Export Finance is provided to exporters to enable them to

meet the financial requirements for carrying out business

activities. Banks and other financial institutions grant

Export Finance based on certain Criteria for eligibility such

as production of the export order from the importers or

other proof of an export order, for granting the finance.

Export Finance: Post-Shipment

Need for Post-shipment finance

• Time gap between shipment of goods and collection of export

proceeds

• Time consumed in process of preparing documents, submitting them

to the bank and then forwarding of them by the bank

• Includes a minimum time period of ~20-25 days

• To bridge this gap commercial banks provide post shipment

financing

• Post shipment finance is a loan, advance or any other credit provided

by an institution to an exporter of goods from India.

• This finance is granted from the date of extending the credit after

shipment of the goods to the realization date of the export proceeds.

What is Post-shipment Finance

Functions

• It is procedurally simple without the need of additional security.

• The drafts are accepted or endorsed with "Per Aval" by the

correspondent bank and therefore are highly secure in collection of

payment.

• Customers are able to immediately receive payments, speed up the

funds turnover and be relieved from shortage of funds.

• The importers have access to deferred payments and have more trade

opportunities.

Process

Exporter Importer

Exporter’s Bank Issuing Bank

1. Discount Agreement

4. Application Discount

5. Net Payment Discount

2. Submit Document

3. Acceptance Notification8. Pay the

Amount Due

7. Payment Due

6. Present Documents

Features of Post-shipment Finance

Purpose of finance

• Post-shipment finance is meant to finance export sales receivables

after the date of shipment of goods, to the realisation of export

proceeds. In case of deemed exports, it is extended to finance the

receivables against supplies made to designate agencies.

Basis of finance

• Post shipment finance is provided against evidence of shipment of

goods or supplies made to the exporter or any other designated body.

Form of Finance• Post-shipment finance can be secured or unsecured. Since the

finance is extended against evidence of export shipment, and banks

obtain the documents of title to the goods, the finance is normally

self liquidating. In cases that involves advances against undrawn

balance, it is unsecured in nature. Further, the finance is mostly a

funded advance. In few cases, such as the financing of project

exports, where the issue of guarantees (retention money guarantees)

is involved, the financing is non-funded in nature.

Form of Finance• Post-shipment finance can be secured or unsecured. Since the

finance is extended against evidence of export shipment, and banks

obtain the documents of title to the goods, the finance is normally

self liquidating. In cases that involves advances against undrawn

balance, it is unsecured in nature. Further, the finance is mostly a

funded advance. In few cases, such as the financing of project

exports, where the issue of guarantees (retention money guarantees)

is involved, the financing is non-funded in nature.

Quantum of Finance

• Post-shipment finance can be extended up to 100% of the invoice

value of the goods. however, where the domestic value of goods

exceeds the value of the export order or the invoice value, finance

for the price difference can also be extended, if such a price

difference is covered by receivables from the government. This form

of finance is not extended at the pre-shipment stage. Banks can also

finance undrawn balance.

Period of Finance• Post-shipment finance can be short-term or long-term, depending on the

payment terms offered by the exporter to the overseas buyer. In the case of cash exports, the maximum period allowed for the realization of export proceeds is 12 months from the date of shipment. Banks can extend post-shipment finance at a lower rate up to normal transit period (NTP)/national due date subject to a maximum 180 days. In case of deferred payment exports, requiring prior approval of an authorised dealer, the EXIM Bank, RBI or EXIM Bank working group, post-shipment finance cane be extended at non-concessive rates up to the approved periods. Also, as per existing RBI guidelines*, the maximum rate of interest chargeable on post shipment finance (PSFC) in foreign currency is Libor + 350 bps and for finance in Indian rupees is PLR - 250 bps

*Subject to change

THANK YOU