WHAT IS EXPORT ACTIVITY ?Goods/ Services are sent out of the country Foreign exchange is received into the countryAny exception?

Manufacturer ExportersMerchant ExportersDeemed ExportersSub-suppliers

STATUS HOLDERSTurnoverExport House 20 CroreStar Export House 100 CroreTrading House 500 CroreStar Trading House2500 CrorePremier Trading House 10000 CroreTypes of Exporters

EXPORT ORDERMFR ( EOH)SUB SUPPLIERS

EXPORT ORDERMERCHANT ( EOH)MANUFACTURERSSUB SUPPLIERS

WHAT IS EXPORT FINANCE ?Working capital financeHow is it different from domestic finance ?

Distinct stages of financeDimension of risksConcessive credit End useMonitoringECGC CoverBench mark Lending normsRefinanceBetter profit margins for exportersHigher income opportunity for bankers

Stages of Export Credit

Pre shipment

From the date of receipt of order to the date of shipment

Inventory Finance

Normally closed by availing Post shipment finance - should be considered along with Post shipment financePost shipment

From the date of shipment to the date of realisation of proceeds

Receivable Finance @ 0% margin

Can be considered in the absence of pre-shipment finance also

Regulations / Guidelines

Foreign Trade Policy 2009-2014RBI directives FEMA FEDAI RulesUCPDC /URC/URR proceduresECGC guidelinesBanks internal guidelines Export Promotion Councils/FICCIGIC (marine insurance)

Appraisal of Export CreditNo compromise on viability/integrityExporters capacity ( timely delivery/ tech/mange -expertise)Need-based (turn-over/cost of inputs)Opinion report on buyerPolitical/regulatory/financial conditions of importing countryAcceptability of LC opening bank/LC conditions

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 commoditiesInterchangeability in pre & post shipment facilitiesTL requirements for modernization etc Not be denied merely on collateral security considerationsAppraisal of Export CreditRBI GUIDELINES

AssessmentSame lines as W.C assessmentRelaxations in NWC/CR /CollateralEPCRs CroresInventory holding in no. of days in case of units with 100% exports.If the unit has domestic sales also, - export production/ inventory holding levels to be arrived at in discussion with the borrower

Particulars31.03.200931.03.2010Export Sales estimated / projected21.2123.33Less: Estimated profit (10%)2.122.33Export Sales after deduction of profit19.0921.00Average Export Sales per month1.591.75Average period for which EPC runs3 months3 monthsEPC required5.175.69EPC Limit requested by the Company5.005.00Recommended EPC Limit 5.005.00

Assessment FBDFBDRs. Crores

Particulars31.03.200931.03.2010Export Sales estimated / projected21.2123.33Average Export Sales per month1.771.94Est. % of sales under Non-L/C (90%)1.591.75Usance period of bills3 months3 monthsFBD (Non-L/C) required4.775.25FBD (Non-L/C) Limit requested by the Co.4.504.50Recommended FBD (Non-L/C) Limit 4.504.50

PRE-SHIPMENT FINANCE PRODUCTS

Export Packing Credit (Rupee / PCFC)Advances against cheques/drafts received as advance paymentAdvances 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 buyers country if the contract involves work to be done in buyers country

Windows of packing credit

Order to order basisRunning AccountPC for export of goods meant for exhibition and saleSharing of EPC Between merchant and manufacturer Inland LC system for suppliers to an EOHPCFC

Letter for sharing EPCdraws EPC USD 75000Letter & ILCProvides EPCUSD 25000Purchase orderUSD 25000Ships / supplies goodsBillBillEPCUSD 25000EOH's BankSHARING OF EPC BETWEEN MERCHANT & MANUFACTURER

Requests for Inland LCOpens I LCILC advice/Provides EPCPurchase orderShips / supplies goodsBillBillDebit EPCEOH's BankINLAND LC SYSTEM BETWEEN MANUFACTURER & SUB SUPPLIER

RUNNING ACCOUNTCommodity wise for each exporter Only for exporters with GOOD TRACK RECORD.Automatic for EOUs, EPZ & SEZ units Monthly statement of LCs/export orders in hand(within 1 month)Not available for sub-suppliersPC availment not a precondition to liquidateFIFO:advances need not be adjusted with export bills of same transaction-subject to not outstanding more than stipulated periodExisting EPC Running a/c o/s of the exporters in rupees can be converted into 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 PCRunning 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-supplierSubstitution of commodity/ order/ buyer purely based on commercial necessityEnd use to be ensured :pay order favouring supplier where possibleTo 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 RemittancesExport Bills negotiated / purchased / discounted / proceeds of duty drawback entitlementsTo be repaid depending on seasonality/WC cycle in any case not exceeding 360 daysHigher rate to be charged if > 270 days but

POST-SHIPMENT FINANCEAny 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 receivablesFinance 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 DocumentsAdvances against bills sent on collectionAdvances against exports sent on consignmentAdvances against Govt. incentivesAdvances against undrawn balances / retention moneyRediscounting of Export Bills Abroad (EBR)*

POST-SHIPMENT FINANCESeparate limits for LC/non-LC billsOpinion Reports on overseas buyers (Buyer-wise limit / D&B Reports) Correspondent arrangement and Country Risk factorsStanding of LC Opening BankNegotiation of Export Documents as per UCPDC/LCNegotiation with discrepancy to have indemnity Purchase or Discount of Non- LC BillsDocuments 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 ratesEffective cost to exporter not to exceed 2.00% over 6 months LIBORAll 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 cant 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 PCFCEBR 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

*