Q1. Discuss the role of EXIM bank in promoting foreign trade. Ans. EXIM bank is setup by government to enhance and encourage exporters to export goods as much as they can. By doing this we will have huge FOREX reserves and so that we can also enjoy good market value of our currency in world market place. While working with EXIM bank we have various facilities given by bank to check all the functions, objectives and final conclusion of EXIM bank working.

Here we have objectives of EXIM bank as given below.

1. To study the international market and opportunities around the world.2. While study EXIM bank we will also get information about various schemes which is

cover by government for exporters.3. We also get information about the rules and regulations of EXIM bank.

Here we have various functions of EXIM bank as given below.

1. EXIM bank provides finance facilities for various loans and credit for exporters in which every exporter can enjoy these facilities for their trading purpose and after selling their goods into another market. It will generate FOREX.

2. Bank also provides finance for services and technological purpose of various firms.3. Bank also provides loads for raw material under pre shipment finance. It is very useful to

fulfill the market requirement at any time with these kinds of finance.4. EXIM bank also provides loads for SEZ areas where we have to setup unit and start work

as per plan. In this bank offers loan on low rate of interest.5. EXIM bank also provides loans for research and development for innovation of new

products. Moreover bank also provides loans for export marketing of products around the world.

6. Bank also provides loans to raise capital along with underwriting facilities.7. Guarantees also provide by bank to exporters in which they can make their payment

secure from the various buyer who are doing their business in negative country list.8. EXIM bank also helps exporters to expand their business in AFRICA with various schemes

which can offer huge benefit to exporters.

Conclusion

After studying various objectives and functions of EXIM bank we observed that EXIM is the back bone of international trade. Because we can enjoys various facilities from bank to get our business expansion with much more growth rate.

Q2. What is the need for export finance in India? Write a short note on export financing facilities in India.

Ans. Export finance is refers to the financing facilities which are offering by various banking institutions to exporter to get expansion of their business around the world. In this exporters can enjoy the benefits to get short term, long term, and pre shipment and post shipment loans from banks and fulfill their requirement for the time being. Today’s time we have huge requirement for finance and everyone don’t have enough money to invest his own to make shipment of goods to their clients. So these kinds of facilities give opportunities to exporter to expand their business around the world and make their shipments.

Here we have some financing facilities as given below for export oriented companies.

1. Exporting companies: in this bank provides term finance and working capital finance for those companies who are doing only exports of goods. They need to maximum sales and for increasing sales we need more funds.a. Term finance: in this we have finance facilities from bank in which we can get loan

from bank to fulfill the shortage of funds for time being.b. Working capital: In this we finance facilities from bank to get finance for the working

capital requirement.2. Non exporting companies:

a. Overseas investment: in this we can take finance from bank regarding investing finance into overseas market to find out various opportunities in that country. It will be helpful for us to maximize business in overseas market.

b. Line of credit: In this we have different channel of transaction in which exporters and importers have to take finance from fulfilling their requirement. Because every exporters and importer has to increase their business and want to enhance their sales in number of volumes and maximize their profit as well.

c. SME finance: In this banks provide finance to those firms who are under small and medium scale of industries. In this government encourage every exporter or domestic manufacturer to sell their goods in overseas market. So that we can increase GDP of our economy and get maximum level of growth.

d. Agriculture and export finance: In this government provides various loan to farmer to increase the growth of crops and maximize production. While increasing number of production we can exports some part of crops to other country and get profit from it.

Q3. As an exporter, what benefits you can get from Post shipment finance scheme? Discuss the types of post shipment credits.

Ans. Post shipment finance is refers to the finance in which exporters’ gets credit which can be extended by bank to exporters upon their request. So it is beneficial term for exporters who are selling their goods in another country on credit terms. Because these kinds of facilities are required by exporters to export goods as much as they can.

Here we have some features of post shipment finance.

1. Purpose of finance: In this payment will be receivable after making of shipment and the realization date would be from the BL date. This makes the payment from buyer to receive after some time from the BL date.

2. Basis of finance: The purpose of these kinds of shipments is to make sure that buyer have been importing goods from long time from our. This makes bank ensure that buyer is not defaulter at any level.

3. Types of finance: Finance is secured and unsecured. Bank generally sends documents to buyer on behalf of goods track record of past shipments. In this if bank sends document to buyer’s bank then it will be secured terms and on another side if bank sends documents directly to buyer then it will be unsecured side.

4. Quantum finance: in this while making shipment to importer we have to draw document as per that time currency rate. But when we have to take payment from buyer then there must be some fluctuation in which we have to face loss or gain. Then we need to ready for these kind of time.

5. Period of finance: Period of finance is depend upon the requirement of exporters in this we can take short term and long term export finance from bank which can be helpful for us.

Post shipment finance provided as given below.

1. Physical exports: Physical export is refers to those export in which actual exporter is involved to transfer the document to importers.

