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Finance in agriculture is as important as development of technologies.

Technical inputs can


be purchased and used by farmer only if he has money (funds). But his own money is
always inadequate and he needs outside finance or credit.
Professional money lenders were the only source of credit to agriculture till 1935. They use
to charge unduly high rates of interest and follow serious practices while giving loans and
recovering them. As a result, farmers were heavily burdened with debts and many of them
perpetuated debts. There were widespread discontents among farmers against these
practices and there were instances of riots also.
With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks Act and
Land Development Banks Act, agricultural credit received impetons and there were
improvements in agricultural credit. A powerful alternative agency came into being. Large-
scale credit became available with reasonable rates of interest at easy terms, both in terms
of granting loans and recovery of them. Both the co-operative banks advance credit mostly
to agriculture. First bank advances short-term and medium term loans while the second
bank advances long-term loans. The Reserve Bank of India as the Central bank of the
country took lead in making credit available to agriculture through these banks by laying
down suitable policies.
Although the co-operative banks started financing agriculture with their establishments in
1930’s real impetons was received only after Independence when suitable legislation were
passed and policies were formulated. There after, bank credit to agriculture made
phenomenal progress by opening branches in rural areas and attracting deposits.
Till 14 major commercial banks were nationalized in 1969, co-operative banks were the
main institutional agencies providing finance to agriculture. After nationalization, it was
made mandatory for these banks to provide finance to agriculture as a priority sector. These
banks undertook special programs of branch expansion and created a network of banking
services through out the country and started financing agriculture on large scale. Thus
agriculture credit acquired multi-agency dimension. Development and adoption of new
technologies and availability of finance go hand in hand. In bringing "Green Revolution",
"White Revolution" and now "Yellow Revolution" finance has played a crucial role. Now the
agriculture credit, through multi agency approach has come to stay.
The procedures and amount of loans for various purposes have been standardized. Among
the various purposes "Crop loans" (Short-term loan) has the major share. In addition,
farmers get loans for purchase of electric motor with pump, tractor and other machinery,
digging wells or boring wells, installation of pipe lines, drip irrigation, planting fruit orchards,
purchase of dairy animals and feeds/fodder for them, poultry, sheep/goat keeping and for
many other allied enterprises.
The quantum of agricultural credit can be judged from the figures of credit disbursed by all
the banks at all Indian level.

Year Rs. in crores

1987-88 9255

1988-89 9785

1989-90 10186

1990-91 8983
1991-92 11303

1992-93 13000

1993-94 15100

1994-95 16700

1999-2000 43000

2000-01 51500

(Budget proposal)

The Credit requirements of agriculture are of three types viz.


1. Short -Term Service
2. Medium - Term (Agricultura
3. Long- Term (LT) l
Finance)
We shall deal with long-term credit in this article.

Long Term Credit :


The period of long-term credit is generally 5 to 20 years or even more in
some special cases. In any industry, long-term investment is necessary, to
create permanent assets which give returns over a period of time. The
permanent investment is not only necessary for a particular industry but
even for the country. Because for continuity of production and progress of
the country. This applies to agriculture also. In Agriculture, long-term
investment comprises of sinking well, land levelling, fencing and
permanent improvements on land purchase of big machinery like tractor
with its attachments including trolleys, establishment of fruit orchard of
mango, cashew, coconut, sapota (chiku), orange, pomogranate, fig,
guava, etc. There are many other items of long-term capital investment.
Investment once made in the beginning continious to give returns over a
long period. Fruit orchards particularly do not give any income in the first
4 - 5 years as in case of other seasonal crops. So the expenditure incurred
in the first 4-5 years becomes a capital cost.

