EXPORT FINANCE

EXPORT FINANCE

SUBMITTED TO: UNIVERSITY OF MUMBAI OCTOBER 2006 Project Guide: Prof. Mr. Umesh

T.Y.B.M.S.

EXPORT FINANCE

PREFACE

I the !i"ht of "ro#i " eed $ im%ort& ce of e'%orts for our cou tr( it is of utmost im%ort& ce th&t e)er(o e shou!d h&)e & i si"ht i the fie!d of e'%orts. I the course of !&st dec&de* the e'%ort sce &rio i I di& h&s u der"o e & treme dous ch& "e. The !i+er&!i,&tio i iti&ted +( the "o)er me t* the -ee com%etitio i the m&r-et %!&ce $ the r&%id i cre&se i the e'%ort of ser)ices h&)e &!! com+i ed to ch& "e the %icture com%!ete!( This %roject #i!! +e co)eri " )&rious &s%ects of e'%ort fi & ce. Are&s co)ered i this %roject &re re!&ted to .co ce%t & d t(%es of e'%ort fi & ce* fi & ci&! i stitutio s/ etc. I ho%e th&t this %roject #ou!d %ro)ide o e* some esse ti&! i form&tio th&t #i!! +e usefu! to i future.

T.Y.B.M.S.

EXPORT FINANCE

TABLE OF CONTENTS
Ch&%ter. o 1 0 P&rticu!&rs Introdu t!on o" E#$ort% E#$ort F!n&n ' 0.1 I troductio 0.0 Co ce%t 0.3 4+jecti)es 3 0.5 A%%r&is&! T($'% o" E#$ort "!n&n ' 3.1 Pre6Shi%me t 5 7 3.0 Post6Shi%me t L'tt'r o" Cr'd!t ) On' o" t*' +o%t o++on +'t*od o" $&(+'nt !n '#$ort "!n&n ' So+' !+$ort&nt Con '$t !n E#$ort F!n&n ' 7.1 Forfeiti " 7.0 F&ctori " 9 7.3 Su%%!ier;s Credit for <eferred P&(me t e'%orts M&,or F!n&n !&- &nd ot*'r In%t!tut!on% 9.1 E'%ort Im%ort B& - of I di& >E?IM B& -@ 9.0 E'%ort Credit Gu&r& tee Co tro! >ECGC@ : = A 12 9.3 Reser)e B& - of I di& >RBI@ M&r.'t D'/'-o$+'nt A%%!%t&n ' 0MDA1 2!3* Court Ru-!n3: E#$ort Lo%%'% &r' not 'nt!t-'d to T&# Con '%%!on% Con -u%!on B!4-!o3r&$*( 7: 8 7= 7A 92 8 91 90 0A 8 79 1: 6 01 00 8 0= 27 8 19 P&"e 1o. 21 20 6 25

E?ECUTIBE SUMMARY

T.Y.B.M.S.

EXPORT FINANCE

FINANCE IS T2E LIFE AND BLOOD OF ANY BUSINESS. Success or f&i!ure of & ( e'%ort order m&i !( de%e ds u%o the fi & ce &)&i!&+!e to e'ecute the order. 1o#&d&(s e'%ort fi & ce is "&i i " "re&t si" ific& ce i the fie!d of i ter &tio &! fi & ce. M& ( 1&tio &!i,ed &s #e!! &s Pri)&te B& -s &re t&-i " me&sures to he!% the e'%orter +( %ro)idi " them %re6shi%me t & d %ost6 shi%me t fi & ce &t su+sidi,ed r&te of i terest. Some of the m&jor fi & ci&! i stitutio s &re E?IM B& -* RBI* & d other fi & ci&! i stitutio s & d +& -s. E?IM I di& is the m&jor +& - i the fie!d of e'%ort & d im%ort of I di&. It h&s i troduced )&rious schemes !i-e forfeiti "* FREPEC Scheme* etc. E)e Go)er me t is t&-i " me&sures to he!% the e'%orters to e'ecute their e'%ort orders #ithout & ( h&ss!es. Go)er me t h&s i troduced schemes !i-e <ut( E tit!eme t P&ss Boo- Scheme* <ut( free M&teri&!s* setti " u% of E'%ort Promotio Co es & d E'%ort 4rie ted U its* & d other scheme %romoti " e'%ort & d im%ort i I di&. I iti&!!( the I di& e'%orter h&d to f&ce m& ( hurd!es for e'ecuti " & e'%ort order* +ut o)er the %eriod these hurd!es h&)e +ee remo)ed +( the "o)er me t to smoothe the %rocedure of e'%ort & d im%ort i I di&.

C2APTER 5 - INTRODUCTION OF EXPORTS

T.Y.B.M.S.

EXPORT FINANCE E'%ort i sim%!e #ords me& s se!!i " "oods &+ro&d. I ter &tio &! m&r-et +ei " & )er( #ide m&r-et* hu"e Du& tit( of "oods c& +e so!d i the form of e'%orts. E'%ort refers to outf!o# of "oods & d ser)ices & d i f!o# of forei" e'ch& "e. E'%ort occu%ies & )er( %romi e t %!&ce i the !ist of %riorities of the eco omic set u% of de)e!o%i " cou tries +ec&use the( co tri+ute !&r"e!( to forei" e'ch& "e %oo!. E'%orts %!&( & cruci&! ro!e i the eco om( of the cou tr(. I order to m&i t&i he&!th( +&!& ce of tr&de & d forei" e'ch& "e reser)e. It is ecess&r( to h&)e & sust&i ed & d hi"h r&te of "ro#th of e'%orts. E'%orts &re & )ehic!e of "ro#th & d de)e!o%me t. The( he!% ot o !( i %rocuri " the !&test m&chi er(* eDui%me t & d tech o!o"( +ut &!so the "oods & d ser)ices* #hich &re ot &)&i!&+!e i di"e ous!(. E'%orts !e&ds to &tio &! se!f6re!i& ce & d reduces de%e de ce o e'ter &! &ssist& ce #hich ho#soe)er !i+er&!* m&( ot +e &)&i!&+!e #ithout stri "s. Thou"h I di&;s e'%ort com%&red to other cou tries is )er( sm&!!* +ut o e of the most im%ort& t &s%ects of our e'%ort is the stro " !i -&"es it is for"i " #ith the #or!d eco om( #hich is & "re&t +oo for & de)e!o%i " &tio !i-e I di&.

C2APTER 2 - EXPORT FINANCE

T.Y.B.M.S.

EXPORT FINANCE 0.1 6 I1TR4<UCTI41 Credit & d fi & ce is the !ife & d +!ood of & ( +usi ess #hether domestic or i ter &tio &!. It is more im%ort& t i the c&se of e'%ort tr& s&ctio s due to the %re)&!e ce of o)e! o 6%rice com%etiti)e tech iDues e cou tered +( e'%orters i )&rious &tio s to e !&r"e their sh&re of #or!d m&r-ets. The se!!i " tech iDues &re o !o "er co fi ed to mere Du&!it(E %rice or de!i)er( schedu!es of the %roducts +ut &re e'te ded to %&(me t terms offered +( e'%orters. Fi+er&! %&(me t terms usu&!!( score o)er the com%etitors eDui%me t +ut &!so of co sumer "oods. The %&(me t terms ho#e)er de%e d u%o the &)&i!&+i!it( of fi & ce to e'%orters i re!&tio to its Du& tum* cost & d the %eriod &t %re6shi%me t & d %ost6shi%me t st&"e. Productio & d m& uf&cturi " for su+st& ti&! su%%!ies for e'%orts t&-e time* i c&se fi & ce is ot &)&i!&+!e to e'%orter for %roductio . The( #i!! ot +e i & %ositio to +oo- !&r"e e'%ort order if the( do ;t h&)e sufficie t fi & ci&! fu ds. E)e merch& dise e'%orters reDuire fi & ce for o+t&i i " %roducts from their su%%!iers. This %roject is & &ttem%t to thro# !i"ht o the )&rious sources of e'%ort fi & ce &)&i!&+!e to e'%orters* the schemes im%!eme ted +( ECGC & d E?IM for e'%ort %romotio & d the rece t de)e!o%me ts i the form of tie6E?IM tie6u%s* credit %o!ic( & ou ced +( RBI i 4ct 0221 & d TRIMS. ot o !( of c&%it&!

0.0 6 C41CEPT 4F E?P4RT FI1A1CE:

T.Y.B.M.S.

EXPORT FINANCE The e'%orter m&( reDuire short term* medium term or !o " term fi & ce de%e di " u%o the t(%es of "oods to +e e'%orted & d the terms of st&teme t offered to o)erse&s +u(er. The short6term fi & ce is reDuired to meet 67or.!n3 &$!t&-8 eeds. The #or-i " c&%it&! is used to meet re"u!&r & d recurri " eeds of & +usi ess firm. The re"u!&r & d recurri " eeds of & +usi ess firm refer to %urch&se of r&# m&teri&!* %&(me t of #&"es & d s&!&ries* e'%e ses !i-e %&(me t of re t* &d)ertisi " etc. The e'%orter m&( &!so reDuire 6t'r+ "!n&n '89 The term fi & ce or term !o& s* #hich is reDuired for medium & d !o " term fi & ci&! eeds such &s %urch&se of fi'ed &ssets & d !o " term #or-i " c&%it&!. E'%ort fi & ce is short6term #or-i " c&%it&! fi & ce &!!o#ed to & e'%orter. Fi & ce & d credit &re &)&i!&+!e ot o !( to he!% e'%ort %roductio +ut &!so to se!! to o)erse&s customers o credit. 0.3 6 4BIECTIBES 4F E?P4RT FI1A1CE To co)er commerci&! $ 1o 6commerci&! or %o!itic&! ris-s &tte d& t o "r& ti " credit to & forei" +u(er. To co)er &tur&! ris-s !i-e & e&rthDu&-e* f!oods etc.

An '#$ort'r +&( &/&!- "!n&n !&- &%%!%t&n ' "ro+ &n( 4&n.: 7*! * on%!d'r% t*' 'n%u!n3 "& tor%: &@ A)&i!&+i!it( of the fu ds &t the reDuired time to the e'%orter. +@ Afford&+i!it( of the cost of fu ds.

0.5 6 APPRAISAF

T.Y.B.M.S.

EXPORT FINANCE A%%r&is&! me& s & &%%ro)&! of & e'%ort credit %ro%os&! of & e'%orter. Ghi!e &%%r&isi " & e'%ort credit %ro%os&! &s & commerci&! +& -er* o+!i"&tio to the fo!!o#i " i stitutio s or re"u!&tio s eeds to +e &dhered to. O4-!3&t!on% to t*' RBI und'r t*' E# *&n3' Contro- R'3u-&t!on% &r': A%%r&ise to +e the +& -;s customer. A%%r&ise shou!d h&)e the E'im code um+er &!!otted +( the <irector Ge er&! of Forei" Tr&de. P&rt(;s &me shou!d ot &%%e&r u der the c&utio !ist of the RBI. O4-!3&t!on% to t*' Tr&d' Contro- Aut*or!t( und'r t*' EXIM $o-! ( &r': A%%r&ise shou!d h&)e IEC um+er &!!otted +( the <GFT. Goods must +e free!( e'%ort&+!e i.e. ot f&!!i " u der the e"&ti)e !ist. If it f&!!s u der the e"&ti)e !ist* the & )&!id !ice se shou!d +e there #hich &!!o#s the "oods to +e e'%orted. Cou tr( #ith #hom the A%%r&ise #& ts to tr&de shou!d ot +e u der tr&de +&rrier. O4-!3&t!on% to EC;C &r': Berific&tio th&t A%%r&ise is ot u der the S%ecific A%%ro)&! !ist >SAF@. S& ctio of P&c-i " Credit Ad)& ces. ;UIDELINES FOR BAN<S DEALIN; IN EXPORT FINANCE: Ghe & commerci&! +& - de&!s i e'%ort fi & ce it is +ou d +( the e sui " "uide!i es: 6 &@ E'ch& "e co tro! re"u!&tio s. +@ Tr&de co tro! re"u!&tio s. c@ Reser)e B& -;s directi)es issued throu"h IEC<. d@ E'%ort Credit Gu&r& tee Cor%or&tio "uide!i es. e@ Guide!i es of Forei" E'ch& "e <e&!ers Associ&tio of I di&.

T.Y.B.M.S.

EXPORT FINANCE

C2APTER = - TYPES OF EXPORT FINANCE

The e'%ort fi & ce is +ei " c!&ssified i to t#o t(%es )i,. Pre6shi%me t fi & ce. Post6shi%me t fi & ce. =95 - PRE-S2IPMENT FINANCE MEANIN;: Pre6shi%me t is &!so referred &s 6$& .!n3 r'd!t89 It is #or-i " c&%it&! fi & ce %ro)ided +( commerci&! +& -s to the e'%orter %rior to shi%me t of "oods. The fi & ce reDuired to meet )&rious e'%e ses +efore shi%me t of "oods is c&!!ed %re6shi%me t fi & ce or %&c-i " credit. DEFINITION: Fi & ci&! &ssist& ce e'te ded to the e'%orter from the d&te of recei%t of the e'%ort order ti!! the d&te of shi%me t is - o# &s %re6shi%me t credit. Such fi & ce is e'te ded to & e'%orter for the %ur%ose of %rocuri " r&# m&teri&!s* %rocessi "* %&c-i "* tr& s%orti "* #&rehousi " of "oods me& t for e'%orts. IMPORTANCE OF FINANCE AT PRE-S2IPMENT STA;E: To %urch&se r&# m&teri&!* & d other i %uts to m& uf&cture "oods. To &ssem+!e the "oods i the c&se of merch& t e'%orters. To store the "oods i suit&+!e #&rehouses ti!! the "oods &re shi%%ed. To %&( for %&c-i "* m&r-i " & d !&+e!!i " of "oods. To %&( for %re6shi%me t i s%ectio ch&r"es. To im%ort or %urch&se from the domestic m&r-et he&)( m&chi er( & d other c&%it&! "oods to %roduce e'%ort "oods. To %&( for co su!t& c( ser)ices. To %&( for e'%ort docume t&tio e'%e ses.

T.Y.B.M.S.

