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ABM-Case Studies CAIIB - BFM - CASE STUDIES Bank Promotion exa

ABM-Recollected Only for Bankers
ABM-Last Minute Pre-shipment and post-shipment Loan RBI
BFM-Case Studies IIBF
An exporter approaches the ABC Bank for pre-shipment and post-shipment loan with estimated sales of Rs. 500 lakh.
BFM-Recollected IRDA
The bank sanctions a limit of Rs. 200 lakh, with 30 % margin for pre-shipment loan on FOB value and margins on bills
BFM-Last Minute of 15 % on foreign demand bills and 20 % on foreign usance bills. SEBI
Important Circulars BCSBI
Master Circulars The firm gets an order for USD 60,000 (CIF) to Australia. On 1.1.2015 when the USD/INR rate was Rs.65.50 per USD, CIBIL
Bank DA Rates
the firm approached the Bank for releasing pre-shipment loan (PCL), which is released.On 31.5.2015, the firm Banking and Insura
submitted export documents, drawn on sight basis for USD 30,000 as full and final shipment.
Bank Holidays Ministry of Finance
Life Ins Companies The bank purchased the documents at Rs.65.85, adjusted the PCL outstanding and credited the balance amount to the Excise & Customs
List of PSBs firm's account, after recovering interest for Normal Transit Period (NTP).The documents were realized on 30.6.2015 Income Tax Departm
List of Private Banks after deduction of foreign bank charges of USD 350. The bank adjusted the outstanding post shipment advance against NSE
List of Foreign Banks
the bill. BSE

Bank charged interest for pre-shipment loan @ 6 % up to 90 days and, @ 7 % over 90 days up to 180 days. For Post
shipment credit the Bank charged interest @ 8 % for demand bills and @ 8.5 % for usance (D/A) documents up to 90
days and @ 9.50 % thereafter and on all overdues interest @ 12%.

01. What is the amount that the Bank can allow as PCL to the exporter against the given export order, considering the
profit margin of 5% and insurance and freight cost of 10% ?

FOB value = 60000 x 65.50 = 3930000 — 393000 (10 % of 3930000 (insurance and freight cost))
= 3537000 — 176850 (5 % profit margin)
= 3360150 - 1008045 (30% margin)
= 2352105

So, the Bank can allow Rs. 2352105 as PCL to the exporter against the given export order.

02. What is the amount of post shipment advance that can be allowed by the Bank under foreign bills purchased, for
the bill submitted by the exporter?

30000 x 65.85 = 1975500

So, the Bank can allow Rs. 1975500 as post shipment advance under foreign bills purchased, for the bill submitted by
the exporter.

03. In the above case, when should the bill be crystallized (latest date), if the bill remains unrealised for over two
months, from the date of purchase (ignore holidays)?

Crystallisation will be done when the bill becomes overdue after 25 days of normal transit period. Date of overdue will
be 25.6.2013. If bill remains overdue, it will be crystallised within 30 days i.e. up to 24.7.2013.

04. What rate of interest will be applicable for charging interest on the export bill at the time of realisation, for the days
beyond Normal Due Date (NDD)?

Rate of interest will be 12% as the overdue interest is stated as 12%

-------------------------------------------------

An exporter approaches the ABC Bank for pre-shipment and post-shipment loan with estimated sales of Rs. 100 lakh.
The bank sanctions a limit of Rs. 50 lakh, with 25 % margin for pre-shipment loan on FOB value and margins on bills of
10 % on foreign demand bills and 20 % on foreign usance bills.

The firm gets an order for USD 50,000 (CIF) to Australia. On 1.1.2013 when the USD/INR rate was Rs.43.50 per USD,
the firm approached the Bank for releasing pre-shipment loan (PCL), which is released.On 31.3.2013, the firm
submitted export documents, drawn on sight basis for USD 45,000 as full and final shipment.

The bank purchased the documents at Rs.43.85, adjusted the PCL outstanding and credited the balance amount to the
firm's account, after recovering interest for Normal Transit Period (NTP).The documents were realized on 30.4.2013
after deduction of foreign bank charges of USD 450. The bank adjusted the outstanding post shipment advance against
the bill.

Bank charged interest for pre-shipment loan @ 7 % up to 90 days and, @ 8% over 90 days up to 180 days. For Post
shipment credit the Bank charged interest @ 7 % for demand bills and @ 7.5 % for usance (D/A) documents up to 90
days and @ 8.50 % thereafter and on all overdues, interest @ 11%.

01. What is the amount that the Bank can allow as PCL to the exporter against the given export order, considering the
profit margin of 10% and insurance and freight cost of 12% ?

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4/28/2019 Free Mock Test for JAIIB & CAIIB
FOB value = 50000 x 43.50 = 2175000 — 24000 (12% of 2175000 (insurance and freight cost))
= 1914000 — 191400 (10% profit margin)
= 1722600 - 430650 (25% margin)
= 1291950

So, the Bank can allow Rs. 1291950 as PCL to the exporter against the given export order.

02. What is the amount of post shipment advance that can be allowed by the Bank under foreign bills purchased, for
the bill submitted by the exporter?

45000 x 43.85 = 1973250

So, the Bank can allow Rs. 1973250 as post shipment advance under foreign bills purchased, for the bill submitted by
the exporter.

03. What will be the period for which the Bank charges concessional interest on DP bills, from date of purchase of the
bill?

25 Days

Concessional rate will be charged for normal transit period of 25 days and there after overdue interest will be charged.

04. In the above case, when should the bill be crystallized (latest date), if the bill remains unrealised for over two
months, from the date of purchase (ignore holidays)?

Crystallisation will be done when the bill becomes overdue after 25 days of normal transit period. Date of overdue will
be 25.4.2013. If bill remains overdue, it will be crystallised within 30 days i.e. up to 24.5.2013.

05. What rate of interest will be applicable for charging interest on the export bill at the time of realisation, for the days
beyond Normal Due Date (NDD)?

Rate of interest will be 10% as the overdue interest is stated as 11%

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