All the long-term investments mentioned above require large amounts of


funds. Although they have good potential to give returns in future,
individual farmers have no financial capacity to make such costly
investments from their own funds because they have no savings or very
little savings. Therefore, they have to resort to bank borrowing to meet
their such needs. The financial criteria terms and conditons procedures of
granting L.T.loans are altogether different from short-term loans : Even
the bank or agency providing LT loans is separatedue to its particular
mode or system of raising capital and graign.
Land Development Banks :
The special banks providing LT Loans are called Land Development Banks
(LDA). The history of LDB’s is quite old. The first LDB was started at Jhang
in Punjab in 1920. But the real impetus to these banks was received after
passing the Land Mortgage Banks Act in 1930’s (LDB’s were originally
called Land Mortgage Banks). After passing this Act LDB’s were started in
different states of India.
Structure :
These Banks have two-tier structure
1. Primary Land Development Bank at district level with branches at taluka
level.
2. Control or State Land Development Bank. All primary Land
Development Banks are federated into Central Land Development Bank at
the State Level. In some States, there is “ Unitary structure” wherein,
there is only one State Land Development Bank at the state level
operating through its branches and sub-branches at district and below
levels.
Raising Funds :
The main function of raising funds is carried out be the Central or State
Land Development Bank which can really deal with the money market of
the country effectively and advance loans to primary LDB’s. The sources of
funds of State LDB’s are:-
1. Share capital.
2. Issue of debentures
3. Loans from NABARD
4. Reimbursements of subsidies from the Govt.
5. Other funds.
Issue of debentures is the main source of funds for the LDB’s. Debentures
is a `Bond’ conveying and acknowledging the debt and also containing the
provision of promise for payment of interest at stipulated rate and return
of the principal amount. The period of debentures varies from 7 to 15
years. As LDB’s require funds of longer duration to advance LT loans to
borrowers, the debenture is a convenient instrument of raising funds.
Because it guarantees that funds will remain with the Banks for a specified
period.
There are three types of debentures:-
1. Regular debentures
2. Rural debentures
3. Special development debentures.
These debentures are mostly purchased by financial institutions like LIC,
Commercial Banks, Co-op. Banks, NABARD, and State Govts. As there is
limited response from the public. The State Govt. give incentive subsidies
for many development activities by individual farmer including purchase of
tractor. The amounts of subsidies are reimbursed to the LDB’s.
Interest rate :
The rates of interest for LT Loans are generally low and within the paying
capacity of farmers. They are around 11 to 12%.
Loan Procedure :
The Branch offices receive applications from the prospective borrower.
Then Agricultural Finance Officer or Inspector scrutinises these
applications, they visit places of the application and ascertain the purpose
of borrowing, verify the genuineness of the proposal and it economic
viability, repaying ability of the farmers, adequacy of security,etc. After
completing those formalities, the loan is granted by the appropriate
authority at appropriate level depending upon the delegation of powers by
the Banks.

CROP LOAN
Crop loan is a short term credit and is generally obtained from primary
credit co-op. Society of a village or also from commercial bank. The period
of loan is about one year except for sugarcane for which the period is 18
months. There are two criteria for granting crop loan.
1. One third of gross value
2. Cost of cultivation.
1. One third of gross value approach takes into account the yield and
price of the crop, its cost of cultivation and family expenditure. If
the gross value is more, more amount of loan becomes available.
For e.g. Rice.

I II

2
Yield (Q.) 25
0

4
Price (Rs/Q) 0 400
0

8
0
Gross value (Rs.) 10,000
0
0

2
7
One third (Rs.) 3330
0
0

2. Thus in second situation farmer is entitled for Rs.3330 per hectare


which is higher than in the first situation. Thus this method takes
into account the productive aspect of a crop.
3. In cost of cultivation, direct paid-out costs are only considered.
They include items, like seeds, manures, fertilizers, pesticides,
diesel/electricity, hired labour etc. In this approach, it is expected
that all direct costs to be incurred by the farmer should be covered
and accordingly he should get adequate credit. If the cost of all
these items of input is Rs.3500/-. If the loan is granted according
to first approach, then the amount which is short, is spent by the
farmer from his own funds. Since crop loan is for one season, its
recovery is made in one installment after the harvest of the crop.
Crop loan is an annual requirement and farmer has to borrow fresh
loan for new crop season every time. Therefore, he has to repay
the earlier loan with interest within stipulated time. Since this loan
is required every season/every year, the procedure of getting this
loan is simple and convenient and it is made available by the
District Central Co-op.Banks through the village Co-op. Credit
Society. So the farmer gets his loan in the village itself. If the loan
is to be taken from commercial bank, it is available from the nearby
branch of the commercial bank. As for security, the farmer has to
offer his land as a security. There is a three tier structure providing
crop-loans through co-operative institutions.
Appex Bank- State Co-op. Bank.
District Central co-op. Bank
Village co-op. Credit Society.
Crop-loan is the most important need of the farmer to increase and
maintain his productive ability. With the help of this loan amount,
he can purchase modern costly inputs and adopt new technologies
on his farms. So through these loans co-operative banks play
important role in the development and prosperity of agriculture.
Among the various types of bank loans to agriculture, the share of
crop loan is the highest.