EXPORT FINANCE FORMS OR MET2ODS OF PRE-S2IPMENT FINANCE: 59 C&%* P& .!n3 Cr'd!t Lo&n: I this t(%e of credit* the +& - orm&!!( "r& ts %&c-i " credit &d)& t&"e i iti&!!( o u secured +&sis. Su+seDue t!(* the +& - m&( &s- for securit(. 29 Ad/&n ' A3&!n%t 2($ot*' &t!on: P&c-i " credit is "i)e to %rocess the "oods for e'%ort. The &d)& ce is "i)e &"&i st securit( & d the securit( rem&i s i the %ossessio of the e'%orter. The e'%orter is reDuired to e'ecute the h(%othec&tio deed i f&)our of the +& -. =9 Ad/&n ' A3&!n%t P-'d3': The +& - %ro)ides %&c-i " credit &"&i st securit(. The securit( rem&i s i the %ossessio of the +& -. 4 co!!ectio of e'%ort %roceeds* the +& - m&-es ecess&r( e tries i the %&c-i " credit &ccou t of the e'%orter. >9 Ad/&n ' A3&!n%t R'd L?C: The Red FHC recei)ed from the im%orter &uthori,es the !oc&! +& - to "r& t &d)& ces to e'%orter to meet #or-i " c&%it&! reDuireme ts re!&ti " to %rocessi " of "oods for e'%orts. The issui " +& - st& ds &s & "u&r& tor for %&c-i " credit. @9 Ad/&n ' A3&!n%t B& .-To-B& . L?C: The merch& t e'%orter #ho is i %ossessio of the ori"i &! FHC m&( reDuest his +& -ers to issue B&c-6To6B&c- FHC &"&i st the securit( of ori"i &! FHC i f&)our of the su+6su%%!ier. The su+6su%%!ier thus "ets the B&c-6To6B& - FHC o the +&sis of #hich he c& o+t&i %&c-i " credit. 69 Ad/&n ' A3&!n%t E#$ort% T*rou3* E#$ort 2ou%'%: M& uf&cturer* #ho e'%orts throu"h e'%ort houses or other &"e cies c& o+t&i %&c-i " credit* %ro)ided such m& uf&cturer su+mits & s&me tr& s&ctio . u dert&-i " from the e'%ort houses th&t the( h&)e ot or #i!! ot &)&i! of %&c-i " credit &"&i st the

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EXPORT FINANCE

A9 Ad/&n ' A3&!n%t Dut( Dr&7 B& . 0DB<1: <BI me& s refu d of customs duties %&id o the im%ort of r&# m&teri&!s* com%o e ts* %&rts & d %&c-i " m&teri&!s used i the e'%ort %roductio . It &!so i c!udes & refu d of ce tr&! e'cise duties %&id o i di"e ous m&teri&!s. B& -s offer %re6shi%me t &s #e!! &s %ost6shi%me t &d)& ce &"&i st c!&ims for <BI. B9 S$' !&- Pr'-S*!$+'nt F!n&n ' S *'+'%: E'im6B& -;s scheme for "r& t for For'!3n Curr'n ( Pr'-S*!$+'nt Cr'd!t 0FCPC1 to e'%orters. P&c-i " credit for D''+'d '#$ort%9

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EXPORT FINANCE SOME SC2EMES IN PRE-S2IPMENT STA;E OF FINANCE 59 PAC<IN; CREDIT SANCTION OF PAC<IN; CREDIT ADVANCES: There &re cert&i f&ctors* #hich shou!d +e co sidered #hi!e s& ctio i " the

%&c-i " credit &d)& ces )i,. i. B& -s m&( re!&' orms for de+t6eDuit( r&tio* m&r"i s etc +ut o com%romise i res%ect of )i&+i!it( of the %ro%os&! & d i te"rit( of the +orro#er. ii. S&tisf&ctio &+out the c&%&cit( of the e'ecutio of the orders #ithi the sti%u!&ted time & d the m& &"eme t of the e'%ort +usi ess. iii. Ju& tum of fi & ce. i). St& di " of credit o%e i " +& - if the e'%orts &re co)ered u der !etters of credit. ). Re"u!&tio s* %o!itic&! & d fi & ci&! co ditio s of the +u(er;s cou tr(. DISBURSEMENT OF PAC<IN; CREDIT: After %ro%er s& ctio i " of credit !imits* the dis+ursi " +r& ch shou!d e sure: To i form ECGC the det&i!s of !imit s& ctio ed i the %rescri+ed form&t #ithi 32 d&(s from the d&te of s& ctio . &@ To com%!ete %ro%er docume t&tio & d com%!i& ce of the terms of s& ctio i.e. cre&tio of mort"&"e etc. +@ There shou!d +e & e'%ort order or & !etter of credit %roduced +( the e'%orter o the +&sis of #hich dis+urseme ts &re orm&!!( &!!o#ed. In 4ot* t*' &%'% "o--o7!n3 $&rt! u-&r% &r' to 4' /'r!"!'d: i. 1&me of the Bu(er. ii. Commodit( to +e e'%orted. iii. Ju& tit(. i). B&!ue. ). <&te of Shi%me t H 1e"oti&tio . )i. A ( other terms to +e com%!ied #ith.

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EXPORT FINANCE 29 FOREI;N CURRENCY PRE-S2IPMENT CREDIT 0FCPC1 The FCPC is &)&i!&+!e to e'%orti " com%& ies &s #e!! &s commerci&! +& -s for !e di " to the former. It is & &dditio &! #i do# to ru%ee %&c-i " credit scheme $ &)&i!&+!e to co)er +oth the domestic i.e. i di"e ous $ im%orted i %uts. The e'%orter h&s t#o o%tio s to &)&i! him of e'%ort fi & ce. To &)&i! him of %re6shi%me t credit i ru%ees $ the the %ost shi%me t credit either i ru%ees or i forei" curre c( de omi &ted credit or discou ti " Hrediscou ti " of e'%ort +i!!s. To &)&i! of %re6shi%me t credit i forei" curre c( $ discou ti "Hrediscou ti " of the e'%ort +i!!s i forei" curre c(. FCPC #i!! &!so +e &)&i!&+!e +oth to the su%%!ier E4UHEPC u it & d the recei)er E4UHEPC u it. Pre6shi%me t credit i forei" curre c( sh&!! &!so +e &)&i!&+!e o e'%orts to ACU 0A%!&n C-'&r!n3 Un!on1 cou tries #ith effect "ro+ 59595CC69 E-!3!4!-!t(: PCFC is e'te ded o !( o the +&sis of co firmed Hfirms e'%ort orders or co firmed FHC;s. The .Ru i " &ccou t f&ci!it( #i!! ot +e &)&i!&+!e u der the scheme. Ko#e)er* the f&ci!it( of the !iDuid&tio of %&c-i " credit u der the first i first out method #i!! +e &!!o#ed. Ord'r or L?C : B& -s shou!d ot i sist o for e)er( dis+urseme t su+missio of e'%ort order or FHC

of %re6shi%me t credit * from e'%orters #ith co siste t!(

"ood tr&c- record. I ste&d* & s(stem of %eriodic&! su+missio of & st&teme t of FHC;s or e'%ort orders i h& d* shou!d +e i troduced. S*&r!n3 o" FCPC: B& -s m&( e'te d FCPC to the m& uf&cturer &!so o the +&sis of the disc!&imer from the e'%ort order.

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EXPORT FINANCE 292 - POST-S2IPMENT FINANCE MEANIN;: Post shi%me t fi & ce is %ro)ided to meet #or-i " c&%it&! reDuireme ts &fter the &ctu&! shi%me t of "oods. It +rid"es the fi & ci&! "&% +et#ee the d&te of shi%me t & d &ctu&! recei%t of %&(me t from o)erse&s +u(er thereof. Ghere&s the fi & ce %ro)ided &fter shi%me t of "oods is c&!!ed %ost6shi%me t fi & ce. DEFENITION: Credit f&ci!it( e'te ded to & e'%orter from the d&te of shi%me t of "oods ti!! the re&!i,&tio of the e'%ort %roceeds is c&!!ed Post6shi%me t Credit. IMPORTANCE OF FINANCE AT POST-S2IPMENT STA;E: To %&( to &"e tsHdistri+utors & d others for their ser)ices. To %&( for %u+!icit( & d &d)ertisi " i the o)er se&s m&r-ets. To %&( for %ort &uthorities* customs & d shi%%i " &"e ts ch&r"es. To %&( to#&rds e'%ort dut( or t&'* if & (. To %&( to#&rds ECGC %remium. To %&( for frei"ht & d other shi%%i " e'%e ses. To %&( to#&rds m&ri e i sur& ce %remium* u der CIF co tr&cts. To meet e'%e ses i res%ect of &fter s&!e ser)ice. To %&( to#&rds such e'%e ses re"&rdi " %&rtici%&tio i e'hi+itio s & d tr&de f&irs i I di& & d &+ro&d. To %&( for re%rese t&ti)es &+ro&d i co ectio #ith their st&( +o&rd.

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EXPORT FINANCE

FORMS?MET2ODS OF POST S2IPMENT FINANCE 1. E#$ort 4!--% n'3ot!&t'd und'r L?C: The e'%orter c& c!&im %ost6shi%me t fi & ce +( dr&#i " +i!!s or dr&fts u der FHC. The +& - i sists o e'%orter. 0. Pur *&%' o" '#$ort 4!--% dr&7n und'r on"!r+'d ontr& t% : The +& -s m&( s& ctio &d)& ce &"&i st %urch&se or discou t of e'%ort +i!!s dr&# u der co firmed co tr&cts. If the FHC is ot &)&i!&+!e &s securit(* the +& - is tot&!!( de%e de t u%o the credit #orthi ess of the e'%orter. 3. Ad/&n ' &3&!n%t 4!--% und'r o--' t!on : I this c&se* the &d)& ce is "r& ted &"&i st +i!!s dr&# u der co firmed e'%ort order FHC & d #hich &re se t for co!!ectio . The( &re ot %urch&sed or discou ted +( the +& -. Ko#e)er* this form is ot &s %o%u!&r &s com%&red to &d)& ce %urch&se or discou ti " of +i!!s. 5. Ad/&n ' &3&!n%t -&!+% o" Dut( Dr&74& . 0DB<1 : <BI me& s refu d of customs duties %&id o the im%ort of r&# m&teri&!s* com%o e ts* %&rts & d %&c-i " m&teri&!s used i the e'%ort %roductio . It &!so i c!udes & refu d of ce tr&! e'cise duties %&id o i di"e ous m&teri&!s. B& -s offer %re6shi%me t &s #e!! &s %ost6shi%me t &d)& ce &"&i st c!&ims for <BI. 7. Ad/&n ' &3&!n%t 3ood% %'nt on Con%!3n+'nt 4&%!% : The +& - m&( "r& t %ost6 shi%me t fi & ce &"&i st "oods se t o co si" me t +&sis. 9. Ad/&n ' &3&!n%t Undr&7n B&-&n ' o" B!--%: There &re c&ses #here +i!!s &re ot dr&# to the fu!! i )oice )&!ue of "ods. Cert&i &mou t is u dr&# +&!& ce #hich is due for %&(me t &fter &djustme ts due to differe ce i r&tes* #ei"ht* Du&!it( etc. +& -s offer &d)& ce &"&i st such u dr&# +&!& ces su+ject to & m&'imum of 7L ecess&r( docume ts &s st&ted i the FHC. if &!! docume ts &re i order* the +& - e"oti&tes the +i!! & d &d)& ce is "r& ted to the

T.Y.B.M.S.

17

EXPORT FINANCE of the )&!ue of e'%ort & d & %roceeds to the +& -. :. Ad/&n ' &3&!n%t D''+'d E#$ort%: S%ecified s&!es or su%%!ies i I di& &re u dert&-i " is o+t&i ed to surre der +&!& ce

co sidered &s e'%orts & d termed &s 6d''+'d '#$ort%89 It i c!udes s&!es to forei" tourists duri " their st&( i I di& & d su%%!ies m&de i I di& to IBR<H I<AH A<B &ided %rojects. Credit is offered for & m&'imum of 32 d&(s. =. Ad/&n ' &3&!n%t R't'nt!on Mon'(: I res%ect of cert&i e'%ort c&%it&! "oods & d %roject e'%orts* the im%orter ret&i s & %&rt of cost "oodsH ser)ices to#&rds "u&r& tee of %erform& ce or com%!etio of %roject. B& -s &d)& ce &"&i st rete tio mo e(* #hich is %&(&+!e #ithi o e (e&r from d&te of shi%me t. A. Ad/&n ' &3&!n%t D'"'rr'd $&(+'nt%: I c&se of c&%it&! "oods e'%orts* the

e'%orter recei)es the &mou t from the im%orter i i st&!!me ts s%re&d o)er & %eriod of time. The commerci&! +& - to"ether #ith E?IM +& - do offer &d)& ces &t co cessio &! r&te of i terest for 1=2 d&(s.

T.Y.B.M.S.

19

EXPORT FINANCE

SOME SC2EMES UNDER OPERATION IN PRE-S2IPMENT FINANCE 59 DEFERRED CREDIT M'&n!n3: Co sumer "oods &re orm&!!( so!d o short term credit* orm&!!( for & %eriod u%to 1=2 d&(s. Ko#e)er* there &re c&ses* es%eci&!!(* i the c&se of e'%ort of c&%it&! "oods & d tech o!o"ic&! ser)icesE the credit %eriod m&( e'te d +e(o d 1=2 d&(s. Such e'%orts #ere !o "er credit terms >+e(o d 1=2 d&(s@ is &!!o#ed +( the e'%orter is c&!!ed &s 6d'"'rr'd r'd!t8 or 6d'"'rr'd $&(+'nt t'r+%89 2o7 t*' $&(+'nt !% r' '!/'dD The %&(me t of "oods so!d o 6d'"'rr'd $&(+'nt t'r+%8 is recei)ed %&rt!( +( #&( of &d)& ce or do# %&(me t* & d the +&!& ce +ei " %&(&+!e i i st&!!me ts s%re&d o)er & %eriod of time. P'r!od o" "!n&n !&- r'd!t %u$$ort: Fi & ci&! i stitutio s e'te d credit for "oods so!d o .deferred %&(me t terms/ >su+ject to &%%ro)&! from RBI* if reDuired@. The credit e'te ded for fi & ci " such deferred %&(me t e'%orts is - o# &s Medium Term & d Fo " Term Credit. The medium credit f&ci!ities &re %ro)ided +( the commerci&! +& -s to"ether #ith E?IM B& - for & %eriod u%to 7 (e&rs. The !o " term credit is offered orm&!!( +et#ee 7 (rs to 10 (rs* & d it is %ro)ided +( E?IM B& -. A+ount o" r'd!t %u$$ort: A ( !o& u%to Rs.12crore for fi & ci " e'%ort of c&%it&! "oods o deferred %&(me t terms is s& ctio ed +( the commerci&! +& - #hich c& refi & ce itse!f from E'im +& -. I c&se of co tr&cts &+o)e Rs.12 F&-hs +ut ot more th& Rs72crore* the E?IM

T.Y.B.M.S.

1:

EXPORT FINANCE B& - h&s the &uthorit( to decide #hether e'%ort fi & ce cou!d +e %ro)ided. Co tr&cts &+o)e Rs.72crore eed the c!e&r& ce from the #or-i " "rou% o E'%ort Fi & ce.

29 REDISCOUNTIN; OF EXPORT BILLS ABROAD 0EBRD1 SC2EME: The e'%orter h&s the o%tio of &)&i!i " of e'%ort credit &t the %ost6shi%me t st&"e either i ru%ee or i forei" curre c( u der the rediscou ti " of e'%ort +i!!s &+ro&d >EBR<@ scheme &t FIB4R !i -ed i terest r&tes. This f&ci!it( #i!! +e & &dditio &! #i do# &)&i!&+!e to e'%orter &!o " #ith the

e'iti " ru%ee fi & ci " schemes to & e'%orter &t %ost shi%me t st&"e. This f&ci!it( #i!! +e &)&i!&+!e i &!! co )erti+!e curre cies. This scheme #i!! co)er e'%ort +i!!s u%to 1=2 d&(s from the d&te of shi%me t >i c!usi)e of & d "r&ce %eriod@ . The scheme e )is&"es A<s rediscou ti " the e'%ort +i!!s i o)erse&s m&r-ets +( m&-i " &rr& "eme ts credit #ith & o)erse&s &"e c(H +& f&ci!it( +( #&( of & !i e of f&ci!it( &t r&tes or +& -er;s &cce%t& ce or & ( other simi!&r orm&! tr& sit %eriod

!i -ed to London Int'r B&n. O""'r'd R&t' >FIB4R@ for si' mo ths. Prior %ermissio of RBI #i!! ot +e reDuired for &rr& "i " the rediscou ti " ot

f&ci!it( &+ro&d so !o " &s the s%re&d for rediscou ti " f&ci!it( &+ro&d does

e'ceed o e %erce t o)er the si' mo ths FIB4R i the c&se of rediscou ti " M#ith recourse; +&sis $ 1.7L i the c&se of M#ithout recourse; f&ci!it(. S%re&d* shou!d +e e'c!usi)e of & ( #ithho!di " t&'. I &!! other c&ses* the RBI;s %ermissio #i!! +e eeded.

