Aditya Bhatt

Anubhav Yadav
Nitin Arora
Shadab Mansoori

EXPORT FINANCE

Export Finance
Pre shipment

Export Finance

Post shipment

Pre-shipment credit

Provides the working capital for the

purchase of raw material, processing,
packaging, transportation,
warehousing etc. of the goods prior
to export.
Provided in Indian Rupees and
foreign currency.

'Pre-shipment credit' means any loan or advance granted or any

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

Time period depending upon the

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

Pre shipment credit in

Indian rupee

Eligibility for packing credit

facility

Merchant/manufacturer exporter
Suppliers/sub suppliers of goods to
merchant exporter
Business associates of
exporter/trading house

Packaging credit

Available for
Cash export-:
Deemed export-:

Condition for giving loan

Against an confirmed export order

Through LC

Running account facility

Without LC or confirm order

Conditions
Extended to those exporter having
goodwill
Units in EOU, SEZ, technology parks
LC or confirm order has to be
produced at reasonable time frame

Amount granted

It depends on FOB/Domestic value

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

Time period of loan

Max. 180 days or the contract time

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

Pre-shipment credit in
foreign currency (PCFC)

International rates applicable.

Basic strategy is to avail the loans at
international competitive rates.
Extended in hard currencies.
Lending rate to the exporter should not
exceed 0.75 percent over LIBOR/EURO
LIBOR/ EURIBOR excluding withholding
tax.

Disbursement of PCFC

Full or part is utilized for domestic

inputs the spot rates are applicable.
Minimum amount of transaction is
left up to the bank convince

Cancellation/Non-execution
of Export Order

Exporter to repay the loan together

with accrued interest
Purchasing foreign exchange
(principal + interest) from domestic
market through the bank.
Interest rate applicable to ECNOS is
LIBOR+4% + penal rate.

Rates applicable in PCFC

Up to 180 days LIBRO/euro /EURIBOR

+.75
From 180 to 360 days add 2% to
initial rates (depends on bank)

Draw back of PCFC

In case of the foreign currency

depreciation the exporter does not
get the benefit.

Duty draw back scheme

Finance available to pay the imports

of goods used for export products
The customs take few weeks from
the date of shipment to refund the
customs duty.

Post-Shipment Financing

Need For Post Shipment

Financing
Time

gap b/w shipment of goods and

collection of export proceeds
Time consumed in process of preparing
documents, submitting them to the bank and
then forwarding of them by the bank.
Includes a minimum time period of 25 days
To bridge this gap commercial banks provide
post shipment financing

What is Post Shipment

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

Features of Post Shipment

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

Classification Of Post Shipment

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

Purchase/Discounting of Export
Documents drawn under Export
Orders

Negotiating banks provide finance by

By purchasing documents drawn under D/P

By discounting documents drawn under D/A

Generally granted to customers enjoying Bill

Purchasing/Discounting limits from the bank

D/A bills due to their nature are unsecured and here

banks run the risk of non-payment

Thus, banks generally opt for ECGC schemes.

ADVANCES AGAINST
EXPORT SENT ON
COLLECTION
It

may sometimes be possible to avail

advances against export bills sent on
collection. In such cases, the export
bills are sent by the bank on collection
basis as against their
purchase/discounting by the bank.
Advances against such bills is granted
by way of a separate loan usually
termed as post shipment loan.

ADVANCES AGAINST
EXPORTS ON
CONSIGNMENT BASIS
When

goods are exported on

consignment basis at the risk of the
exporter for sale to the agent/consignee
and eventual remittance of sale
proceeds to him by the agent or
consignee, banks may agree to finance
against such transactions subject to the
exporter enjoying specific limits
consignee to
Overseas
customer
thatbranch
effect.
bank

ADVANCE AGAINST
UNDRAWN BALANCES
In

certain lines of export, it is the trade

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

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

- do-

3. Against incentives - not exceeding BPLR

receivable from
minus2.5
government
percentage points

4. Against undrawn balance

upto 90 days - not exceeding BPLR
minus 2.5
percentage point
5.Against retention money
(for supplies portion only)-do-

1.Who is eligible for post shipment

finance?
Exporter

if the goods have been shipped

by him directly.
Exporter in whose name the export
documents have been transferred.
In case of deemed exports, finance is
extended to the suppliers of goods who
supply the goods to designated
agencies

2.On what basis is post shipment finance

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

4.What is the quantum of this finance?

Can

be extended upto 100% of

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

5.What is the period for which this

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