There are three basic considerations, which must be taken into account before a lending
agency decides to agency decides to advance a loan and the borrower decides to borrow:
1. returns from the Proposed Investment,
2. repaying capacity, it will generate and
3. The risk bearing ability of the borrower.
These are known as the Three R’s of credit.
Returns: The First Test
Emphasis here should be on additional returns and additional costs involved in utilizing the
borrowed funds. It involves working out the optimum combination of farm enterprises and
the returns thereof, resulting from the additional availability of resources made possible
through borrowed funds. The following points
1. Estimates of returns should be made on the basis of resources including borrowed
funds.
2. Estimates of returns and costs should be made at the margin, not on an average.
3. Not only the MR=MC principles be kept in view while deciding the amount of credit
but the law of equi-marginal returns must be fully exploited.
4. The level of other resources should be considered before deciding upon the amount
of working capital tobe used. The possibilities of enhancing the level of other most
limiting resources to farm production should also be examined.
5. Due care should be taken that more than the required amount of money is not
advanced or obtained. At the same time, an inadequate amount of funds would not
serve the purpose. Funds should, therefore, be advanced neither inadequately or
excessively, but just the amount that can be profitably used.
6. Money needed for consumption purposes should also be considered for their
marginal value to the farm-family satisfaction against the marginal productivity of
the production loans.
Repaying Capacity-The Second Test
Although necessary, it is not sufficient to only analyse the productivity or the additional
returns that will accrue due to the borrowed funds. A loan may be productive but still it may
not generate sufficient income to leave funds sufficient enough to repay the loan. Repaying
capacity is the portion of the amount that a farm family will earn from a year’s operation,
which shall be available for the repayment of the loan. It should be based on an estimate of
anticipated income from all sources of the borrower during the year. Repaying capacity, is
therefore, worked out as a residual after meeting the requirements of the family
consumption and payment of other dues, debts and repayments.
There can be two types of loans
Self liquidating,
Non-liquidating or partially self-liquidating loans.
The repaying capacity should be determined separately for self-liquidating and non-
liquidating loans.
In case of the self-liquidating loans the amount gets absorbed in the production process in
one year or production period and the formula here is:
Repaying capacity= Gross Income- [Living expenses+Working expenses (not including loan)
+ taxes + other loans and payments].
In case of non-liquidating or partially liquidating loans, the resource acquired with the funds
are not directly consumer or are consumed over a number of years. They do not become
completely a part of the first year’s costs and the returns from the investment are spread
over a period of several years. For non-liquidating or partially liquidating loans, the repaying
capacity is worked out as
Repaying capacity= gross cash income- (all working expenses+ other loans+taxes and
payments due).
Risk Bearing Ability-The Third Test
It is necessary but again not sufficient that the credit should be productive and generate
sufficient repaying capacity. It is also essential that the borrower should be able to
withstand the shocks of probable financial losses. This is known as the risk-bearing ability of
the borrower. Assessment of risk-bearing ability is necessary because the returns and
repaying capacity analysis are made on the basis of averages. i.e., estimated production,
prices and costs etc. but these averages seldom hold true. Agricultural business is subject to
the vagaries of nature ad is exposed to many other hazards such as pest attacks, diseases
and price fluctuations. Variations in income occur as a rule rather than an exception. The
variability in income has, therefore, to be counted for in order to arrive at a fairly stable and
reliable estimate of the repaying capacity.
The overall variability in returns has been estimated to be 21% in Ludhiana district. Such
variability coefficients are needed especially by the financial organizations in all parts of the
country where they wish to operate. The gross income should be deflated by this coefficient
and the analysis should the follow the same pattern as for repaying capacity.