T.Y.B.M.S.

1=

EXPORT FINANCE

=9 FINANCE FOR RUPEE EXPENDITURE FOR PROEECT EXPORT CONTRACTS 0FREPEC1 59 F*&t !% FREPEC Pro3r&+D This %ro"r&m see-s to Fi & ce Ru%ee E'%e diture for Project E'%ort Co tr&cts* i curred +( I di& com%& ies. 29 To F*&t !% t*' $ur$o%' o" t*!% Cr'd!tD e &+!e I di& %roject e'%orters to meet Ru%ee e'%e diture

i curredHreDuired to +e i curred for e'ecutio eDui%me t* &cDuisitio of %erso Ru%ees. =9

of o)erse&s %roject e'%ort of m&teri&!s & d

co tr&cts such &s for &cDuisitio H%urch&seH&cDuisitio

e!* %&(me ts to +e m&de i I di& to st&ff*

su+6co tr&ctors* co su!t& ts & d to meet %roject re!&ted o)erhe&ds i I di&

F*o &r' '-!3!4-' "or A%%!%t&n ' und'r FREPEC Pro3r&+D I di& %roject e'%orters #ho &re to e'ecute %roject e'%ort co tr&cts o)erse&s secure o c&sh %&(me t terms or those fu ded +( mu!ti!&ter&! &"e cies #i!! +e e!i"i+!e. The %ur%ose of the e# !e di " %ro"r&m is to "i)e +oost to %roject e'%ort efforts of com%& ies #ith "ood tr&c- record & d sou d fi & ci&!s.

>9

F*&t !% t*' Gu&ntu+ o" r'd!t '#t'nd'd und'r t*!% $ro3r&+D U% to 122L of the %e&- deficit &s ref!ected i the Ru%ee c&sh f!o# st&teme t %re%&red for the %roject. E'im B& - #i!! ot orm&!!( t&-e u% c&ses i )o!)i " credit reDuireme t +e!o# Rs. 72 !&-hs. A!thou"h* o m&'imum &mou t of credit is +ei " %ro%osed* #hi!e &%%ro)i " o)er&!! credit !imit* credit6 #orthi ess of the e'%orter6+orro#er #ou!d +e t&-e i to &ccou t. Ghere

T.Y.B.M.S.

1A

EXPORT FINANCE fe&si+!e* credit m&( +e e'te ded i %&rtici%&tio #ith s%o sori " commerci&! +& -s.

@9

2o7 &r' D!%4ur%'+'nt% +&d' und'r t*!% Pro3r&+D <is+urseme ts #i!! m&de i Ru%ees throu"h & +& - &ccou t of the +orro#er6 com%& ( &"&i st docume t&r( e)ide ce of e'%e diture i curred &ccom%& ied +( & certific&te of Ch&rtered Accou t& ts.

69 2o7 !% & FREPEC Lo&n to 4' '#t!n3u!%*'dD Re%&(me t of credit #ou!d orm&!!( +e out of %roject recei%ts. Period of re%&(me t #ou!d de%e d u%o the %roject c&sh f!o# st&teme ts* +ut #i!! ot e'ceed 5 >four@ (e&rs from the effecti)e d&te of %roject e'%ort co tr&ct. The !i&+i!it( of the +orro#er to re%&( the credit & d %&( i terest & d other mo ies #i!! +e &+so!ute & d #i!! ot +e de%e de t u%o &ctu&! re&!i,&tio of %roject +i!!s. A9 F*&t !% t*' %' ur!t( %t!$u-&t'd "or FREPEC -o&nD K(%othec&tio of %roject recei)&+!es & d %roject mo)&+!es. 4%tio &!: #here &)&i!&+!e Perso &! Gu&r& tees of <irectors of the Com%& (. A)&i!&+!e co!!&ter&! securit(.

T.Y.B.M.S.

02

EXPORT FINANCE

C2APTER > - LETTER OF CREDIT

INTRODUCTION: This is o e of the most %o%u!&r & d more secured of method of %&(me t i rece t times &s com%&red to other methods of %&(me t. A FHC refers to the docume ts re%rese ti " the "oods & d ot the "oods themse!)es. B& -s &re ot i the +usi ess of e'&mi i " the "oods o +eh&!f of the customers. T(%ic&! docume ts* #hich &re reDuired i c!udes commerci&! i )oice* tr& s%ort docume t such &s Bi!! of !&di " or Air#&( +i!!* & i sur& ce docume ts etc. FHC de&!s i docume ts & d ot "oods. DEFINITION: A Fetter of Credit c& +e defi ed &s 6&n und'rt&.!n3 4( !+$ort'rH% 4&n. %t&t!n3 t*&t $&(+'nt 7!-- 4' +&d' to t*' '#$ort'r !" t*' r'Gu!r'd do u+'nt% &r' $r'%'nt'd to t*' 4&n. 7!t*!n t*' /&-!d!t( o" t*' L?C89 PARTIES INVOLVED IN LETTER OF CREDIT: A$$-! &nt: I%%u!n3 4&n.: B'n'"! !&r(: Ad/!%!n3 4&n.: The +u(er or im%orter of "oods Im%orter;s +& -* #ho issues the FHC The %&rt( to #hom the FHC is &ddressed. The Se!!er or su%%!ier of "oods. Issui " +& -;s +r& ch or corres%o de t +& - i The e'%orter;s cou tr( to #hom the FHC is se d for 4 #&rd tr& smissio to the +e efici&r(. Con"!r+!n3 4&n.: The +& - i +e efici&r(;s cou tr(* #hich Gu&r& tees the credit o the reDuest of the issui " B& -.

T.Y.B.M.S.

01

EXPORT FINANCE N'3ot!&t!n3 4&n.: The +& - to #hom the +e efici&r( %rese ts his <ocume ts for %&(me t u der FHC

A L'tt'r o" Cr'd!t ont&!n% t*'%' '-'+'nt%: A %&(me t u dert&-i " "i)e +( the +& - >issui " +& -@ o +eh&!f of the +u(er >&%%!ic& t@ To %&( & se!!er >+e efici&r(@ & "i)e &mou t of mo e( !imits These docume ts co formi " to terms & d co ditio s set out i the !etter of credit <ocume ts to +e %rese ted &t & s%ecified %!&ce. o %rese t&tio of s%ecified docume ts re%rese ti " the su%%!( of "oods #ithi s%ecific time

In %!+$-' 7ord%: t*' I%%u!n3 B&n.I% ro-' !% t7o"o-d: To "u&r& tee to the se!!er th&t if com%!ete docume ts &re %rese ted* the +& #i!! %&( the se!!er the &mou t due. This offers securit( to the se!!er 8 the +& s&(s i effect NGe #i!! %&( (ou if (ou %rese t docume ts >?YC@N To e'&mi e the docume ts & d o !( %&( if these com%!( #ith the terms & d co ditio s set out i the !etter of credit. This %rotects the +u(erOs i terests 6 the +& - s&(s NGe #i!! o !( %&( (our su%%!ier o (our +eh&!f if the( %rese t docume ts >?YC@ th&t (ou h&)e &s-ed forN ADVANTA;ES OF LETTER OF CREDIT ADVANTA;ES TO T2E EXPORTER: 1o +!oc-i " of fu ds. C!e&r& ce of im%ort re"u!&tio s. Free from !i&+i!it(. Pre6 shi%me t fi & ce. 1o 6refus&! +( im%orter.

T.Y.B.M.S.

00

EXPORT FINANCE Reductio i +&d6de+ts.

ADVANTA;ES TO T2E IMPORTER: Better terms of tr&de. Assur& ce of shi%me t of "oods. 4)erdr&ft f&ci!it(. 1o +!oc-i " of fu ds. <e!i)er( o time. Better re!&tio s.

DISADVANTA;ES OF LETTER OF CREDIT: F&c-s f!e'i+i!it(. Com%!e' method E'%e si)e for im%orter Pro+!em of re)oc&+!e FHC

T.Y.B.M.S.

03

EXPORT FINANCE

Sample Document: Letter of Credit (Documentary Credit) T2E MOON BAN< INTERNATIONAL OPERATIONS @ MOONLI;2T BLVD9: EXPORT-CITY AND POSTAL CODE EXPORT-COUNTRY

OUR ADVICE NO9 MB67530 To* UBG E'%orts == Pros%erit( Street E&st* Suite :2: E'%ort6Cit( & d Post&! Code <e&r Sirs:

ISSUIN; BAN< REF9 NO9 J DATE SBRE6::: P& u&r( 09* 0227

Ge h&)e +ee reDuested +( The Su B& -* Su !i"ht Cit(* Im%ort6Cou tr( to &d)ise th&t the( h&)e o%e ed #ith us their irre)oc&+!e docume t&r( credit um+er SB6=:975 For &ccou t of <EF Im%orts* : Su shi e Street* Su !i"ht Cit(* Im%ort6Cou tr( i (our f&)or for the &mou t of ot e'ceedi " T#e t( Fi)e Thous& d U.S. <o!!&rs >USQ07*222.22@ &)&i!&+!e +( (our dr&ft>s@ dr&# o us &t si"ht for fu!! i )oice )&!ue A o+$&n!'d 4( t*' "o--o7!n3 do u+'nt%: 1. Si" ed commerci&! i )oice i fi)e >7@ co%ies i dic&ti " the +u(erOs Purch&se 4rder 1o. <EF6121 d&ted P& u&r( 12* 0227

T.Y.B.M.S.

05

EXPORT FINANCE 0. P&c-i " !ist i fi)e >7@ co%ies. 3. . Fu!! set 3H3 c!e& o +o&rd oce& +i!! of !&di "* %!us t#o >0@ o 6 e"oti&+!e co%ies* issued to order of The Su B& -* Su !i"ht Cit(* Im%ort6Cou tr(* otif( the &+o)e &ccou tee* m&r-ed Nfrei"ht Pre%&idN* d&ted !&test M&rch 1A* 0227* & d sho#i " docume t&r( credit um+er. 5. I sur& ce %o!ic( i du%!ic&te for 112L CIF )&!ue co)eri " I stitute C&r"o C!&uses >A@* I stitute G&r & d Stri-e C!&uses* e)ide ci " th&t c!&ims &re %&(&+!e i Im%ort6 Cou tr(.

Co/'r!n3:

500 S't% IABCI Br&nd Pn'u+&t! Too-%: 5?2K dr!/':

o+$-'t' 7!t* *o%' &nd Gu! . ou$-!n3%: CIF Sunn( Port Shi%me t from: P&rti&! shi%me t Tr& 6shi%me t S%eci&! co ditio s: 1. A!! docume ts i dic&ti " the Im%ort Fice se 1o. IPH103579 d&ted P& u&r( 1=* 0227. 0. A!! ch&r"es outside the Im%ort6Cou tr( &re o +e efici&r(Os &ccou t <ocume ts must +e %rese ted for %&(me t #ithi 17 d&(s &fter the d&te of shi%me t. <r&ft>s@ dr&# u der this credit must +e m&r-ed <r&# u der docume t&r( credit 1o. SB6=:975 of The Su B& -* Su !i"ht Cit(* Im%ort6Cou tr(* d&ted P& u&r( 09* 0227 Ge co firm this credit & d here+( u dert&-e th&t &!! dr&fts dr&# u der & d i co formit( #ith the terms of this credit #i!! +e du!( ho ored u%o de!i)er( of docume ts &s s%ecified* if %rese ted &t this office o or +efore M&rch 09* 0227 Ber( tru!( (ours* RRRRRRRRRRRRRRRRRRRRRRRRRR Authori,ed Si" &ture Moo +e&m Port* E'%ort6Cou tr( to Su Prohi+ited Permitted ( Port* Im%ort6Cou tr(

T.Y.B.M.S.

07

EXPORT FINANCE
Unless otherwise expressly stated, this Credit is subject to the Uniform Customs and ractice for Documentary Credits, !""# $e%ision, &nternational Chamber of Commerce ublication 'o( )**(

C2APTER @ - SOME IMPORTANT CONCEPTS IN EXPORT FINANCE

@95 - FORFEITIN; Forfeiti " is & mech& ism of fi & ci " e'%orts.

B( discou ti " e'%ort recei)&+!es E)ide ced +( +i!!s of e'ch& "e or %romissor( otes Githout recourse to the se!!er >)i,. e'%orter@ C&rr(i " medium to !o " term m&turities 4 & fi'ed r&te +&sis >discou t@ U%to 122 %erce t of the co tr&ct )&!ue.

The #ord SforfeitO is deri)ed from the Fre ch #ord S& forfeitO #hich me& s the surre der of ri"hts. Sim%!( %ut* Forfeiti " is the o 6recourse discou ti " of e'%ort recei)&+!es. I & forfeiti " tr& s&ctio * the e'%orter surre ders* #ithout recourse to him* his ri"hts to c!&im for %&(me t o "oods de!i)ered to & im%orter* i retur for immedi&te c&sh %&(me t from & forfeiter. As & resu!t* & e'%orter i I di& c& co )ert & credit s&!e i to & c&sh s&!e* #ith o recourse to the e'%orter or his +& -er.

T.Y.B.M.S.

09

EXPORT FINANCE

CONCEPT OF FORFEITIN; 59 F*&t '#$ort% &r' '-!3!4-' "or "or"'!t!n3D A!! e'%orts of c&%it&! "oods & d other "oods m&de o medium to !o " term credit &re e!i"i+!e to +e fi & ced throu"h forfeiti ". 29 2o7 do'% "or"'!t!n3 7or.D Recei)&+!es u der & deferred %&(me t co tr&ct for e'%ort of "oods* e)ide ced +( +i!!s of e'ch& "e or %romissor( otes* c& +e forf&ited. Bi!!s of e'ch& "e or %romissor( otes* +&c-ed +( co6&cce%t& ce from & +& >#hich #ou!d "e er&!!( +e the +u(erOs +& -@* &re e dorsed +( the e'%orter* #ithout recourse* i f&)our of the forfeiti " &"e c( i e'ch& "e for discou ted c&sh %roceeds. The co6&cce%ti " +& - must +e &cce%t&+!e to the forfeiti " &"e c(. =9 I% t*'r' & $r'% r!4'd "or+&t "or t*' 4!--% o" '# *&n3' or $ro+!%%or( not'%D Yes. The +i!!s of e'ch& "e or %romissor( otes shou!d +e i the %rescri+ed form&t. >9 F*&t ro-' 7!-- E#!+ B&n. $-&( !n "or"'!t!n3 tr&n%& t!on%D The ro!e of E'im B& - #i!! +e th&t of & f&ci!it&tor +et#ee the I di& e'%orter & d the o)erse&s forfeiti " &"e c(. @9 2o7 7!-- E#!+ B&n. "& !-!t&t' & "or"'!t!n3 tr&n%& t!onD

T.Y.B.M.S.

