EXPORT CREDIT::
Export sector has been recognised as a thrust area considering its importance
and contribution of this sector to the economy. Therefore, the sector is being
presently extended finance at concessional rates, with flexibility in financing norms.
Export finance is by a large regulated through the directive / guidelines issued by
the Reserve Bank of India (RBI), Director General of Foreign Trade (DGFT) and
the Foreign Exchange Dealers’ Association of India (FEDAI). Export finance is
broadly classified into two categories
:
(i) Pre-shipment finance and
(ii) Post-shipment finance
Pre-shipment finance often referred to as ‘Export Packing Credit (EPC)’ is extended
as working capital for purchase of raw materials, processing, packing, transportation
and warehousing of goods meant for export. Both manufacturers as well as merchant
exporters are eligible to avail Rupee Packing Credit at concessional rate of interest.
Pre-shipment credit is available in foreign currency also. It has two essential features,
viz.,. existence of an export order and / or letter of credit and liquidation of the credit by
submission of export documents within a stipulated period. In case of exporters of
proven standing, the facility can also be extended on a running account basis
provided the conduct of the account is satisfactory and orders are lodged
subsequently within a reasonable time. Substitution of contracts / export orders are
also permitted in case of running accounts.
EPC can also be provided to units established in SEZ / EPZ/ AEPZ/ EOUs for
supply to units in the same or another SEZ / EPZ/ AEPZ/ EOU although
no movement of merchandise takes place across the borders of the country.
There is no fixed formula for determining the quantum of finance to be granted to an
exporter against specific order / LCs. The guiding principle to the applied in all such
cases is a concept of need-based finance. The period for which the Bank gives
packing credit depends upon the manufacturing / trade cycle or specific requirements
of the individual export, normally not exceeding 180 days. The percentage of
margin is determined depending on the nature of order, commodity, capability of
exporter, etc. keeping in view the spirit behind RBI guidelines for liberal finance to
export sector.
Since packing credit loans are concessional and purpose oriented, it will be
necessary to ensure proper end use of amounts disbursed to the exporters.
Post- shipment finance can be extended upto 100% of the invoice value of goods. It
can be short term or long term finance depending upon the payment terms offered
by Indian exporters to overseas buyers. The maximum period usually allowed for realisation of export proceeds is 180 days from the date of shipment, with certain
exceptions. Post- shipment finance is also available both in rupees and specified
foreign currencies. Very often export business takes place without support of
documentary Letters of Credit and the Bank normally extends finance to the exporters
by purchasing the bills drawn by them of foreign buyers or granting advance against
bills sent on collection basis. While purchasing the bill, the Bank takes into
consideration the track record of the exporter, country risk, nature of merchandise,
terms of payment, payment record of the drawee, etc. Advances against Duty
Drawback receivable are also granted under Post-shipment Finance.
RBI has been traditionally pursuing a policy to make available export credit at
reasonably low interest rate with a view to helping the exporters to be competitive
vis-a-vis their competitors. RBI have rationalised the interest rates on export
credit which are indicated by RBI, periodically, in their Monetary & Credit Policy as
ceiling rate in respect of all categories of export credit so that interest rates
charged by the banks can actually be lower than the prescribed rate. Such ceiling
rates will be linked to PLRs of respective banks as applicable to other domestic
borrowers.
As far as deferred exports are concerned, RBI has allowed banks to charge
their normal term lending rate based on the credit rating of the borrower. In this
connection, deferred exports are those where the realisation period exceeds 180
days, with certain exceptions. All deferred exports are subject or regulatory
guidelines contained in Project Export Manual (PEM) published by RBI.
The Export Credit Guarantee Corporation of India Ltd. (ECGC) provides support to
both exporters and financing banks through export credit insurance. The related
guarantee / policies issue by ECGC cover individual Packing Credit Guarantee
(IPCGO) cover from ECGC for pre-shipment credits on a case-to-case by authorities
empowered by the Bank for the same. As regards post - shipment credit, Bank
may stipulate Individual post- shipment Guarantee (IPSG) on a case-to-case basis
depending on the risk perception.