Regional Rural Banks


Service
In the multiagency approach to provide credit to agriculture, Regional
(Agricultural
Rural Banks (RRB’s) have special place. They are state sponsored,
Finance)
regionally based and rural oriented commercial banks. The Govt. of
India, in July 1975, appointed a Working Group to study in depth the
problem of devising alternative agencies to provide institutional credit to
the rural people in the context of steps then initiated under the 20 Point
Economic Programme. The Working Group identified various weaknesses
of the co-operative credit agencies and the commercial banks and felt
that these institutions would not be able to fill the regional and functional
gaps in the rural credit system within a reasonable period of time. The
Group therefore recommended a new type of institution which combines
a. Local feel and familiarity with rural possess problems which co-
operative banks.
b. Degree of business organization ability to mobilise deposit, access
to money market and modernised outlook which commercial
banks have.
Thus, it was envisaged to combine desirable qualities of co-operative
banks and commercial banks in RRB’s at the same time, it was
emphasised that the role of RRB’s would be to supplement and not
supplant the other institutional agencies already existing in the field.
Formation and Objective:3
The Government of India promulgated the Regional Rural Banks
Ordinance on 26th September 1975, which was later replaced by the
Regional Rural Bank Act 1976. The preamble to the Act states the
objective to develop rural economy by providing credit and facilities for
the development of agriculture, trade, commerce, industry and other
productive activities in the rural areas, particularly to small and marginal
farmers, agricultural labourers, artisans and small entrepreneurs.
Capital Structure:
The RRB Act empowers the Central Govt. to open the banks from time to
time at places where it may consider it necessary. A Regional Rural Bank
is jointly owned by the Govt. of India, the Government of concerned
state and public sector bank, which sponsored it. The authorised capital
of each bank is Rs. 1 crore and the issued capital is Rs. 25 lakhs; which
is held by them in the proportion of 50, 15 and 35 per cent respectively.
Each bank carries the banking business within the local limits specified
by the Govt. notification.
Organisational structure:
The management of a RRB is vested in a nine-member Board of Directors
headed by
i. Chairman who is an officer deputed by a sponsor bank but
appointed by the Govt. of India.
ii. Three directors to be nominated the Central Govt.
iii. Two directors to be nominated by the concerned State
Govt.
iv. Three directors to be nominated by the sponsor bank.
The sponsor bank, besides subscribing to the capital and deputing one of
its official as chairman, provides assistance to RRB in several ways such
as financial accommodation, deputing managerial and other staff and
arranging the recruitment of staff and their training.

COMMERCIAL BANKS
The commercial banks form the core of the organised banking system and constitute
quantitatively the most important group of financial intermediaries in the country,
compresing both scheduled and non-scheduled banks. Deposits paid up capital and
borrowings from the Reserve Bank of India form the resources of the commercial banks.
Commercial banks are the most important intermediaries for promoting and mobilizing the
savings and for allocating investment among the different productive sectors. The short
term and medium term credit needs of both industry and agriculture are met by the
commercial banks and they also help finance developmental plans by investing funds in the
government securities. Initially, the commercial banks were concentrating only on the
financing of the trade and industry.
However, with the nationalization of the banks, they are now actively involved in the
disbursement of agricultural credit. On account of the branch licensing policy adopted by the
RBI, the rural branches of the commercial banks account for a large percentage of the total
network and the Agricultural Development Branches, Gram Vikas Kendras and Rural Service
Centres were set up to cater exclusively to the needs of agriculture and the allied activities.
Under the ‘Lead Bank Scheme’ all districts were allotted to commercial banks that were
entrusted with the responsibility of preparing credit plans for their lead districts. The ‘Village
Adoption Scheme’ was formulated by commercial banks to carry out leading operations in
contributing significantly to the development of agriculture

