WHAT IS EXPORT ACTIVITY ?

Goods/ Services are sent out of the country

Foreign exchange is received into the country
Any exception?
 Types of Exporters
 Manufacturer Exporters
 Merchant Exporters
 Deemed Exporters
 Sub-suppliers

STATUS HOLDERS Turnover

• Export House 20 Crore
• Star Export House 100 Crore
• Trading House 500 Crore
• Star Trading House 2500 Crore
• Premier Trading House 10000 Crore
 WHAT IS EXPORT FINANCE ?
Working capital finance

How is it different from domestic finance ?

• Distinct stages of finance
• Dimension of risks
• Concessive credit – End use
• Monitoring
• ECGC Cover
• Bench mark Lending norms
• Refinance
• Better profit margins for exporters
• Higher income opportunity for bankers
 Regulations / Guidelines
1) Foreign Trade Policy 2009-2014
2) RBI directives
3) FEMA
4) FEDAI Rules
5) UCPDC /URC/URR procedures
6) ECGC guidelines
7) Bank’s internal guidelines –
8) Export Promotion Councils/FICCI
9) GIC (marine insurance)
 Appraisal of Export Credit
No compromise on viability/integrity
Exporter’s capacity ( timely delivery/ tech/mange
-expertise)
Need-based (turn-over/cost of inputs)
Opinion report on buyer
Political/regulatory/financial conditions of
importing country
Acceptability of LC opening bank/LC conditions
 Appraisal of Export Credit
RBI GUIDELINES

Time norms for sanction(new-45/ren-30/adhoc-15)

Online Credit (limits should continue uninterrupted
in case of delay in renewal)
Peak/non-peak credits for seasonal commodities
Interchangeability in pre & post shipment facilities
TL requirements for modernization etc
Not be denied merely on collateral security
considerations
 Assessment
• Same lines as W.C assessment
• Relaxations in NWC/CR /Collateral Inventory holding in no. of
days in case Rsof units with
Crores
EPC
100% exports.
Particulars 31.03.2009 31.03.2010
If the unit has domestic sales
Export Sales estimated / projected 21.21 23.33
also, - export production/
•Less: Estimated profit (10%) 2.12
inventory 2.33levels to be
holding
arrived at in discussion with
•Export Sales after deduction of profit 19.09 21.00
the borrower
Average Export Sales per month 1.59 1.75
Average period for which EPC runs 3 ¼ months 3 ¼ months
EPC required 5.17 5.69
EPC Limit requested by the Company 5.00 5.00
Recommended EPC Limit 5.00 5.00
 Assessment – FBD
FBD Rs. Crores
Particulars 31.03.2009 31.03.2010
Export Sales estimated / projected 21.21 23.33
•Average Export Sales per month 1.77 1.94
•Est. % of sales under Non-L/C (90%) 1.59 1.75
Usance period of bills 3 months 3 months
FBD (Non-L/C) required 4.77 5.25
FBD (Non-L/C) Limit requested by the Co. 4.50 4.50
Recommended FBD (Non-L/C) Limit 4.50 4.50
PRE-SHIPMENT FINANCE PRODUCTS

 Export Packing Credit (Rupee / PCFC)

 Advances against cheques/drafts received as
advance payment
 Advances against Govt. Incentives

Other facilities—
-- Bid Bond / Advance payment / Performance
Guarantees (Turnkey / C G Exports)
--LCs for input imports/Back-to-back LCs
--Arranging line of credit in buyer’s country if the
contract involves work to be done in buyer’s country
Windows of packing credit

1. Order to order basis

2. Running Account
3. PC for export of goods meant for exhibition
and sale
4. Sharing of EPC
a. Between merchant and manufacturer
b. Inland LC system for suppliers to an EOH
5. PCFC
PCFC
(Pre-shipment Credit in Foreign Currency )
• Within sanctioned EPC limits
• Four designated currencies – USD / GBP/JPY/EUR
• Conversion of EPC to PCFC not allowed
• Funds angle clearance
• Sharing of PCFC allowed
• Cross currency drawals permitted
• Partly rupee/ partly FC permitted
• RoI LIBOR + 2.00% up to 180 days
• plus 2% for next 180 days
• PCFCs not adjusted within 360 days to be crystallised
at current TT selling rate.
 Rules relating to Packing Credit
• LC/PO to be obtained prior to disbursement (or
allow reasonable time)
• Order to order basis / Back-up register / One
account per PC
• Running account Facility
• No cheque operations
• DP to be lower of advance value of stocks and
outstanding Export Orders (Segregation of Domestic
& Export stocks)
• Release in one lump sum or stages.
 Rules relating to Packing Credit
• Sharing of EPC between Merchant & Manufacturer /
EOH & Sub-supplier
• Substitution of commodity/ order/ buyer purely based
on commercial necessity
• End use to be ensured :pay order favouring supplier
where possible
• To be repaid on shipment- normally within 270 days;
not more than one year
• PCFC – Packing credit in designated foreign currency
can also be given
Rules relating to liquidation of EPC / PCFC
• Advance Remittances
• Export Bills negotiated / purchased / discounted /
proceeds of duty drawback entitlements
• To be repaid depending on seasonality/WC cycle in any
case not exceeding 360 days
• Higher rate to be charged if > 270 days but <360 days
only for the addl. 90 days/
• Beyond 360 days – NO CONCESSIONAL INT.
(Normal Interest + Penal Interest)
• if no export takes place normal rate + penal rate
• PCFC for deemed exports- should be closed by EBR
within 30 days.
 POST-SHIPMENT FINANCE

• Any credit provided to exporter from date of

extending credit after shipment of goods to the date
of realisation of export proceeds(tide over waiting
period)
• To finance export receivables
• Finance against evidence of a shipping document
(i.e. shipment of export goods)
Post-shipment Finance windows
 Negotiation of Documents under LCs.
 Purchase/Discount of Non-LC Documents
 Advances against bills sent on collection
 Advances against exports sent on consignment
 Advances against Govt. incentives
 Advances against undrawn balances / retention
money
 Rediscounting of Export Bills Abroad (EBR)*
 POST-SHIPMENT FINANCE
• Separate limits for LC/non-LC bills
• Opinion Reports on overseas buyers (Buyer-wise limit /
D&B Reports)
• Correspondent arrangement and Country Risk factors
• Standing of LC Opening Bank
• Negotiation of Export Documents as per UCPDC/LC
• Negotiation with discrepancy to have indemnity
Purchase or Discount of Non- LC Bills
– Documents should be in accordance with the / firm
order/ sales contract
– Clear instructions of drawer in case of non
acceptance/ non payment.
 Rediscounting of Export Bills Abroad
(EBR )
• Post shipment finance at internationally
competitive interest rates
• Effective cost to exporter not to exceed
2.00% over 6 months LIBOR
• All export bills, demand and usance, are
eligible for EBR scheme
 EBR
• All export bills on account of which PCFC has earlier
been sanctioned should be discounted under EBR
and such bills can’t be sent on collection basis.
• All exporters are eligible to cover their bills drawn
under letters of credits, non-credit bills under
sanctioned limits in the bill rediscounting scheme
• Forward contracts can be booked to the extent to
which it is not covered under PCFC
• EBR is offered for a maximum period of 180 days,
inclusive of grace and transit periods* except where a
customer can draw bills beyond 180 days.
• Re discounting vs EBR