Export sector has been recognised as a thrust area considering its importance
and contribution of this sector to the economy. Therefore, the sector is being
presently extended finance at concessional rates, with flexibility in financing norms.
Export finance is by a large regulated through the directive / guidelines issued by
the Reserve Bank of India (RBI), Director General of Foreign Trade (DGFT) and
the Foreign Exchange Dealers’ Association of India (FEDAI). Export finance is
broadly classified into two categories
:
(i) Pre-shipment finance and
(ii) Post-shipment finance
Pre-shipment finance often referred to as ‘Export Packing Credit (EPC)’ is extended
as working capital for purchase of raw materials, processing, packing, transportation
and warehousing of goods meant for export. Both manufacturers as well as merchant
exporters are eligible to avail Rupee Packing Credit at concessional rate of interest.
Pre-shipment credit is available in foreign currency also. It has two essential features,
viz.,. existence of an export order and / or letter of credit and liquidation of the credit by
submission of export documents within a stipulated period. In case of exporters of
proven standing, the facility can also be extended on a running account basis
provided the conduct of the account is satisfactory and orders are lodged
subsequently within a reasonable time. Substitution of contracts / export orders are
also permitted in case of running accounts.
EPC can also be provided to units established in SEZ / EPZ/ AEPZ/ EOUs for
supply to units in the same or another SEZ / EPZ/ AEPZ/ EOU although
no movement of merchandise takes place across the borders of the country.
There is no fixed formula for determining the quantum of finance to be granted to an
exporter against specific order / LCs. The guiding principle to the applied in all such
cases is a concept of need-based finance. The period for which the Bank gives
packing credit depends upon the manufacturing / trade cycle or specific requirements
of the individual export, normally not exceeding 180 days. The percentage of
margin is determined depending on the nature of order, commodity, capability of
exporter, etc. keeping in view the spirit behind RBI guidelines for liberal finance to
export sector.
Since packing credit loans are concessional and purpose oriented, it will be
necessary to ensure proper end use of amounts disbursed to the exporters.
Post- shipment finance can be extended upto 100% of the invoice value of goods. It
can be short term or long term finance depending upon the payment terms offered
by Indian exporters to overseas buyers. The maximum period usually allowed for realisation of export proceeds is 180 days from the date of shipment, with certain
exceptions. Post- shipment finance is also available both in rupees and specified
foreign currencies. Very often export business takes place without support of
documentary Letters of Credit and the Bank normally extends finance to the exporters
by purchasing the bills drawn by them of foreign buyers or granting advance against
bills sent on collection basis. While purchasing the bill, the Bank takes into
consideration the track record of the exporter, country risk, nature of merchandise,
terms of payment, payment record of the drawee, etc. Advances against Duty
Drawback receivable are also granted under Post-shipment Finance.
RBI has been traditionally pursuing a policy to make available export credit at
reasonably low interest rate with a view to helping the exporters to be competitive
vis-a-vis their competitors. RBI have rationalised the interest rates on export
credit which are indicated by RBI, periodically, in their Monetary & Credit Policy as
ceiling rate in respect of all categories of export credit so that interest rates
charged by the banks can actually be lower than the prescribed rate. Such ceiling
rates will be linked to PLRs of respective banks as applicable to other domestic
borrowers.
As far as deferred exports are concerned, RBI has allowed banks to charge
their normal term lending rate based on the credit rating of the borrower. In this
connection, deferred exports are those where the realisation period exceeds 180
days, with certain exceptions. All deferred exports are subject or regulatory
guidelines contained in Project Export Manual (PEM) published by RBI.
The Export Credit Guarantee Corporation of India Ltd. (ECGC) provides support to
both exporters and financing banks through export credit insurance. The related
guarantee / policies issue by ECGC cover individual Packing Credit Guarantee
(IPCGO) cover from ECGC for pre-shipment credits on a case-to-case by authorities
empowered by the Bank for the same. As regards post - shipment credit, Bank
may stipulate Individual post- shipment Guarantee (IPSG) on a case-to-case basis
depending on the risk perception.
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