0:

EXPORT FINANCE 4 & reDuest from & e'%orter* for & e'%ort tr& s&ctio #hich is e!i"i+!e to +e forf&ited* E'im B& - #i!! o+t&i i dic&ti)e & d firm forfeiti " Duotes 6 discou t r&te* commitme t & d other fees 6 from o)erse&s &"e cies. E'im B& - #i!! recei)e &)&i!ed +i!!s of e'ch& "e or %romissor( otes* &s the c&se m&( +e* & d se d them to the forfeiter for discou ti " & d #i!! &rr& "e for the discou ted %roceeds to +e remitted to the I di& e'%orter. E'im B& - #i!! issue &%%ro%ri&te certific&tes to e &+!e I di& e'%orters to remit commitme t fees & d other ch&r"es. 69 F*&t do'% "or"'!t!n3 o%t !n -ud'D A forfeiti " tr& s&ctio h&s t(%ic&!!( three cost e!eme ts: Commitme t fee <iscou t fee <ocume t&tio fee

:. F*&t 4'n'"!t% & ru' to &n '#$ort'r "ro+ "or"'!t!n3D Co )erts & deferred %&(me t e'%ort i to & c&sh tr& s&ctio * im%ro)i " !iDuidit( & d c&sh f!o# Frees the e'%orter from cross6+order %o!itic&! or commerci&! ris-s &ssoci&ted #ith e'%ort recei)&+!es Fi & ce u% to 122 %erce t of the e'%ort )&!ue is %ossi+!e &s com%&red to =26=7 %erce t fi & ci " &)&i!&+!e from co )e tio &! e'%ort credit %ro"r&m As forfeiti " offers #ithout recourse fi & ce to & e'%orter* it does ot im%&ct the e'%orterOs +orro#i " !imits. Thus* forfeiti " re%rese ts & source of fu di "* co tri+uti " to im%ro)ed !iDuidit( & d c&sh f!o# Pro)ides fi'ed r&te fi & ceE hed"es &"&i st i terest & d e'ch& "e ris-s &risi " from deferred e'%ort credit &dditio &!

T.Y.B.M.S.

0=

EXPORT FINANCE E'%orter is freed from credit &dmi istr&tio & d co!!ectio %ro+!ems Forf&iti " is tr& s&ctio tr& s&ctio E'%orter s&)es o i sur& ce costs &s forfeiti " o+)i&tes the eed for e'%ort credit i sur& ce s%ecific. Co seDue t!(* & !o " term +& -i " ot ecess&r( to &rr& "e & forfeiti "

re!&tio shi% #ith the forfeiter is

@92 - FACTORIN;
F&ctori " m&( +e defi ed &s 6A ontr& t 4( 7*! * t*' "& tor !% to $ro/!d' &t -'&%t t7o o" t*' %'r/! '%: 0"!n&n ': t*' +&!nt'n&n ' o" & ount%: t*' o--' t!on o" r' '!/&4-'% &nd $rot' t!on &3&!n%t r'd!t r!%.%1 &nd t*' %u$$-!'r !% to &%%!3n'd to t*' "& tor on & ont!nu!n3 4&%!% 4( 7&( o" %&-' or %' ur!t(: r' '!/&4-'% &r!%!n3 "ro+ t*' %&-' o" 3ood% or %u$$-( o" %'r/! '%89 F&ctori " offers sm&!!er com%& ies the i st& t c&sh &d)& t&"e th&t #&s o ce &)&i!&+!e o !( to !&r"e com%& ies #ith hi"h s&!es )o!umes. Gith F&ctori "* thereOs o eed for credit or co!!ectio de%&rtme ts* & d o eed to s%e d (our %rofits o m&i t&i i " &ccou ts recei)&+!es. I sim%!e #ords...F&ctori " tur s (our r' '!/&4-' !nto &%* tod&(: i ste&d of #&iti " to +e %&id &t & future d&te. Int'rn&t!on&- '#$ort F& tor!n3 S *'+': RBI h&s &%%ro)ed the &+o)e scheme e)o!)ed +( SBI F&ctors & d Commerci&! Ser)ices fo!!o#s: P)t. Ftd Mum+&i for %ro)idi " 6Int'rn&t!on&- E#$ort F& tor!n3 the scheme &re &s S'r/! '%8 o 67!t* r' our%'8 +&sis. The s&!ie t fe&tures of

T.Y.B.M.S.

0A

EXPORT FINANCE A e'%orter shou!d su+mit to SBI F& tor% J Co++'r !&- S'r/! '% P/t9Ltd i.e. the E#$ort F& tor0EF1 & !ist of Bu(ers>customers@ i dic&ti " their &mes $ street &ddresses & d his credit !i e eeds . The I+$ort F& tor 0IF1 !oc&ted i the im%orter;s cou tr( se!ected +( EF* #i!! r&te the +u(er;s !ist & d the resu!ts #i!! +e re%orted to the e'%orter throu"h EF. The e'%orter #i!! &%%!( for & credit !imit i res%ect of o)erse&s im%orter. IF #i!! "r& t credit !i e +&sed o the &ssessme t of credit6#orthi ess of the o)erse&s im%orter. The e'%orter #i!! there&fter e ter i to & e'%ort f&ctori " &"reeme t #ith EF. A!! e'%ort recei)&+!e #i!! +e &ssi" ed to the EF* #ho i tur #i!! &ssi" them to IF. The e'%orter #i!! shi% merch& dise to &%%ro)ed forei" +u(ers. E&ch i )oice is m&de %&(&+!e to & s%ecific f&ctor i the +u(er;s >im%orter@ cou tr(. Co%ies of i )oices $ shi%%i " docume ts shou!d +e se t to IF throu"h EF. EF #i!! m&-e %re%&(me t to the e'%orter &"&i st &%%ro)ed e'%ort recei)&+!es. EF #i!! re%ort the tr& s&ctio i re!e)& t E1C st&teme t det&i!i " fu!! %&rticu!&rs* such &s E'%orter;s Code 1um+er* GR Form 1um+er* Custom 1um+er* Curre c(* I )oice )&!ue etc. 4 recei%t of %&(me ts from +u(ers o the due d&te of i )oice* IF #i!! remit fu ds to EF #ho #i!! co )ert forei" curre c( remitt& ces i to ru%ees & d #i!! tr& sfer %roceeds to the e'%orter &fter deducti " the &mou t of %re%&(me ts* if m&de. Simu!t& eous!(* EF #i!! re%ort the tr& s&ctio i the re!&ti)e MR; retur s e c!osi " du%!ic&te co%( of the res%ecti)e GR form du!( certified. The %&(me t recei)ed #i!! +e the et %&(me t &fter deductio of & ser)ice fee* #hich r& "es from 2.7 L to 0L of the )&!ue of the i )oices. If & &%%ro)ed +u(er >im%orter@ is u &+!e to %&( the %roceeds of e'%orts* IF #i!! %&( the recei)&+!es to EF* 122 d&(s &fter the due d&te. The tr& s&ctio s of this

T.Y.B.M.S.

32

EXPORT FINANCE &ture #i!! +e re%orted +( EF i the h&!f (e&r!( st&teme ts #hich &re to +e su+mitted to RBI* i dic&ti " therei the re&so s for de!&( H o %&(me t.

@9= - Su$$-!'rI% Cr'd!t "or d'"'rr'd $&(+'nt '#$ort%

D'"!n!t!on o" D'"'rr'd P&(+'nt E#$ort%: I terms of Re"u!&tio A of the Forei" E'ch& "e M& &"eme t Act 1AAA* the &mou t re%rese ti " the fu!! e'%ort )&!ue of "oods e'%orted must +e re&!i,ed & d re%&dri&ted to I di& #ithi 9 mo ths of d&te of e'%ort. E'%orts #here more th& 12L of the )&!ue is re&!i,ed +e(o d the %rescri+ed %eriod* i.e. 9 mo ths from d&te of shi%me t* &re tre&ted &s <eferred P&(me t E'%orts 59 F*&t !% &n o""'rD E'im B& - offers Su%%!ierOs Credit i Ru%ees or i Forei" Curre c( &t %ost6 shi%me t st&"e to fi & ce e'%ort of e!i"i+!e "oods & d ser)ices o deferred %&(me t terms. Su%%!ierOs Credit is &)&i!&+!e +oth for su%%!( co tr&cts &s #e!! &s %roject e'%ortsE the !&tter i c!udes co structio * tur -e( or co su!t& c( co tr&cts u dert&-e o)erse&s. 29 F*o &n %''. "!n&n 'D E'%orters c& see- Su%%!ierOs Credit i Ru%eesH Forei" Curre c( from E'im B& - i res%ect of e'%ort co tr&cts o deferred %&(me t terms irres%ecti)e of )&!ue of e'%ort co tr&cts. =9 F*&t &r' t*' 3'n'r&- t'r+% o" Su$$-!'rI% Cr'd!tD E#t'nt o" Su$$-!'rI% Cr'd!t: 122L of %ost6shi%me t credit e'te ded +( e'%orter to o)erse&s +u(er.

T.Y.B.M.S.

31

EXPORT FINANCE Curr'n ( o" Cr'd!t: Su%%!ierOs Credit from E'im B& - is &)&i!&+!e i I di& Ru%ees or i Forei" Curre c(.

R&t' o" Int'r'%t: The r&te of i terest for Su%%!ierOs Credit i Ru%ees is & fi'ed r&te & d is &)&i!&+!e o reDuest. Su%%!ierOs Credit i Forei" Curre c( is offered +( E'im B& - o & f!o&ti " r&te +&sis &t & m&r"i o)er FIB4R de%e de t u%o cost of fu ds. S' ur!t(: AdeDu&te securit( +( #&( of &cce%t&+!e !etter of credit & dHor "u&r& tee from & +& - i the cou tr( of im%ort or & ( third cou tr( is ecess&r(* &s %er RBI "uide!i es. P'r!od o" Cr'd!t &nd R'$&(+'nt: Period of credit is determi ed for e&ch %ro%os&! h&)i " re"&rd to the )&!ue of co tr&ct* &ture of "oods co)ered* securit(* com%etitio . Re%&(me t %eriod for Su%%!ierOs Credit f&ci!it( is fi'ed coi cidi " #ith the re%&(me t of %ost6shi%me t credit e'te ded +( I di& e'%orter to o)erse&s +u(er. Ko#e)er* the I di& e'%orter #i!! re%&( the credit to E'im B& - &s %er &"reed re%&(me t schedu!e* irres%ecti)e of #hether or ot the o)erse&s +u(er h&s %&id the I di& e'%orter. O/'r%'&% Bu('rI% Cr'd!t: Credit is offered direct!( to o)erse&s +u(er for & s%ecific %rojectH co tr&ct.

T.Y.B.M.S.

30

EXPORT FINANCE

C2APTER 6 - MAEOR FINANCIAL AND OT2ER INSTITUTIONS

For %ro)idi " credit & d fi & ce & d i suri " e'%ort credit ris-* there &re 0 %rim&r( i stitutio s i.e. E?IM B& - & d ECGC. A!thou"h there &re other commerci&! +& -s* i stitutio s &re E?IM B& -* ECGC* & d RBI. &tio &!i,ed i stitutio s & d %ri)&te i stitutio s such &s IFCI* I<BI* e "&"ed i %ro)idi " fi & ce to e'%orter. The m&jor

695 - EXIM BAN<

E#!+ B&n. A t-Co+$-'t'd 20 ('&r% o" o$'r&t!on%9 Set u% +( & Act of P&r!i&me t i Se%tem+er 1A=1. Comme ced o%er&tio s i M&rch 1A=0. Gho!!( o# ed +( the Go)er me t of I di&. E'%ort6Im%ort B& - of I di& #&s set u% for the %ur%ose of fi & ci "* f&ci!it&ti " & d %romoti " forei" tr&de i I di&. E'im is the %ri ci%&! fi & ci&! i stitutio i the cou tr( for co6ordi &ti " #or-i " of i stitutio s e "&"ed i fi & ci " e'%orts & d im%orts.

T.Y.B.M.S.

33

EXPORT FINANCE

INTRODUCTION The E'%ort6Im%ort +& - of I di& is the &%e' i stitutio for %roject fi & ce* #hich %ro)ides direct fi & ce & d coordi &tes the #or-i " of the i stitutio * #hich is e "&"ed i fi & ci " e'%ort or im%ort of "oods & d ser)ices. It h&s t&-e o)er the o%er&tio s of i ter &tio &! fi & ce #i " of the i dustri&! de)e!o%me t +& - of I di& >I<BI@. The E?IM +& - of I di& c&me i to e'iste ce o 1 st P& u&r( 1A=0* & d st&rted fu ctio i " from 1st m&rch 1A=0. It h&s it;s he&dDu&rter i Mum+&i & d its +r& ches & d offices i im%ort& t cities i I di& & d &+ro&d. O""! '% 2'&d o""! ' 8 Mum+&i. A n't7or. o" 5= o""! '% !n Ind!& &nd O/'r%'&%9 Do+'%t! O""! '% 6 Ahmed&+&d* B& "&!ore* Che &i* K(der&+&d* Io!-&t&* Mum+&i* 1e# <e!hi* Pu e. O/'r%'&% O""! '% - Bud&%est* Poh& es+ur"* Mi!& * Si "&%ore* G&shi "to <C.

T.Y.B.M.S.

35

EXPORT FINANCE PURPOSE The E?IM +& - #&s est&+!ished for the %ur%ose of fi & ci " medium & d !o " term !o& to the e'%orters there+( %romoti " forei" tr&de of I di&. MAIN OBEECTIVES To %ro)ide fi & ci&! &ssist& ce >medium & d !o " term@ to e'%orters & d im%orters. To fu ctio &s the %ri ci%&! fi & ci&! i stitutio for coordi &ti " the #or-i " of i stitutio s e "&"ed i %ro)idi " e'%ort fi & ce. To %romote Forei" Tr&de of I di&. To de&! #ith &!! m&tters th&t m&( +e co sidered to +e i cide t&! or co duci)e to the &tt&i me t of &+o)e o+jecti)es. FUNCTIONS The &ssist& ce %ro)ided +( E?IM B& - to the e'%orters c& +e "rou%ed u der t#o he&ds: A9 Fund B&%'d A%%!%t&n '9 B9 Non-Fund 4&%'d A%%!%t&n '9 T*' /&r!ou% &%%!%t&n ' $ro/!d'd 4( EXIM B&n. &n 4' *&rt'd &% "o--o7%:

ASSISTANCE OFFERED BY EXIM BAN<

FUND BASED ASSISTANCE

NON-FUND BASED ASSISTANCE

INDIAN PARTIES. INDIAN BANKS. OVERSEAS BUYERS. OVERSEAS BANKS.

FINANCIAL GUARANTEES. ADVISORY AND OTHER SERVICES.

T.Y.B.M.S.

