Welcome to a presentation on

Pre & Post Shipment Finance

BYS V R Murty

INTRODUCTION

Export finance is a short term, working capital finance allowed to an exporter. An exporter may avail financial assistance from any bank provided following two requirements are satisfied:

1. Timely availability of credit2. Cost of the funds should be

affordable

EXPORT FINANCE – Guidelines

RBI Trade Control Regulations ICC ECGC of India Ltd FEDAI guidelines and rules

STAGES OF EXPORT FINANCE

1. Pre-shipment FinanceFinancial assistance extended for execution of an export order from the date of receipt of an export order till the date of shipment.

2. Post-shipment FinanceFinancial assistance from the date of shipment to the date of realisation.

Types of Pre-shipment Finance

Packing Credit (Merchant Exporter/Manufacturer)

Advance against Cheques/Drafts representing Advance Payment

Types of Post shipment finance

Export Bills N/P/D Advances against bills sent on

collection basis Advances against exports on

consignment basis Advances against undrawn balances Advances against Duty Drawback

receivable from Govt.

Packing Credit Loan I.E. Code SAL of ECGC RBI Caution List Sanctioned Limits Confirmed Order/L.C. Tenor INCO Terms Quantum of Loan

Packing Credit Loan

Goods must be freely exportable(should not be banned/canalised/ restricted)

Foreign Trade Policy, ITC(HS), BTN Destination country Period of Advance Disbursement of PCL

Packing Credit Loan

Liquidation Bye products Partial domestic sale Export of deoiled/defatted cakes Running Account Facility Substitution of Buyer Telescopic Rate of Interest

Export of Services

Pre-shipment and post-shipment finance may be provided to exporters of all the 161 tradable services covered under the General Agreement on trade in Services where payment for such services is received in free foreign exchange as stated at Chapter 3 of FTP 2009-14All provisions of this circular shall apply mutatis mutandis to export of services as they apply to export of goods unless otherwise specified.

Post Shipment Export Credit

Appropriate Sanctioned Limit Liquidation of Post-shipment credit Normal Transit Period (NTP) (Iraq – 60 days)

Usance Bills Fixed Due Date

Post Shipment Export Credit

TT reimbursement under L.C. Overdue Bills Extension of time limit Crystallisation Payment of compensation to

exporters in r/o delayed credit

Export Credit in Foreign Currency

Finance in Foreign Currency at competitive rates

Interest linked to LIBOR/EURIBOR Choice of currency (USD/GBP/JPY/EUR) Exports to ACU countries are also

covered Source of Funds for Banks

Export Credit Guarantee Corporation of India Ltd.

1. Export credit insurance2. Covers issued by ECGC

A. Policies to ExportersB. Guarantees to Banks

Export Credit Guarantee Corporation of India Ltd.

1. Whole Turnover Packing Credit Guarantee

2. Whole Turnover Post-Shipment Guarantee

3. Individual Post-Shipment Guarantee

Software Exports

The guidelines issued by RBI classifies software and I.T. into four categories.

Software Services Project Services Software Products & Packages IT related services

Software Exports

1. More than 65% of Indian exports are from Software Industry

2. More than 60% of software exports are to USA and around 25% to Europe

3. India has a large pool of trained scientific manpower, who are mainly English speaking

4. World Software industry is dominated by the English as the main language

Thank You