PRE SHIPMENT

FINANCE
EXIM
GROUP A2

MEANING

Short term funding

Offered to an exporter
By way of Packing Credit
For working capital
Given in rupees or foreign currency
(PCFC)
In form of a loan, cash credit or overdraft
facility

ELIGIBILITY

Holding an Export Order or Letter of

Credit (L/C) taken out by the buyer

Running Account Facility

TENOR

RBIs concessional ROIs

Maximum Period: 180 days + 90 days
Minimum Period: 7 days
Banks own interest rates
Maximum Period: 270 days
Minimum Period: 360 days

COSTS

BPLR: 13.25%
Upto 180 days: 10%, Concessional ROI
Extension of 90 days: 12% ROI
Over 270 days: Commercial rates higher
than 270 days

DOCUMENTS

Export Order/Contract or L/C in original

Undertaking for advance utilized only for
exporting purposes
Undertaking from Trading House for not
availing for credit facility for same
transaction, if sub-supplier
Copies of Income Tax/Wealth Tax
Assessment Order

CONTD

Copy of a valid RCMC and/or Trading

House Certificate
Policy/guarantee of the ECGC
Credentials of foreign buyer
Certificate of origin
Bill of Lading
Bill of Exchange

SPECIAL SCHEMES

Exim Banks scheme for financing cost of

imported inputs
Scheme of credit to sub-suppliers
Credit for deemed exports
Pre shipment Credit in Foreign Currency
(PCFC)

AMOUNT OF FINANCE AN
EXPORTER CAN GET

Need Based Financing

Margin differs from bank to bank (10 25%)
Margins are stipulated:

Exporter has some stake in transaction

Cover erosion in goods
No lending against exporters profit margin

Banking Practice

90% of FOB
75% of CIF

CREDIT OBTAINED IN
DIFFERENT CURRENCIES

Domestic Currency, the Rupee, if exporter

based in India

Foreign Currency preferred when cost of

borrowing is lower

WAYS TO LIQUIDATE
SHIPMENT FINANCE

PRE

Proceeds of export bills negotiated,

purchased or discounted
No liquidation by debit to cash credit
account
Conversion of pre shipment finance to post
shipment
Bills discounted under Rediscounting of
Export Bills Abroad scheme, if PCFC

RECENT UPDATES (AUGUST 07)

Many small and medium-sized exporters have

inadequate short-term working capital
Market failure from informational irregularities
on part of banks about exporters ability to
execute export orders
Several countries have established pre shipment
export finance guarantee facility
Aim to act as catalyst to temporarily share nonperformance risks of exporters
Encouragement of implementation of pre
shipment finance in some countries without
guarantees

THANK YOU