National Bank for Agriculture & Rural Development


The National Bank for Agriculture & Rural Development (NABARD) : was setup by an act of
1981. The objective of the Bank was to provide credit for promotion of Agriculture, small-
scale Industry, cottage and village industries, handicrafts and other rural crafts and other
allied economic activities in rural area with a view to promote integrated rural development
and to secure prosperity of rural area and for matters connected therewith or incidental
thereto.
i. Establishment of the Bank: The Bill for setting up the Bank was passed by the
Parliament in December, 1981 and National Bank came into existence on 12th July,
1982.
The review committee envisaged that the new apex bank would be an organisational
device for providing undivided attention, forceful direction and pointed focus to the
credit problems arising out of the integrated approach to rural development. The
Committee recommended that the new bank take over from the Reserve Bank the
overseeing the entire rural credit system, including credit for rural artisans and
village industries, and the statutory inspection of co-operative banks and Regional
Rural Banks on an agency basis, the Bank continuing to retain its essential control.
The new bank was to have organic links with the Reserve Bank by virtue of the latter
contributing half of its share capital ( the other half being contributed by the Central
Government), and three members of the Central Board of Directors of the Reserve
Bank being appointed on its board, besides Deputy Governor of Reserve Bank being
appointed as its Chairman.
On the establishment, the National Bank has taken over the entire undertaking of
the Agriculture Refinance and Development Corporation, and has taken over from
the Reserve Bank its refinancing functions in relation to the State Co-operative Banks
and the Regional Rural Banks. The bank is now coordinating agency in relation to the
Central Government, Planning Commission, State Governments and institutions at
all-India level and State-level engaged in the development of small-scale industries,
rural crafts, etc. for giving effect to the various policies and programmes related to
rural credit.
ii. Capital and Management: The Central Government has made provision for increasing
the capital of NABARD which was raised from Rs. 170 crore to Rs.500 crore and will
be raised to further Rs. 2,000 crore in the next five years. In terms of the Act, the
Board of Directors will consist of fifteen members to be appointed by the Central
Government in consultation with the Reserve Bank and will comprise, besides the
Chairman and the Managing
Director, three Directors from the Central Board of the Reserve Bank, three officials
of the Central Government, two officials of the State Governments and five Directors
from among experts in rural economics, rural development, handicrafts and village
and cottage industries ,etc. and persons with experience in the working of co-
operative banks and commercial banks. The Act provides for constitution by the
Board of an Advisory Council consisting of the directors of the National Bank and
other persons having special knowledge of subjects which is considered useful to the
bank.
iii. Operations: The National Bank is empowered to provide short-term refinance
assistance for periods not exceeding 18 months to state Co-operative Banks,
Regional Rural Banks and any fianancial institution approved by Reserve Bank in this
behalf; for a wide range of purposes, including marketing and trading, relating to
rural economy. These short term loans granted to State co-operative Banks and
Regional Rural Banks , in so far as they relate to the financing of agricultural
operations or marketing of crops, can be converted by the National Bank into
medium-term loans for periods not exceeding seven years under conditions of
drought, famine or other natural calamities, military operations or enemy action. The
National Bank can grant medium-term loans to the State co-operative Banks and
Regional Rural Banks for period extending from 18 months to seven years for
agriculture and rural development and such other purposes as may be determined by
it from time to time subject to their being fully guaranteed by the State
Governments as to the repayment of principal and payment of interest. Such
guarantee can however be waived by the National Bank in such circumstances. The
National Bank is empowered to provide by way of refinance assistance long-term
loans extending upto a maximum period of 25 years including the period of re-
scheduling such loans to the State Land Development Banks, Regional Rural Banks,
Commercial Banks, State Co-operative Banks or any other financial institutions
approved by the Reserve Bank for the purpose of making investment loans. It may
also give short-term loans alongwith long-terms loans where such composite loans
are considered necessary. Loans for periods not exceeding 20 years can be made to
the State Governments to enable them to subscribe directly or indirectly to the Share
capital of Co-operative Societies. Moreover, the new bank can contribute to the share
capital or invest in the securities of any institutions concerned with agriculture or
rural development.
iv. Resources: For its short-term operations, the National Bank will borrow funds from
the Reserve Bank in the form of Line of Credit under Section 17 (4E) of the Reserve
Bank of India Act which permitted the Reserve Bank to grant short-term loans to the
Agricultural Refinance and Development Corporation earlier and which has now been
amended suitably by the National Bank for Agriculture and Rural Development Act .
For its term-loan operations, the National Bank will draw funds, as the Corporation was
doing earlier, from the Central Government, World Bank/IDA, and other multilateral and
bilateral aid agencies, the market and National Rural Credits (long-term operations). Fund
that it has established. To this Fund has been transferred the balance in the National
Agricultural Credit (Long term operations). Funds maintained by the Reserve Bank. Further
contributions would be made annually to the new Fund by the Reserve Bank in addition to
the contributions by the National Bank itself. Provision has been made also for the Central
Government and the State Governments to contribute to this Fund from time to time.