2. Deemed exports: In this finance is provided to those suppliers who are already exporting goods and importing by various agencies.

3. Capital goods and project exports: In this sometimes goods are sold to those person who are actually importing this and its payment to remitted from importer directly to exporter.

Q4. Write short notes on: a) Export credit guarantee corporation

Ans. Export credit guarantee corporation is refers to the government of India institute in which every exporter can apply for insurance cover over his various transaction with importers. Because many exporter sells their goods on credit terms which means unconditional period when the payment has to receive. In this exporter given them particular time of credit and after that importer has to make payment. If they don’t make payment then exporter can ask to ECGC for the claim and ECGC will pay our money and take necessary actions against importer. It is very beneficial for those who export goods from our country. This is like credit term in which exporter can make huge shipment to their buyer and be on safer side to get maximum of benefit from it. This is not essential for all exporters to apply for it. But if we apply for this we must be on safer side. Because it provides us insurance cover on all our shipment in which we sells goods on credit term to foreign buyers. It

b) Foreign exchange risk

Ans. Foreign exchange risk is refers to the risk which is always exist in every transaction of export or import order. In this when we make transaction of export or import order we have to send/receive payment to/from supplier/ buyer. Then this kind of situation occurs that we purchase goods on another exchange rate and sells goods on another exchange rate. In this we have to make forward booking of currency which makes us more secure about the currency rate fluctuations. Foreign exchange rates are changing very frequently and it is not remained same always. Every day it is changing and we have to make transaction according to that. In this we have to use some principles which are like forecasting, assumptions, measurements. By forecasting we can observe how much price can be reducing and higher then present market conditions. Assumptions are use when we have seen reforms of economy which make difference in exchange rate thru it. After some economic change we can assume that currency price will be stronger or weaker. Final measurement, by this we can measure approximate exchange rate of currency with various economical tools.

Q5. Discuss the payment options available to exporter and importer.

Ans. While doing international business we have various channels thru we can send payments to our suppliers and buyers. In this we need to take acceptance from our supplier/buyer from where we can send payment and receive payment.

1. Payment in advance: Payment in advance is the oldest model of payment term to receive and send payment to our buyer/supplier. In this we have to send advance

payment to supplier from bank to supplier’s account. It is very easy and normal process to sending payment to supplier/buyer.

2. Letter of credit: Letter of credit is the guarantee which is given by our bank to our supplier. In this we have a proper channel in which bank opens letter of credit in which payment has to send to supplier after agreed period of time. This is the safest mode of payment to send or receive and it has huge network of usage in our today’s transaction policies.

3. Documentary collection: in this we have documentary collection of document from our buyer on agreed terms and conditions. However after making export of goods to our buyer then we have to send documents to him but we also need payment against that order. In this case exporter make agrees to importer to send him payment after some days and after that there will be some interest charges if importers failed to make payment. a. Documents against payment: In this exporter send document documents to buyer’s

bank and document hand overed by bank to buyer after making payment to document. It is very easy and fast way to get payment. It help both exporter and importer to increase mutual understanding of each other and increase sales.

b. Documents against acceptance: In this exporter has to give this option as credit to buyer. Most of the time exporter can give credit to buyer from 30 days to 90 days. This is very helpful for those who are new comer in market. It will also make increase in confidence of exporter to increase the shipments to buyer.

4. Open account: in this exporter send document to buyer after making shipment and send document after negotiation by bank directly to buyer. In this we have big risk. Because we have to send documents to buyer and he can refuse to pay the amount but we have to be confident about he will make payment on proper time. For this we have to take ECGC to protect ourselves from this risk.

Q6. What is custom duty? Discuss its types.

Ans. Customs duty is a type of indirect tax which is levied by government of country to control over the import and export of goods which are not suppose to send out country and receive in our country. This is to make proper balance of goods and payment which are flowing from our country. For example in present condition government of India imposed custom duty on Gold to make sure that proper import of gold in good quantity. Because excessive import also harms the current account of country.

Here we have types of customs duties as given below.

1. Basic customs duty: In this customs has to take duty on all goods which are imported from any country. Because this is the only things which customs takes from the

importers. In this importer has to pay some certain amount in which they can import goods without any problem to country.

2. Additional duties of customs: In this after paying the basic duty we have to pay additional duties which are for special case according to their HS code. However we have to pay more amounts to those products which are not allowed to import from any country. Like for example Chinese cycles are very cheaper then Indian cycles and if we import Chinese cycle then we have to pay huge money then Indian cycle. This is just because of protection of domestic manufacturers. This is like anti-dumping of goods which are not supposed to import in our country.

3. Education cess : In this customs as to impose 2% of total value tax on value of goods. This is to enhance the education system. So that’s why they charge education cess from every importer. This is also like basic custom duty which has to be paid by importer to import goods in our country.

4. Special CVD( counter prevailing duties): In this customs has to charge 4% tax on total value which is a part of customs duties. This is also like basic in which we can’t ignore to pay it.