry of Finance)

Government of India (Ministry of Finance)

Foreign Exchange Dealers Association of India (FEDAI)

Regulatory Institutions - Government of India (Ministry of Finance)

Government of India (Ministry of Finance)

Foreign Exchange Dealers Association of India (FEDAI)

Regulatory Institutions - Government of India (Ministry of Finance)