37

EXPORT FINANCE

A9 FUND BASED ASSISTANCE: A%%!%t&n ' to Ind!&n E#$ort'r%: >&@ It %ro)ides fi & ci&! &ssist& ce to 6D'"'rr'd r'd!t '#$ort%89 >+@ It offers credit f&ci!ities to 6D''+'d E#$ort%89 >c@ It fi & ces 6Indian Joint Ventures in Foreign countries9 >d@ Fi & ces u its i EPZ/ SEZ and 100% EOUs. >e@ It %ro)ides Pre6shi%me t fi & ce to e'%orters for %rocuri " r&# m&teri&!s & d other i %uts. >f@ It fi & ces e'%ortHim%ort of m&chi er( & d eDui%me t o !e&se +&sis. >"@ It %ro)ides Com%uter Soft#&re e'%orters forei" e'ch& "e !o& su+ject to RBI c!e&r& ce. >h@ It %ro)ides fi & ce f&ci!it( &"&i st deferred credit to e'%orters of co su!t& c(* tech o!o"( & d other ser)ices. >i@ It %ro)ides fi & ce to I di& e'%orters to u dert&-e )&rious e'%ort m&r-eti " &cti)ities i I di& & d &+ro&d throu"h E'%ort M&r-eti " Fu d >EMF@. >j@ It &!so o%er&tes E'%ort <e)e!o%me t Fu d >E<F@ to fi & ce tech o6 eco omic sur)e(Hrese&rch or & ( other stud( for the de)e!o%me t of I di& E'%orts. A%%!%t&n ' to Ind!&n Co++'r !&- B&n.%: >&@ It %ro)ides Refi & ce F&ci!ities so &s to I di& e'%orters #ho e'te d term credit to im%orters. >+@ It offers E'%ort Bi!!s Rediscou ti " F&ci!it( to commerci&! +& -s i I di& #ho h&)e e&r!ier discou ted +i!!s of e'%orters. A%%!%t&n ' to O/'r%'&% Bu('r%: >&@ It offers .4)erse&s Bu(er;s Credit/ f&ci!it( to forei" im%orters for im%ort of I di& c&%it&! "oods & d re!&ted ser)ices #ith re%&(me t s%re&d o)er & %eriod of (e&rs.

T.Y.B.M.S.

39

EXPORT FINANCE

A%%!%t&n ' to O/'r%'&% B&n.%: >&@ Fo " term fi & ce is &!so %ro)ided u der .Fi es of Credit/ to fi & ce fi & ci&! i stitutio s &+ro&d* #ho i tur * e'te d fi & ce to im%orters of their cou tr( to +u( I di& C&%it&! "oods. >+@ It %ro)ides Re!e di " F&ci!it( to o)erse&s B& -s to m&-e &)&i!&+!e term fi & ce to their c!ie ts for im%ort of I di& "oods.

29 NON-FUND BASED ASSISTANCE ;u&r&nt''% &nd Bond%:

E?IM B& - %ro)ides o 6fu d +&se &ssist& ce i the form of "u&r& tees i the &ture of Bid Bo ds* Perform& ce Gu&r& tee etc. These "u&r& tees &re %ro)ided to"ether #ith Commerci&! B& -s. Ad/!%or( &nd Ot*'r S'r/! '%: >&@ It &d)ises I di& com%& ies* i E ecuting !ontracts "#road* & d o sources of o)erse&s fi & ci ". >+@ It &d)ises I di& e'%orters o "!o+&! e'ch& "e co tro! %r&ctices. >c@ The E?IM B& - offers Fi & ci&! & d "d$isor% Ser$ices to Indian construction &ro'ects a#road. >d@ It &d)ises s(a))*sca)e (anu+acturers o e'%ort m&r-ets & d %roduct &re&s. >e@ It %ro)ides Euro Financing sources & d ,)o#a) !redit sources to I di& e'%orters. >f@ It &ssists the e'%orters u der For"'!t!n3 % *'+'.

T.Y.B.M.S.

3:

EXPORT FINANCE

FRELUENTLY AS<ED LUESTIONS 0FALH%1 IN EXIM BAN< 59 F*&t !% E#$ort-I+$ort B&n. o" Ind!&D F*&t &r' !t% o4,' t!/'%D The E'%ort6Im%ort B& - of I di& >E'im B& -@ is & %u+!ic sector fi & ci&! i stitutio cre&ted +( & Act of P&r!i&me t* the E'%ort6im%ort B& - of I di& Act* 1A=1. The +usi ess of E'im B& - is to fi & ce I di& co ti uit( of forei" e'%orts th&t !e&d to e'ch& "e for I di&. The B& -Os %rim&r( o+jecti)e is to

de)e!o% commerci&!!( )i&+!e re!&tio shi%s #ith & t&r"et set of e'ter &!!( orie ted com%& ies +( offeri " them & com%rehe si)e r& "e of %roducts & d ser)ices* &imed &t e h& ci " their i ter &tio &!i,&tio efforts. 29 F*&t !% t*' $-& ' o" E#!+ B&n. !n t*' !n%t!tut!on&- %tru tur' "or "!n&n !n3 d'/'-o$+'nt&- n''d%D There &re &%e' i stitutio s i the cou tr(* #hich de&! #ith m&jor eco omic

&cti)ities* )i,. i dustr(* &"ricu!ture & d forei" tr&de. The I dustri&! <e)e!o%me t B& - of I di& e'te ds term i dustri&! !o& sE the 1&tio &! B& - for A"ricu!tur&! !o& sE & d the E'im B& - e'te ds term !o& s for forei" tr&de. A!! these i stitutio s &re #ho!es&!e +& -s. The(* therefore #or- c!ose!( #ith commerci&! +& -s & d other st&te !e)e! fi & ci&! i stitutio s th&t o%er&te the ret&i! +& -i " s(stem i the cou tr(. =9 F*&t &r' t*' t($'% o" %'r/! '% $ro/!d'd 4( E#!+ B&n.D E'im B& - %ro)ides & r& "e of & &!(tic&! i form&tio & d e'%ort re!&ted ser)ices. The B& -Os fee +&sed ser)ices he!% ide tif( e# +usi ess %ro%ositio s* source tr&de & d i )estme t re!&ted i form&tio * cre&te & d e h& ce %rese ce throu"h joi t et#or- of i stitutio &! !i -&"es &cross the "!o+e* & d &ssists e'ter &!!( orie ted com%& ies i their Duest for e'ce!!e ce & d "!o+&!i,&tio . Ser)ices of tech o!o"( su%%!iers* i c!ude se&rch for o)erse&s %&rt ers* ide tific&tio

e"oti&ti " &!!i& ces* & d de)e!o%me t of joi t )e tures i I di& & d &+ro&d. The

T.Y.B.M.S.

3=

EXPORT FINANCE B& - &!so su%%orts I di& %roject e'%orters & d co su!t& ts to %&rtici%&te i

%rojects fu ded +( mu!ti!&ter&! fu di " &"e cies. >9 2o7 do'% E#!+ B&n. %u$$ort Ind!&n o/'r%'&%D E'im B& - e cour&"es I di& co su!t& ts to "&i & d e h& ce their i ter &tio &! e'%osure +( &ssisti " them i securi " &ssi" me ts o)erse&s. Assi" me ts &re &#&rded u der %ro"r&mme s%o sored +( I ter &tio &! Fi & ce Cor%or&tio >IFC@ i G&shi "to to %romote %ri)&te sector de)e!o%me t i se!ect cou tries & d re"io s. Arr& "eme ts set i %!&ce co)er: Afric& Project <e)e!o%me t F&ci!it( Afric& M& &"eme t Ser)ices Com%& ( Afric& E ter%rise Fu d South6e&st Euro%e E ter%rise <e)e!o%me t F&ci!it( Me-o " Project <e)e!o%me t F&ci!it( Busi ess Ad)isor( & d Tech ic&! Assist& ce Ser)ices >BATAS@ 4ther Tech ic&! Assist& ce $ Trust Fu ds on%u-t&nt% to %' ur' &%%!3n+'nt%

E'im B& - &ssists these &"e cies i the recruitme t of I di& co su!t& ts & d meets the %rofessio &! fees of the co su!t& t se!ected +( IFC. Co su!t& c( &ssi" me ts u dert&-e com%rise %re6fe&si+i!it( studies* %roject & d s(stems* o%er&tio s & d i )estme t re!&ted ser)ices* m& &"eme t i form&tio i dustr(* co sumer "oods* !i"ht e "i eeri "* te!ecom. @9 F*&t &r' t*' /&r!ou% t($'% o" "!n&n !&- "& !-!t!'% $ro/!d'd 4( E#!+ B&n. to Ind!&n Co+$&n!'% "or '#$ort o" turn.'(? on%tru t!on $ro,' t%: '#$ort o" %'r/! '% &nd '#$ort o" &$!t&-? 'n3!n''r!n3 3ood% J on%u+'r dur&4-'%D E'im B& - %ro)ides fi & ci&! &ssist& ce to I di& Com%& ies +( #&( of & )&riet( of !e di " Pro3r&++'%: /!M9 Non-Fund'd

m&i te & ce su%%ort m&i !( for SMEs i & )&riet( of sectors !i-e &"ricu!ture* &"ro6

T.Y.B.M.S.

3A

EXPORT FINANCE

Bid Bo d Ad)& ce P&(me t Gu&r& tee Perform& ce Gu&r& tee Gu&r& tee for re!e&se of Rete tio Mo e( Gu&r& tee for r&isi " Borro#i "s 4)erse&s 4ther "u&r& tees

Fund'd Pre6shi%me t Ru%ee Credit Post6shi%me t Ru%ee Credit Forei" Curre c( Fo& 4)erse&s Bu(erOs Credit Fi es of Credit Fo& u der FREPEC %ro"r&mme Refi & ce of E'%ort Fo& s

69 2o7 !% For"'!t!n3 u%'"u- &% &n '#$ort "!n&n !n3 o$t!onD F*&t ro-' do'% E#!+ B&n. $-&( !n & For"'!t!n3 tr&n%& t!onD Forfeiti " is & mech& ism of fi & ci " e'%orts +( discou ti " e'%ort recei)&+!es e)ide ced +( +i!!s of e'ch& "eH %romissor( otes #ithout recourse to the e'%orter. E'im B& - %!&(s the ro!e of & i termedi&r( for f&ci!it&ti " the forf&iti " tr& s&ctio +et#ee the I di& e'%orter & d the o)erse&s forfeiti " &"e c(. A9 F*&t &r' t*' /&r!ou% t($'% o" "!n&n !&- "& !-!t!'% $ro/!d'd 4( E#!+ B&n. to Ind!&n Co+$&n!'% "or '#$ort &$&4!-!t( r'&t!onD E'im B& - %ro)ides fi & ci&! &ssist& ce to I di& Fe di " Pro"r&mme for E'%ort 4rie ted U its Productio EDui%me t Fi & ce Pro"r&mme Im%ort Fi & ce Com%& ies for e'%ort

c&%&+i!it( cre&tio +( #&( of & )&riet( of !e di " %ro"r&mmes* )i,.*

T.Y.B.M.S.

52

EXPORT FINANCE

E'%ort M&r-eti " Fi & ce Pro"r&mme Fe di " Pro"r&mme for Soft#&re Tr&i i " I stitutes Pro"r&mme for Fi & ci " Rese&rch $ <e)e!o%me t Pro"r&mme for E'%ort F&ci!it&tio : Port <e)e!o%me t E'%ort Be dor <e)e!o%me t Fe di " Pro"r&mme Forei" Curre c( Pre6Shi%me t Credit Gor-i " C&%it&! Term Fo& Pro"r&mme for E'%ort 4rie ted u its

B9 F*&t t($' o" "!n&n !&- &%%!%t&n ' !% '#t'nd'd 4( E#!+ B&n. !n %'tt!n3 u$ ,o!nt /'ntur'%D Assist& ce is e'te ded to I di& Promoter Com%& ies +( #&( of %ro"r&mmes th&t &ddress to differe t reDuireme ts of the %romoter com%& ( i setti " u% of the joi t )e ture. 4)erse&s I )estme t Fi & ce Pro"r&mme for setti " u% joi t )e tures & d #ho!!( o# ed su+sidi&ries &+ro&d. Asi& Cou tries I )estme t P&rt ers >ACIP@ Pro"r&mme for cre&tio of & joi t )e ture i I di& #ith E&st Asi& cou tries* throu"h four f&ci!ities th&t &ddress differe t st&"es of & %roject c(c!e.

T.Y.B.M.S.

51

EXPORT FINANCE

EXPORT FINANCIN; PRO;RAMMES PROVIDED BY EXIM BAN< EXIM INDIA offers & r& "e of fi & ci " %ro"r&ms th&t m&tch the me u of E'im B& -s of the i dustri&!i,ed cou tries. Ko#e)er* the B& - is &t(%ic&! i the u i)erse of E'im B& -s i th&t it h&s o)er the (e&rs e)o!)ed* so &s to & tici%&te & d meet the s%eci&! eeds of & de)e!o%i " cou tr(. The B& - %ro)ides com%etiti)e fi & ce &t )&rious st&"es of the e'%ort c(c!e co)eri ": EXIM INDIA o%er&tes & #ide r& "e of fi & ci " & d %romotio &! %ro"r&ms. The B& - fi & ces e'%orts of I di& m&chi er(* m& uf&ctured "oods* & d co su!t& c( & d tech o!o"( ser)ices o deferred %&(me t terms. E?IM I1<IA &!so see-s to co fi & ce %rojects #ith "!o+&! & d re"io &! de)e!o%me t &"e cies to &ssist I di& e'%orters i their efforts to %&rtici%&te i such o)erse&s %rojects. The B& - is i )o!)ed i %romotio I di& of t#o6#&( tech o!o"( tr& sfer throu"h the joi t )e tures o)erse&s & d forei" direct

out#&rd f!o# of i )estme t i

i )estme t f!o# i to I di&. EXIM INDIA is &!so & P&rt er I stitutio #ith Euro%e& U io & d o%er&tes Euro%e& Commu it( I )estme t P&rt ersO Pro"r&m >ECIP@ for f&ci!it&ti " %romotio of joi t )e tures i I di& throu"h tech ic&! & d fi & ci&! co!!&+or&tio #ith medium si,ed firms of the Euro%e& U io . The E'%ort6 Im%ort B& - of I di& >E'im B& -@ %ro)ides fi & ci&! &ssist& ce to %romote I di& e'%orts throu"h direct fi & ci&! &ssist& ce* o)erse&s i )estme t fi & ce* term fi & ce for e'%ort %roductio & d e'%ort de)e!o%me t* %re6shi%%i " credit* +u(erOs credit* !i es of credit* re!e di " f&ci!it(* e'%ort +i!!s rediscou ti "* refi & ce to commerci&! +& -s.

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50

EXPORT FINANCE

Lo&n% to Ind!&n Ent!t!'%

D'"'rr'd $&(+'nt '#$ort%: Term fi & ce is %ro)ided to I di& e'%orters of e!i"i+!e "oods & d ser)ices* #hich e &+!es them to offer deferred credit to o)erse&s +u(ers. <eferred credit c& &!so co)er I di& co su!t& c(* tech o!o"( & d other ser)ices. Commerci&! +& -s %&rtici%&te i this %ro"r&m direct!( or u der ris- s( dic&tio &rr& "eme ts.

Pr'-%*!$+'nt

r'd!t: fi & ce is &)&i!&+!e form E'im B& - for com%& ies

e'ecuti " e'%ort co tr&cts i )o!)i " c(c!e time e'ceedi " si' mo ths. The f&ci!it( &!so e &+!es %ro)isio of ru%ee mo+i!i,&tio e'%e ses for co structio Htur -e( %roject e'%orters. T'r+ -o&n% "or '#$ort $rodu t!on : E'im B& - %ro)ides term !o& sHdeferred %&(me t "u&r& tees to 122L e'%ort6orie ted u its* u its i free tr&de ,o es & d com%uter soft#&re e'%orters. I co!!&+or&tio #ith I ter &tio &! Fi & ce Cor%or&tio . G&shi "to * E'im B& - %ro)ides !o& s to e &+!e sm&!! & d medium e ter%rises u%"r&de e'%ort %roductio c&%&+i!it(. F&ci!ities for deeded e'%ortsE <eemed e'%orts &re e!i"i+!e for fu ded & d o 6 fu ded f&ci!ities from E'im B& -. O/'r%'&% In/'%t+'nt "!n&n ': I di& )e ture. F!n&n ' "or '#$ort +&r.'t!n3: This %ro"r&m* #hich is & com%o e t of & Gor!d B& - !o& * he!%s e'%orters im%!eme t their e'%ort m&r-et de)e!o%me t %!& s. com%& ies est&+!ishi " joi t )e tures i the joi t

o)erse&s &re %ro)ided fi & ce to#&rds their eDuit( co tri+utio

T.Y.B.M.S.