Export finance
The financial function in the export department is similar to the financial function in an other
organisation, but with this essential difference – that there are a host of government,
banking and export insurance regulations one should strictly adhere to, and quite a few
insurance regulations one should strictly adhere to, and quite a few precautions to be taken
since the export deal will be in foreign exchange and any inappropriate handling will result
in a serious loss of foreign exchange, apart from the other consequences.
The areas where finance would be essentially needed, after one obtains an export order will
be:
a. Procuring raw materials and components, and manufacturing the product.
b. Refinance facilities so as to get the proceeds of export bills at the time of negotiation
of export benefits are realized.
c. Refinance facilities for long-term credits offered for the export of products.
The schemes of export financing available to an exporter in India are reasonably liberal and
it may be safely stated that no export contract would normally be frustrated for lack of
finance. Financial institutions, like commercial banks, require basic procedural formalities to
be completed between the buyer and the exporter to enable them to provide the necessary
financial facilities to the exporter, whether such facilities extend over a short, medium or
long term.
Finance
Pre-shipment Finance
The procedure adopted for preshipment credit against a deferred payment contract are the
same as those applicable to short-term contracts. Pre-shipment credit is allowed by banks
against a contract/letter of credit.
Post-shipment Finance
When an exporter enters into a deferred payment contract, the entire contract value,
excluding the advance payment received by him, is realized by him over an extended period
of, say, upto 5 years. This imposes a severe burden on his finances. To relieve him of this
burden, as also to give incentives to exporters, the Reserve Bank of India has authorised
commercial banks to extend to the exporters a "Term Export Credit" as post-shipment
credit.
Depending on the nature of the deferred payment contract, post shipment credit is given
either directly by a commercial bank or in collaboration with Exim Bank.
Export –Import Bank of India
The Export-Import Bank of India (EXIM Bank) is a public sector financial institution,
established on January 1, 1982. It has taken over the various export financing of the
Industrial Development Bank of India. It was established by and Act of Parliament for the
purpose of financing, facilitating and promoting foreign trade of India. It is the principal
financial institution for co-ordination the working of institution engaged in financing export
of consultancy and related services, finance export oriented industries and provide
international merchant banking services.
Lending Programmes
The main focus of EXIM Bank operation is on export credits for medium-term and long-term
exports. Whenever a buyer of exported goods services from India, is allowed to defer
payment, an export credit arises. Deferred export credit is available for the sale of Indian
machinery, manufactured equipment and related services. Capital goods eligible for export
credit have been identified.
It is divided into group A which is eligible for term credit beyond 2 years, and group B which
is eligible for credit upto a maximum of 2 years. Such credit given may be in the form of
supplier’s credit or buyer’s credit. Supplier’s credit arises when Indian exporters credit to
the overseas buyer and finances himself through EXIM Bank. The deferred export credit
takes the form of buyer’s credit when EXIM Bank extends credit directly to the buyer. EXIM
Bank operates three broad programmes of financing. These are – Loans, Re-discounting and
Guarantees.
The leading and rediscounting programmes are divided into nine categories as indicated
below:
a. Provide financial assistance to exporters
This enables the Indian exporter to extend term credit to an importer overseas for
the purchase of Indian capital goods. The exports include equipments, machinery
and related services, project exports, turnkey projects, construction projects, etc.
Export of this nature arise when an Indian company contracts supply agreements for
the supply of equipments and services or a project export agreement involving the
setting up of a textile mill, sugar plant etc.
b. Technology and consultancy services
Indian companies borrow funds from EXIM Bank and provide deferred credit to
overseas buyers of Indian technology or consultancy services.
c. Overseas investment financing
The bank provides financing when an Indian company establishes a joint venture
overseas, and requires funds towards equity participation.
d. Pre-shipment credit
This loan of credit is available for companies that have won an export contract for
capital goods and are seeking finance to produce the goods which entails a
production period exceeding six months.
e. Overseas buyers’ credit
This is offered directly to foreign importers for the import of Indian capital goods and
relative services with repayment terms spread over a period of years.
f. Lines of credit to foreign governments
Lines of credit are offered to foreign governments and foreign financial institutions.
Such lines provide long-term finance for import of Indian capital goods, and related
services.
g. Relending facility to bank overseas
This facility to overseas bank is made available to enable them to provide term
finance to importers for import of Indian capital goods. The overseas banks will
facilitate the foreign buyer, the EXIM Bank, and supplier to avail of these facilities.
h. Export bills re-discounting
This lending programme is available to commercial banks in India that are authorised
to deal in foreign exchange. Such banks can re-discount their short-term usance
export bills with the EXIM Bank. EXIM Bank provides funds under this programme for
a period of 90 days.
i. Refinance of export credit
Under this Programme, the commercial banks in India, who are authorised to deal in foreign
exchange, can obtain from EXIM Bank 100% refinance of term loans extended for export of
Indian capital goods. This credit is commercial banks can obtain financing participation
under EXIM Bank’s other programmes.
ECGC
Export Credit & Guarantee Corporation. Export transactions by their very method and
operations involved, carry substantial risks which are both commercial and political in
nature. This scheduled banks, which are authorised to extend easy financial terms for
export endeavors are not equipped to take care of these risks. Besides, it also provides
financial guarantees to banks and exporters for exports against deferred credit payment
terms.