53

EXPORT FINANCE

Lo&n% to Co++'r !&- B&n.% !n Ind!& E#$ort B!--% R'd!% ount!n3: Commerci&! B& -s i I di& #ho &re &uthori,ed to de&! i forei" e'ch& "e c& rediscou t their short term e'%ort +i!!s #ith E'im B& -s* for & u e'%ired us& ce %eriod of ot more th& A2 d&(s. R'"!n&n ' o" E#$ort Cr'd!t: Authori,ed de&!ers i forei" e'ch& "e c& o+t&i from E'im B& - 122L refi & ce of deferred %&(me t !o& s e'te ded for e'%ort of e!i"i+!e I di& "oods. ;u&r&nt''!n3 o" O4-!3&t!on%: E'im B& - %&rtici%&tes #ith commerci&! +& -s i I di& i the issue of "u&r& tees reDuired +( I di& com%& ies for the e'%ort co tr&cts & d for e'ecutio of o)erse&s co structio & d tur -e( %rojects.

Lo&n% to O/'r%'&% Ent!t!'% O/'r%'&% Bu('rI% Cr'd!t: Credit is direct!( offered to forei" e tities for im%ort of e!i"i+!e "oods & d re!&ted ser)ices* o deferred %&(me t. L!n'% o" Cr'd!t: Besides forei" "o)er me ts* fi & ce is &)&i!&+!e to forei" fi & ci&! i stitutio s & d "o)er me t &"e cies to o 6!e d i the res%ecti)e cou tr( for im%ort of "oods & d ser)ices from I di&. R'-'nd!n3 F& !-!t( to B&n.% O/'r%'&%: Re!e di " f&ci!it( is e'te ded to +& -s o)erse&s to e &+!e them to %ro)ide term fi & ce to their c!ie t;s #or!d#ide for im%orts from I di&.

T.Y.B.M.S.

55

EXPORT FINANCE

A RAN;E OF EXPORT SERVICES PROVIDED BY EXIM BAN<

E?IM I1<IA %ro)ides & r& "e of & &!(tic&! i form&tio & d e'%ort re!&ted ser)ices ecess&r( for "!o+&!i,&tio of I di& com%& ies. E?IM I1<IA throu"h its #ide et#or- of &!!i& ces #ith fi & ci&! i stitutio s* tr&de %romotio &"e cies* i form&tio %ro)iders &cross the "!o+e &ssists e'ter &!!( orie ted I di& com%& ies i their Duest for e'ce!!e ce & d "!o+&!i,&tio . Ser)ices i c!ude se&rch for o)erse&s %&rt ers* ide tific&tio of tech o!o"( su%%!iers* e"oti&ti " &!!i& ces* & d de)e!o%me t of joi t )e tures i I di& & d &+ro&d.

T.Y.B.M.S.

57

EXPORT FINANCE

A9 ADVISORY SERVICES

I9 MULTILATERAL A;ENCIES FUNDED PROEECTS OVERSEAS 0MFPO1 S'r/! '% I form&tio & d su%%ort ser)ices to I di& com%& ies to he!% im%ro)e their %ros%ects for securi " +usi ess i mu!ti!&ter&! &"e cies fu ded %rojects. <issemi &tio of +usi ess o%%ortu ities i fu ded %rojects Pro)idi " det&i!ed i form&tio o %rojects of i terest

T.Y.B.M.S.

59

EXPORT FINANCE I form&tio o Procureme t Guide!i es* Po!icies* Pr&ctices of Mu!ti!&ter&! A"e cies Assist& ce for Re"istr&tio #ith Mu!ti!&ter&! A"e cies Ad)isi " I di& com%& ies o %re%&r&tio of E'%ressio of I terest* C&%&+i!it( Profi!e. Bid I ter)e tio II9 PROMOTIN; INDIAN CONSULTANCY TIE-UP FIT2: I ter &tio &! Fi & ce Cor%or&tio * G&shi "to <.C. Afric& Project <e)e!o%me t F&ci!it( Afric& E ter%rise Fu d Tech ic&! Assist& ce $ Trust Fu ds Me-o " Project <e)e!o%me t F&ci!it(

E&ster $ Souther Afric& Tr&de $ <e)e!o%me t B& - >PTA B& -@ Afric& M& &"eme t Ser)ices Com%& ( >AMSC4@* 1ether!& ds

EXAMPLES Gems $ Pe#e!!er( Stud( 6 C&m+i& Fi & ci&! Tr&i i " Missio 6 Ie (& Ceme t Project 6 C&meroo Soft#&re 6 M&d&"&sc&r Goo! I itti " 6 Biet &m Te'ti!e 6 1i"eri& Refri"er&tio 6 Gh& &

T.Y.B.M.S.

5:

EXPORT FINANCE Fi & ci&! Tr&i i " 6 Po!& d

III9 EXIM BAN< AS A CONSULTANT Fe&si+i!it( stud( for est&+!ishme t of & e'%ort credit & d "u&r& tee f&ci!it( for Gu!f Coo%er&tio Cou ci! cou tries. Re"io &! coo%er&tio i e'%ort fi & ce & d e'%ort credit "u&r& tees for ESCAP. Stud( o %romotio of i ter &tio &! com%etiti)e ess & d e'%orts of m& uf&ctured "oods for ESCAP. Setti " u% the AFRICA16E?IM B& -. <esi" i " of E'%ort Fi & ci " Pro"r&mmes 6 Tur-e( Setti " u% & E'im B& - i M&!&(si& <esi" of E'%ort M&r-eti " Semi &rs for SMEs i Biet &m E'%ort <e)e!o%me t Project : U-r&i e E ter%rise Su%%ort Fu d : Arme i& Est&+!ishi " & E'%ort Credit Gu&r& tee Com%& ( i Cim+&+#e Ad)isor( ser)ices to I dustri&! <e)e!o%me t Cor%or&tio of South Afric& for i ter &tio &! fi & ce %roducts

B9 <NOFLED;E BUILDIN; I9 EXIMIUS CENTRE FOR LEARNIN;: BAN;ALORE Set u%* i 4cto+er 1AA5* to or"& i,e semi &rs & d #or-sho%s i &re&s such &s i ter &tio &! tr&de $ i )estme t* e'%ort m&r-eti "* Du&!it(*

T.Y.B.M.S.

5=

EXPORT FINANCE %&c-&"i "* +usi ess o%%ortu ities i mu!ti!&ter&! &"e cies fu ded %rojects* sector & d cou tr( s%ecific %ro"r&mmes Guest f&cu!t( from et#or- %&rt ers such &s IFC* Gor!d B& -* EBR<* U1I<4. 1um+er of Pro"r&mmes Co ducted: 73 II9 RESEARC2 STUDIES Rese&rch Studies o %roducts* sectors* cou tries* m&cro eco omic issues re!e)& t to i ter &tio &! tr&de & d i )estme t 1um+er of rese&rch studies %u+!ished &s 4cc&sio &! P&%ers: =7 C9 INFORMATION E'%ortersHIm%orters I dustr(HM&r-et Re%orts Tr&de Re"u!&tio s $ F&#s Cou tr( Re%orts I ter &tio &! Ju&!it( St& d&rds P&rt er Ide tific&tio Product <is%!&( E#&+$-'% o" In"or+&t!on S'r/! '% Ku "&ri& Ph&rm&ceutic&! Sector Im%orters of S& it&r( #&re* C&sti "s i 1orth Americ& Im%orters of A"ro6chemic&!s i E&ster Euro%e Stud( for e&r +uds m&r-et i Ku "&r( Stud( of the I di& Gi e m&r-et for & Ku "&ri& Com%& ( P&rt er ide tific&tio for & It&!i& S& it&r( #&re m& uf&cturer Stud( of the I di& Cr& e I dustr( for & Fi ish com%& ( Re"u!&tor( Fr&me#or- for setti " u% & Ph&rm& Project i Chi & M&r-et re%ort for Com%uter Mo itors i I di& for & Si "&%ore& firm Stud( o Bic(c!e m&r-et i E&ster Euro%e for I di& C(c!e e'%orter

T.Y.B.M.S.

5A

EXPORT FINANCE M&r-et Pote ti&! for <e im i South E&st Asi&

692 - EXPORT CREDIT ;UARANTEE CORPORATION OF INDIA LTD9 I order to %ro)ide e'%ort credit & d i sur& ce su%%ort to I di& e'%orters* the G4I set u% the E'%ort Ris-s I sur& ce Cor%or&tio 1A=3* it is o# - o# &s ECGC of I di& Ftd. ECGC is & com%& ( #ho!!( o# ed +( the G4I. It fu ctio s u der the &dmi istr&ti)e co tro! of the Mi istr( of Commerce & d is m& &"ed +( & Bo&rd of <irectors re%rese ti " "o)er me t* B& -i "* I sur& ce* Tr&de & d I dustr(. The ECGC #ith its he&dDu&rters i Bom+&( & d se)er&! re"io &! offices is the on-( i stitutio %ro)idi " i sur& ce co)er to I di& e'%orters &"&i st the ris- of o 6re&!i,&tio of e'%ort %&(me ts due to occurre ce of the commerci&! & d %o!itic&! ris-s i )o!)ed i e'%orts o credit terms & d +( offeri " "u&r& tees to commerci&! +& -s &"&i st !osses th&t the +& - m&( suffer i "r& ti " &d)& ces to e'%orts* i co tr& s&ctio s. OBEECTIVES OF EC;C: To %rotect the e'%orters &"&i st credit ris-s* i.e. o 6re%&(me t +( +u(ers To %rotect the +& -s &"&i st !osses due to o 6re%&(me t of !o& s +( e'%orters COVERS ISSUED BY EC;C: T*' o/'r% !%%u'd 4( EC;C &n 4' d!/!d'd 4ro&d-( !nto "our 3rou$%: 1. STANDARD POLICIES 8 issued to e'%orters to %rotect the &"&i st %&(me t ris-s i )o!)ed i e'%orts o short6term credit. 0. SPECIFIC POLICIES 8 desi" ed to %rotect I di& firms &"&i st %&(me t risi )o!)ed i >i@ e'%orts o deferred terms of %&(me t >ii@ ser)ice re dered to forei" &+ro&d. 3. FINANCIAL ;UARANTEES 8 issued to +& -s i I di& to %rotect them from ris- of !oss i )o!)ed i their e'te di " fi & ci&! su%%ort to e'%orters &t %re6 shi%me t & d %ost6shi%me t st&"esE & d %&rties* & d >iii@ co structio #or-s & d tur -e( %rojects u dert&-e ectio #ith their e'%ort >ERIC@ i Pu!(* 1A7:. It #&s tr& sformed i to e'%ort credit "u&r& tee cor%or&tio !imited >ECGC@ i 1A95. Si ce

T.Y.B.M.S.

72

EXPORT FINANCE 5. SPECIAL SC2EMES such &s Tr& sfer Gu&r& tee me& t to %rotect +& -s #hich &dd co firm&tio to !etters of credit o%e ed +( forei" +& -s* I sur& ce co)er for Bu(er;s credit* etc. 0A1 STANDARD POLICIES: ECGC h&s desi" ed 5 t(%es of st& d&rd %o!icies to %ro)ide co)er for shi%me ts m&de o short term credit: 1. Shi%me ts >com%rehe si)e ris-s@ Po!ic( 8 to co)er +oth %o!itic&! & d commerci&! ris-s from the d&te of shi%me t 0. Shi%me ts >%o!itic&! ris-s@ Po!ic( 8 to co)er o !( %o!itic&! ris-s from the d&te of shi%me t 3. Co tr&cts >com%rehe si)e ris-s@ Po!ic( 8 to co)er +oth commerci&! & d %o!itic&! ris- from the d&te of co tr&ct 5. Co tr&cts >Po!itic&! ris-s@ Po!ic( 8 to co)er o !( %o!itic&! ris-s from the d&te of co tr&ct RIS<S COVERED UNDER T2E STANDARD POLICIES: 59 Co++'r !&- R!%.% I so!)e c( of the +u(er Bu(er;s %rotr&cted def&u!t to %&( for "oods &cce%ted +( him Bu(er;s f&i!ure to &cce%t "oods su+ject to cert&i co ditio s 29 Po-!t! &- r!%.% Im%ositio of restrictio s o remitt& ces +( the "o)er me t i the +u(er;s cou tr( or & ( "o)er me t &ctio #hich m&( +!oc- or de!&( %&(me t to e'%orter. G&r* re)o!utio or ci)i! distur+& ces i the +u(er;s cou tr(. C& ce!!&tio of & )&!id im%ort !ice se or C& ce!!&tio e# im%ort !ice si " restrictio s i of the +u(er;s cou tr( &fter the d&te of shi%me t or co tr&ct* &s &%%!ic&+!e. of e'%ort !ice se or im%ositio e# e'%ort !ice si " restrictio s i I di& &fter the d&te of co tr&ct >u der co tr&ct %o!ic(@. P&(me t of &dditio &! h& d!i "* tr& s%ort or i sur& ce ch&r"es occ&sio ed +( i terru%tio or di)ersio of )o(&"e th&t c& ot +e reco)ered from the +u(er.

T.Y.B.M.S.

71

EXPORT FINANCE A ( other c&use of !oss occurri " outside I di&* ot orm&!!( i sured +( commerci&! i surers & d +e(o d the co tro! of the e'%orter & d H or +u(er. RIS<S NOT COVERED UNDER STANDARD POLICIES: The !osses due to the fo!!o#i " ris-s &re ot co)ered: 1. Commerci&! dis%utes i c!udi " Du&!it( dis%utes r&ised +( the +u(er* u !ess the e'%orter o+t&i s & decree from & com%ete t court of !&# i the +u(er;s cou tr( i his f&)our* u !ess the e'%orter o+t&i s & decree from & com%ete t court of !&# i the +u(ers; cou tr( i his f&)our 0. C&uses i here t i the &ture of the "oods. 3. Bu(er;s f&i!ure to o+t&i im%ort or e'ch& "e &uthori,&tio from &uthorities i his cou t( 5. I so!)e c( or def&u!t of & ( &"e t of the e'%orter or of the co!!ecti " +& -. 7. !oss or d&m&"e to "oods #hich c& +e co)ered +( commerci=&! i surers 9. E'ch& "e f!uctu&tio :. <iscre%& c( i docume ts.

0B19 SPECIFIC POLICIES

The st& d&rd %o!ic( is & #ho!e tur o)er %o!ic( desi" ed to %ro)ide & co ti ui " i sur& ce for the re"u!&r f!o# of e'%orter;s shi%me t of r&# m&teri&!s* co sum&+!e dur&+!e for #hich credit %eriod does ot orm&!!( e'ceed 1=2 d&(s. Co tr&cts for e'%ort of c&%it&! "oods or tur -e( %rojects or co structio #or-s or re deri " ser)ices &+ro&d &re ot of & re%etiti)e &ture. Such tr& s&ctio s &re* therefore* i sured +( ECGC o & c&se6to6c&se +&sis u der s%ecific %o!icies. S%ecific %o!icies &re issued i res%ect of Su%%!( Co tr&cts >o deferred %&(me t terms@* Ser)ices A+ro&d & d Co structio Gor- A+ro&d. 51 S$' !"! $o-! ( "or Su$$-( Contr& t%:

T.Y.B.M.S.

70

EXPORT FINANCE S%ecific %o!ic( for Su%%!( co tr&cts is issued i c&se of e'%ort of C&%it&! "oods so!d o deferred credit. It c& +e of & ( of the four forms: S$' !"! S*!$+'nt% 0Co+$r'*'n%!/' R!%.%1 Po-! ( to co)er +oth

commerci&! & d %o!itic&! ris-s &t the Post6shi%me t st&"e. S$' !"! S*!$+'nt% 0Po-!t! &- R!%.%1 Po-! ( to co)er o !( %o!itic&! ris-s &fter shi%me t st&"e. S$' !"! Contr& t% 0Co+$r'*'n%!/' R!%.%1 Po-! ( to co)er %o!itic&! & d commerci&! ris-s &fter co tr&ct d&te. S$' !"! Contr& t% 0Po-!t! &- R!%.%1 Po-! ( to co)er o !( %o!itic&! ris-s &fter co tr&ct d&te. 21 S'r/! ' $o-! (: I di& firms %ro)ide & #ide r& "e of ser)ices !i-e tech ic&! or %rofessio &! ser)ices* hiri " or !e&si " to forei" %&rties >%ri)&te or "o)er me t@. Ghere I di& firms re der such ser)ices the( #ou!d +e e'%osed to %&(me t ris-s simi!&r to those i )o!)ed i e'%ort of "oods. Such ris-s &re co)ered +( ECGC u der this %o!ic(. If the ser)ice co tr&ct is #ith o)erse&s "o)er me t* the S%ecific Ser)ices >%o!itic&! ris-s@ Po!ic( c& +e o+t&i ed & d if the ser)ices co tr&ct is #ith o)erse&s %ri)&te %&rties the s%ecific ser)ices >com%rehe si)e ris-s@ %o!ic( c& +e o+t&i ed* es%eci&!!( those co tr&cts ot su%%orted +( +& - "u&r& tees. 1orm&!!(* co)er is issued o c&se6to6c&se +&sis. The %o!ic( o/'r% C0No" t*' -o%% suffered. =1 Con%tru t!on For.% Po-! (: This %o!ic( co)ers ci)i! co structio jo+s &s #e!! &s tur -e( %rojects i )o!)i " su%%!ies & d ser)ices. This %o!ic( co)ers co structio co tr&cts +oth #ith %ri)&te & d forei" "o)er me t. This %o!ic( co)ers =7L of !oss suffered o &ccou t of co tr&cts #ith "o)er me t &"e cies & d :7L of !oss suffered o &ccou t of co structio co tr&cts #ith %ri)&te %&rties. 0C19 FINANCIAL ;UARANTEES E'%orters reDuire &deDu&te fi & ci&! su%%ort from +& -s to c&rr( out their e'%ort co tr&cts. ECGC +&c-s the !e di " %ro"r&mmes of +& -s +( issui " fi & ci&! "u&r& tees. The

T.Y.B.M.S.

73

EXPORT FINANCE "u&r& tees %rotect the +& -s from !osses o "u&r& tees h&)e +ee e)o!)ed for this %ur%ose:6 >i@. P&c-i " Credit Gu&r& tee >ii@. E'%ort Productio Fi & ce Gu&r& tee >iii@. E'%ort Fi & ce Gu&r& tee >i)@. Post Shi%me t E'%ort Credit Gu&r& tee >)@. E'%ort Perform& ce Gu&r& tee >)i@. E'%ort Fi & ce >4)erse&s Fe di "@ Gu&r& tee. These "u&r& tees "i)e %rotectio to +& -s &"&i st !osses due to o 6%&(me t +( e'%orters o &ccou t of their i so!)e c( or def&u!t. The ECGC ch&r"es & %remium for its ser)ices th&t m&( )&r( from 7 %&ise to :.7 %&ise %er mo th for Rs. 122H6. The %remium ch&r"ed de%e ds u%o the t(%e of "u&r& tee & d it is su+ject to ch& "e* if ECGC so desires. 0!1 P& .!n3 Cr'd!t ;u&r&nt'': A ( !o& "i)e to e'%orter for the m& uf&cture* %rocessi "* %urch&si " or %&c-i " of "oods me& t for e'%ort &"&i st & firm order of FHC Du&!ifies for this "u&r& tee. Pre6shi%me t &d)& ces "i)e +( +& -s to firms #ho e ters co tr&cts for e'%ort of ser)ices or for co structio #or-s &+ro&d to meet %re!imi &r( e'%e ses &re &!so e!i"i+!e for co)er u der this "u&r& tee. ECGC %&(s t#o thirds of the !oss. 0!!1 E#$ort Produ t!on F!n&n ' ;u&r&nt'': this is "u&r& tee e &+!es +& -s to %ro)ide fi & ce &t %re6shi%me t st&"e to the fu!! e'te t of the of the domestic cost of %roductio & d su+ject to cert&i "uide!i es. The "u&r& tee u der this scheme co)ers some s%ecified %roducts such & te'ti!es* #oo!e c&r%ets* re&d(6m&de "&rme ts* etc & d the !oss co)ered is t#o third. 0!!!1 E#$ort F!n&n ' ;u&r&nt'': this "u&r& tee o)er %ost6shi%me t &d)& ces "r& ted +( +& -s to e'%orters &"&i st e'%ort i ce ti)es recei)&+!e such &s <BI. I c&se* the e'%orter <oes ot re%&( the !o& * the the +& -s suffer !ossT The !oss i sured is u% to three fourths or :7L. 0!/1 Po%t-S*!$+'nt E#$ort Cr'd!t ;u&r&nt'': %ost shi%me t fi & ce "i)e to e'%orters +( the +& -s %urch&se or discou ti " of e'%ort +i!!s Du&!ifies for this "u&r& tee. Before e'te di " such "u&r& tee* the ECGC m&-es sure th&t the e'%orter h&s o+t&i ed Shi%me t or Co tr&ct Ris- Po!ic(. The !oss co)ered u der this "u&r& tee is :7L. &ccou t of their !e di " to e'%orters. Si'

T.Y.B.M.S.

75

EXPORT FINANCE

0/1 E#$ort P'r"or+&n ' ;u&r&nt'': e'%orters &re ofte c&!!ed u%o to e'ecute +id +o ds su%%orted +( & +& - "u&r& tee & d it the co tr&ct is secured +( the e'%orter th& he h&s to fur ish & +& - "u&r& tee to forei" %&rties to e sure due %erform& ce or &"&i st &d)& ce %&(me t or i !ieu of or rete tio mo e(. A e'%ort %ro%ositio m&( +e frustr&ted if the e'%orter;s +& - is u #i!!i " to issue the "u&r& tee. This "u&r& tee %rotects the +& - &"&i st :7L of the !osses th&t it m&( suffer o &ccou t of "u&r& tee "i)e +( it o +eh&!f of e'%orters. 0/!1 E#$ort F!n&n ' 0O/'r%'&% L'nd!n31 ;u&r&nt'': if & +& - fi & ci " o)erse&s %rojects %ro)ides & forei" curre c( !o& to the co tr&ctor* it c& %rotect itse!f from ris- of o 6 %&(me t +( the co tr&ctor +( o+t&i i " this "u&r& tee. The !oss co)ered u der this %o!ic( is to e'te t of three fourths >:7L@. 0D1 SPECIAL SC2EMES A %&rt from %ro)idi " %o!icies >St& d&rds & d S%ecific@ & d "u&r& tees* ECGC %ro)ides s%eci&! schemes. These schemes &re %ro)ided o the +& -s & d to the e'%orters. The schemes &re: I. Tr&n%"'r ;u&r&nt'': the tr& sfer "u&r& tee is %ro)ided to s&fe"u&rd +& -s i I di& &"&i st !osses &risi " out of ris- of co firm&tio of FHC. the ris-s c& +e either %o!itic&! or commerci&! or +oth. Foss due to %o!itic&! ris-s is co)ered u% to A2 L & d th&t due to commerci&! ris-s u% to :7L. II. In%ur&n ' Co/'r "or Bu('rH% Cr'd!t &nd L!n'% o" Cr'd!t: Fi & ci&! I stitutio s i I di& h&)e st&rted direct !e di " to +u(ers or fi & ci&! i stitutio s i de)e!o%i " cou tries for im%orti " m&chi er( & d eDui%me t from I di&. This sort of fi & ci " f&ci!it&tes immedi&te %&(me t to e'%orters & d frees them from the %ro+!em of credit m& &"eme t. ECGC h&s e)o!)ed this scheme to %rotect fi & ci&! i stitutio s i I di& #hich e'te t e'%ort credit to o)erse&s +u(ers or i stitutio s. III. O/'r%'&% In/'%t+'nt In%ur&n ': #ith the i cre&si " e'%orts of c&%it&! "oods & d tur -e( %rojects from I di&* the i )o!)eme t of e'%orters i c&%it&! & tici%&tio i o)erse&s %rojects h&s &ssumed im%ort& ce. ECGC h&s e)o!)ed this scheme to %ro)ide %rotectio for such i )estme t. 1orm&!!( the i sur& ce co)er is for 17 (e&rs.

T.Y.B.M.S.

77

EXPORT FINANCE

69= - RESERVE BAN< OF INDIA INTRODUCTION: The RBI #ith its he&d Du&rters i Mum+&i & d se)er&! re"io &! offices is the ce tr&! +& -s of our cou tr( to &uthori,e e'te d & d re"u!&te e'%ort credit & d tr& s&ctio i c!udi " forei" e'ch& "e &ff&irs. RBI does ot direct!( %ro)ide e'%ort fi & ce to the e'%orters* +ut it &do%ts %o!icies & d i iti&tes me&sures to e cour&"e commerci&! +& -s & d other fi & ci&! i stitutio s to %ro)ide !i+er&! e'%ort fi & ce. T*' T7o D'$&rt+'nt% o" RBI &r': I dustri&! & d credit de%&rtme t & d E'ch& "e co tro! de%&rtme t These <e%&rtme ts &dmi isters )&rious %o!icies re!&ted to e'%ort fi & ceHcredit & d forei" e'ch& "e. SC2EMES OFFERED BY RBI TO ENCOURA;E COMMERCIAL BAN<S TO PROVIDE EXPORT CREDIT TO T2E EXPORTERS: EXPORT BILLS CREDIT SC2EME: 5C6=: U der this scheme* RBI used to "r& t &d)& ce to schedu!ed +& -s &"&i st e'%ort +i!!s m&turi " #ithi 1=2 d&(s. 1o# this scheme is ot i o%er&tio . PRE-S2IPMENT CREDIT SC2EME: 5C6C: U der this scheme* RBI %ro)ides re6fi & ce f&ci!ities to schedu!ed +& -s th&t %ro)ide %re6shi%me t !o& s to +o &fide customers. EXPORT CREDIT INTEREST SUBSIDIES SC2EME: 5C6B: U der this scheme* RBI %ro)ides i terest su+sidies of mi imum 1.7 L %.&. to +& -s* #hich %ro)ide e'%ort fi & ce to e'%orters* %ro)ided th&t the +& -s ch&r"e i terest to e'%orter #ithi the cei!i " %rescri+ed +( RBI. The su+sidies &re "i)e +oth &"&i st $& .!n3 r'd!t & d $o%t-%*!$+'nt9 DUTY DRAF BAC< CREDIT SC2EME: 5CA6: U der this scheme* the e'%orters c& &)&i! & i terest free &d)& ces from the +& - u% to A2 d&(s &"&i st shi%%i " +i!! %ro)isio &!!( certified +( the customs &uthorit( to#&rds & refu d of

T.Y.B.M.S.

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EXPORT FINANCE customs dut(. The &d)& ces m&de +( commerci&! +& -s u der this scheme &re e!i"i+!e for re6fi & ce* free of i terest from RBI for +&#!+u+ $'r!od o" C0 d&(% form the d&te of &d)& ce. Ot*'r &$$ro/'% or %&n t!on% o" &$$-! &t!on +&d' 4( t*' '#$ort'r% 7!t* RBI E'te sio of time !imit for re&!i,&tio of e'%ort %roceeds. <eductio i i )oice %rice of e'%orts "oods. Fi'&tio of commissio to o)erse&s co si" ee or &"e ts. Pro)isio of +!& -et %ermit #here & !um% sum e'ch& "e is re!e&sed for & um+er of %ur%oses. Remitt& ce &+ro&d i res%ect of &d)ertisi "* !e"&! e'%e ses etc. A ( other m&tters re!&ti " to forei" tr&de th&t reDuire c!e&r& ce form the e'ch& "e Co tro! de%&rtme t of RBI. C!e&r& ce i res%ect of joi t )e ture &+ro&d.

;UIDELINES ISSUED BY RBI und'r %' t!on >A o" T2E FEMA: 5CCC9 Issued +( RBI u der Sec. 5: of Forei" E'ch& "e M& &"eme t Act* 1AAA. T($'% o" E#$ort% o/'r'd: E'%ort of Goods o <eferred P&(me t Terms >e.". E'%ort of m&chi er(* eDui%me t* m& uf&ctured %roducts@ Tur -e( Projects >e.". Setti " u% of Su"&r P!& t* Ceme t P!& t@ Co structio Projects >e.". Co structio of Ro&ds* <&ms* Brid"es@ Co su!t& c( $ Tech ic&! Ser)ices >e.". 4%er&tio $ M&i te & ce Co tr&cts@ co!!ecti)e!( referred to &s OPR4PECT $ SERBICES E?P4RTSO. TURN<EY: CONSTRUCTION J SUPPLY BIDS ? CONTRACTS U$to R%9 @0 ror'%: Schedu!ed Commerci&! B& -s. U$to R%9 200 ror'%: E'im B& -. A4o/' R%9 200 ror'%: Gor-i " Grou%.

T.Y.B.M.S.

7:

EXPORT FINANCE SERVICES BIDS ? CONTRACTS On C&%* T'r+% U$to R%9 @ ror'%: Schedu!ed Commerci&! B& -s. U$to R%9 50 ror'%: E'im B& -. A4o/' R%9 50 ror'%: Gor-i " Grou%.

On D'"'rr'd P&(+'nt T'r+% For &n( &+ount: Gor-i " Grou%.

2o7 to &$$-( "or -o&nD The %ro%os&! is to +e su+mitted i the %rescri+ed &%%!ic&tio form >Ref: Memor& dum PEM@ &!o " #ith im%!eme t&tio schedu!e* curre c(6#ise c&sh f!o#s & d #rite6u% #ith re"&rd to site & d i fr&6structur&! co ditio * & d su+6co tr&cti " &rr& "eme ts e )is&"ed. I c&se of & o 6Go)er me t +u(er* st&tus re%ort o the c!ie tH%rime co tr&ctor #ou!d first eed to +e o+t&i ed. The com%!eted &%%!ic&tio s &re to +e su+mitted to the s%o sori " +& -* for co sider&tio * #ithi fiftee d&(s of e teri " i to co tr&ct.

T.Y.B.M.S.

7=

EXPORT FINANCE It #ou!d &!so +e ecess&r( to co su!t ECGC i &d)& ce i c&ses #here cor%or&tio Os i sur& ce co)er & dHor cou ter "u&r& tees &re reDuired. The &%%!ic&tio s &re for#&rded +( the s%o sori " +& -s #ith their comme ts* to the fo!!o#i " &"e cies #hich co stitute the Gor-i " Grou%: E'im B& -* Mum+&i. Reser)e B& - of I di&* E'ch& "e Co tro! <e%&rtme t* Mum+&i. E'%ort Credit Gu&r& tee Cor%or&tio of I di& Fimited* Mum+&i. Mi istr( of Fi & ce* <e%&rtme t of Eco omic Aff&irs* B& -i " <i)isio * 1e# <e!hi. Mi istr( of Fi & ce* <e%&rtme t of Eco omic Aff&irs >FT@* 1e# <e!hi. Mi istr( of Commerce* 1e# <e!hi. 4ther %&rtici%&ti " +& -s E'%ort C&%&+i!it( Cre&tio Pro"r&mmes: Fe di " Pro"r&mme for E'%ort 4rie ted U its Productio EDui%me t Fi & ce Pro"r&mme Tech o!o"( U% "r&d&tio Fu d Scheme for Te'ti!e & d Pute I dustries 4)erse&s I )estme t Fi & ce Pro"r&mme EDuit( I )estme t i I di& Be tures A+ro&d Asi& Cou tries I )estme t P&rt ers Pro"r&mme E'%ort M&r-eti " Fi & ce Pro"r&mme E'%ort Product <e)e!o%me t Pro"r&mme E'%ort Be dor <e)e!o%me t Pro"r&mme Pro"r&mme for E'%ort F&ci!it&tio : Port <e)e!o%me t

T.Y.B.M.S.

7A

EXPORT FINANCE Soft#&re Tr&i i " I stitutes Forei" Curre c( Pre6shi%me t Credit Gor-i " C&%it&! Term Fo& Pro"r&mme for E'%ort 4rie ted U its Bu!- Im%ort Fi & ce Fi & ce for Rese&rch $ <e)e!o%me t for E'%ort 4rie ted U its Fo " Term Gor-i " C&%it&! Im%ort Fi & ce

Po%t-A7&rd C-'&r&n ' o" E#$ort Contr& t% E'%orter su+mits &%%!ic&tio i %rescri+ed from &!o " #ith co%ies of co tr&ct throu"h his commerci&! +& - for Post A#&rd C!e&r& ce. E'%orter c& direct!( &%%ro&ch E'im B& - for %ro%os&!s of )&!ue !imits u%to Rs.022 crores. 4 recei%t of &%%!ic&tio & d co tr&ct co%ies from the commerci&! +& -* E?IM B& - &%%ro)es the %ro%os&! if the s&me f&!!s #ithi co )e es Gor-i " Grou% meeti ". I &%%ro)ed c&ses* E'im B& -HGor-i " Grou% &ccords c!e&r& ce to the fi &! terms & d co ditio s of the co tr&ct i c!udi " )&rious fu d +&sed & d o 6fu d +&sed f&ci!ities & d reDuisite e'ch& "e co tro! &%%ro)&!s. 4 the +&sis of %&c-&"e %ost &#&rd c!e&r& ce "r& ted +( E'im B& -HGor-i " Grou%* fi &! &%%ro)&!s for fu d +&sed & d o 6fu d +&sed f&ci!ities & d reDuisite e'ch& "e co tro! &%%ro)&!s &re issued +( the co cer ed i stitutio s & d e'%ortOs +& -s. Cr!t'r!& "or Con%!d'r&t!on "or C-'&r&n ' o" E#$ort Pro$o%&-% E'%orterOs fi & ci&! %ositio * tr&c- record. St&tus of o)erse&s c!ie t 6 Go)er me tH Pri)&te. Bre&-6u% of co tr&ct )&!ue 6 I di& H Third Cou tr( H Foc&!. Ris- Assessme t of Bu(erOs Cou tr(. Estim&tes of Cost & d Profit&+i!it(. Curre c( of P&(me t 6 Co )erti+!e Curre c( H Foc&! Curre c( its de!e"&ted %o#ers or

T.Y.B.M.S.

92

EXPORT FINANCE Securit( 6 Fetter of Credit* B& - Gu&r& tee* Go)er me t Gu&r& tee* E'ter &!i,&tio u dert&-i " of Ce tr&! B& -. Forei" E'ch& "e 4ut"o. F&ci!ities reDuired +( the e'%orter. S&!ie t P&r&meters of A%%r&is&! for C!e&r& ce of E'%ort Pro%os&!s P&(me t Terms : Ad)& ce P&(me t* Pro"ress H <o# P&(me t* <eferred P&(me t* Rete tio Mo e( A)&i!&+i!it( of ECGC Co)er* #here ecess&r( Im%ort& t Co tr&ctu&! C!&uses : Preshi%me t I s%ectio Ar+itr&tio Force M&jeure St&tus of E'%orter : Prime Co tr&ctorHSu+6co tr&ctorH Co sortium Mem+er Pe &!t( H FiDuid&ted <&m&"es for de!&( i Co tr&ct E'ecutio Price Esc&!&tio Source of Fu di " : Mu!ti!&ter&! H Foc&! Forei" E'ch& "e 4ut"o F&ci!ities reDuired +( the e'%orter

T.Y.B.M.S.

91

EXPORT FINANCE

C2APTER A - MAR<ETIN; DEVELOPMENT ASSISTANCE 0MDA1 INTRODUCTION: M&r-et de)e!o%i " &ssist& ce is %ro)ided for meeti " the e'%e diture o e'%ort %romotio scheme & d %rojects for the de)e!o%me t of m&r-et &+ro&d for I di& %roducts. It is &)&i!&+!e for s%o sori " tr&de de!e"&tio &+ro&d* m&r-et studies* %u+!icit(* setti " of #&rehouseHsho#room* rese&rch & d de)e!o%me t* Du&!it( co tro!* etc. it is &)&i!&+!e to & i di)idu&!Hor"& i,&tio e "&"ed i Hco cer ed #ith e'%ort m&r-eti ". BENEFICIARIES: It is &)&i!&+!e !&r"e!( toE E#$ort *ou%'%9 Tr&d!n3 *ou%'%9 St&r tr&d!n3 *ou%'%9 Su$'r St&r tr&d!n3 *ou%'%9 Ind!/!du&- '#$ort'r or ot*'r $'r%on% %$on%or'd or dr&"t'd 4( t*' &$$ro/'d or3&n!M&t!on %u * &% EPC: IIFT: IIP: FIEO: MOC 't 9 T*' MDA 3r&nt% d!%4ur%'d 4( t7o &3'n !'% n&+'-(: I. Feder&tio of I di& e'%ort or"& i,&tio >FIE4@ II. Mi istr( of Commerce >M4C@. BENEFITS AVAILABLE UNDER MAR<ET DEVELPOMENT ASSISTANCE SC2EME The co su!t& c( firms m&( +e %ro)ided &ssist& ces from the M<A for the fo!!o#i " t(%e of &cti)ities & d &t the s%ecified r&te.

T.Y.B.M.S.

90

EXPORT FINANCE I. E'%ort Pu+!icit( Assist& ce6 for %u+!icit( c&m%&i" &t 92L of the et e'%e diture &fter t&-i " i to &ccou t the re)e ue from s&!es & d &d)ertiseme t for %u+!ishi " m&"&,i es i c!udi " jour &!s* directories* +rochure* %&m%h!ets* etc. for use &+ro&d. II. For or"& i,&tio of tr&de f&irs & d e'hi+itio . III. 4)erse&s m&r-et sur)e(sHstudies6 for u dert&-i " m&r-et studies &+ro&d &t =2L. IB. M<A for o%e i " forei" offices & d other e'%ort &cti)ities6 for o%e i " & o%er&ti " forei" office &t 92L of the &%%ro)ed e'%e diture for the first t#o (e&rs* 52L for the e't t#o (e&rs & d 07L for the fifth (e&r. B. 52L of the e'%e diture o +r& d %u+!icit(. BI. 92L of the &%%ro)ed e'%e diture to co su!t& c( firms u dert&-i " fe&si+i!it( studies &+ro&d o their o# i iti&ti)e. Cost of such studies i c!udes cost o i ter &tio &! tr&)e!* +o&rdi " etc. the firms h&)i " & mi imum & u&! tur o)er of Rs. 12 !&cs &re e tit!ed for this +e efits. BII. 72L reim+urseme t of the cost of %re%&r&tio & d su+missio of +ids for tur -e(Hco structio %rojectsH o%er&tio &! & d m&i te & ce of ser)ices co tr&ctsHco su!t& c( co tr&cts su+ject to st& d&rd cost cei!i "s o differe t +ids. BIII. 0.7L of +id )&!ue u%to Rs. 72 !&cs re!&ti " to co su!t& c( %rojects. The &ssist& ce #i!! "o u%to to0.7L of Rs. 72 !&cs %!us 1L of the i creme t&! cost of %roject +e(o d Rs. 72 !&cs su+ject & m&'imum of Rs. 9 !&cs. I?. 72L of the fi & ci " cost of +id +o d. ?. S%o sori " tr&de de!e"&tio s & d stud(6cum6s&!es te&ms. ?I. Forei" e'ch& "e for s%ecified %ur%oses. ?II. E'em%tio Hre+&te i i come t&' o e'%orts or forei" e'ch& "e e&r i "s. ?III. Reim+urseme t of ce tr&! s&!e t&' is e'em%tio form s&!es t&'.

T.Y.B.M.S.

93

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C2APTER B - O 2I;2 COURT RULIN;: EXPORT LOSSES NOT ENTITLED TO TAX CONCESSIONS
I & !& dm&r- jud"eme t * the Mum+&i Ki"h court ru!ed th&t o !( %rofit from e'%orts is e tit!ed to t&' co cessio s u der Sectio =2KKC of the I come T&' Act. Fosses &re ot to +e co sidered for deductio KKC* the court ru!ed. Pustice B C <&"&* "&)e this ru!i " o 0.:.0221* i & &%%e&! &"&i st & d order +( the I come T&' A%%e!!&te Tri+u &!. C&%' D't&!-%: The KC h&d to decide #hether the !oss i curred i e'%ort of "oods #&s to +e i" ored #hi!e determi i " the &%%e!!& t;s e tit!eme t to deductio uHsec =2 KKC >3@ c of I6T Act. I this c&se* I%c&;s e'%ort i come co t&i ed 0 %&rts: 4 e th&t resu!ted i Profit & d the other th&t resu!ted i !osses. I%c& c!&imed deductio s for the %rofit it h&d m&de i the e'%ort of "oods m& uf&ctured +( it* e)e thou"h it m&de & !oss i the e'%ort of "oods m&de +( other m& uf&cturers. The com%& ( c!&imed th&t the !oss it h&d i curred shou!d +e i" ored +ec&use the !oss #&s i e'%ort of "oods m&de +( others* the +e efits of #hich h&d +ee surre dered +( the com%& ( i f&)our of the su%%orti " m& uf&cturers. The IT de%t o the other h& d* too- & st& d th&t %rofit $ !oss shou!d +e &""re"&ted $ o !( the +&!& ce is e tit!ed for deductio s. As %er the de%&rtme t* the resu!t #&s & et !oss from the e'%ort of "oods* i the c&se of I%c&. As & resu!t the com%& ( did ot "et & ( +e efit u der Sectio =2 KKC. I%c&;s retur i dic&ted & et !oss from the e'%ort of "oods 6 !oss from "oods m& uf&ctured +( su%%orti " m& uf&cturi " &t Rs.9.=9 crore & d %rofits from e'%ort of "oods m& uf&ctured +( it &t Rs.3.:= crore. I its ru!i " the hi"h court s&id: u der Sectio =2 fi!ed +( I%c& F&+s

The di)isio +e ch com%risi " of Pustice S.K. I&%&di& $

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EXPORT FINANCE Ko#e)er* the &r"ume t is th&t +ec&use of the disc!&imer* the !oss o the e'%ort of tr&di " "oods &mou ti " to Rs.9.=9 crore +e i" ored & d o !( the %rofits from the se!f m& uf&ctured "oods &t Rs.3.:= crore &!o e shou!d +e t&-e i to &ccou t. This is & i "e ious method +ec&use if this &r"ume t is &cce%ted the the su%%orti " m& uf&cturers &s #e!! &s the e'%orti " house #ou!d +oth +e e tit!ed to the +e efits of t&' co cessio s or deductio s u der Sectio =2 KKC.

C2APTER C - CONCLUSION
L'&rn!n3H%?Su33'%t!on% t*rou3* t*!% $ro,' t: E'%ort Fi & ce is & )er( im%ort& t +r& ch to stud( $ u derst& d the o)er&!! "&mut of the i ter &tio &! fi & ce m&r-et. A)&i!&+i!it( of f&)or&+!e E'%ort fi & ce schemes direct!( im%&cts the !oc&! tr&de* e cour&"es e'%orters* e !&r"es m&r-ets &+ro&d* im%ro)es Du&!it( of domestic "oods & d o)er&!! he!%s the &tio +oost its e'ch& "e e&r i "s. The Go)er me t of & ( &tio %!&(s & )er( )it&! ro!e i +oosti " e'%ort tur o)er. The credit %o!ic( of the I di& Go)er me t is &!so ch& "ed de%e di " u%o the eeds of the e'%orters* "!o+&! tr&de e )iro me t etc. The credit %o!ic( of 4ct 0221 is & %oi ter i this directio . ECGC & d E?IM B& - t&-e & !ot of efforts for E'%ort %romotio . The str&te"ies of these 0 &"e cies i I di& shou!d +e f!e'i+!e $ their fi & ce schemes shou!d +e co st& t!( s( chro i,ed #ith the ch& "i " sce e of #or!d tr&de. This &!o e c& he!% I di& e'%orters to st& d com%etitio i #or!d m&r-ets effecti)e!( & d more "&i 6fu!!(.

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EXPORT FINANCE Fi &!!(* & )er( esse ti&! Duestio %o!icies h&d emer"ed #he eeds to +e & s#ered +( the I ter &tio &! Tr&de

"urus #ith refere ce to .Re!e)& ce of E?IM Po!ic( i the curre t times/. E'im the st&te decided to !imit im%orts & d e cour&"e e'%orts i order to m&i t&i curre c( reser)es. Ko#e)er* such ide&s +&c-fired: co sumers #ere hurt & d %roducers tur ed !&,(.

2'n ' !t% t!+' t*' '#$'rt%?3uru% &n%7'r t*' "o--o7!n3 Gu'r!'%: &@ Shou!d the st&te "et out of the #&( of tr&deT +@ Is the %rotectio i here t i the e# E?IM %o!ic( "ood for the cou tr(T c@ Gou!d I di& +e & m&jor e'%orter if o !( she #&s eDui%%ed #ith & #or-i " i fr&structure A &%%ro%ri&te* r&tio &! & d fe&si+!e re%!( to the &+o)e three Duestio s m&tched #ith de)oted $ si cere im%!eme t&tio +( the "o)er me ts #i!! "o & !o " #&( i m&-i " I di& & %o#erhouse for i ter &tio &! tr&de i the (e&rs to comeU

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BIBLIO;RAP2Y
Boo.% R'"'rr'd: E'%ort 8Gh&t Ghere $ Ko# E'%ort M&r-eti " E'%ort M& &"eme t +( P&r&s R&m +( Mich&e! B&, +( T. A .S. B&!&"o%&!

N'7%$&$'r% &nd M&3&M!n'% R'" 'rr'd: Busi ess I di& Eco omic Times

Int'rn't F'4%!t'%: ###."oo"!e.com

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###.eco omictimes.com ###.rediff.com

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