Presentation on Export Credit

STATE BANKOF PATIALA STATE BANKOF PATIALA INFOTECH ACADEMYINFOTECH ACADEMY

EXPORT CREDITEXPORT CREDITNEED FOR EXPORTSNEED FOR EXPORTSNATIONAL PRIORITYNATIONAL PRIORITYINCENTIVES AND SUBSIDISED INCENTIVES AND SUBSIDISED FINANCEFINANCERBI’S GOALS FOR BANKSRBI’S GOALS FOR BANKS

ADVANTAGES TO THE BANKADVANTAGES TO THE BANKBetter monitoring / Controls ( short term Better monitoring / Controls ( short term and time-bound nature of portfolios) and time-bound nature of portfolios) (less NPAs)(less NPAs)Availability of ECGC coverAvailability of ECGC coverSelf-liquidating in natureSelf-liquidating in natureOther income – FLCs, FBGs, bills Other income – FLCs, FBGs, bills handling commission, forex handling commission, forex remuneration etc.remuneration etc.Refinance from RBIRefinance from RBI

PRE SHIPMENT CREDITPRE SHIPMENT CREDITELIGIBILITYELIGIBILITYPacking Credit is normally granted to Packing Credit is normally granted to manufacturer exporters, merchant manufacturer exporters, merchant exporters. Besides these two exporters. Besides these two categories, exporters who are sub-categories, exporters who are sub-suppliers, known as indirect suppliers, known as indirect exporters and deemed exporters are exporters and deemed exporters are also offered the concessional financealso offered the concessional finance..

ASSESSMENTASSESSMENTAssessment is done on the basis of Assessment is done on the basis of turnover method, projected balance turnover method, projected balance sheet method or cash budget method, sheet method or cash budget method, as applicable to the unit.as applicable to the unit.Besides usual factors like capacity, Besides usual factors like capacity, viability, integrity and past viability, integrity and past performance, additional factors as performance, additional factors as follows, peculiar to EPC should be taken follows, peculiar to EPC should be taken into account:into account:Exporter should have obtained IEC Exporter should have obtained IEC (importer – exporter code) number from (importer – exporter code) number from DGFT and should have registered with DGFT and should have registered with relevant export promotion councilrelevant export promotion council

Exporters should not figure in the SAL Exporters should not figure in the SAL (specific approval list) of ECGC. If so, ECGC (specific approval list) of ECGC. If so, ECGC specific approval is necessary for taking specific approval is necessary for taking fresh exposure on exporterfresh exposure on exporter

Exporters should not figure in RBI’s Exporters should not figure in RBI’s caution list. If figuring, RBI’s permission caution list. If figuring, RBI’s permission should be obtained for fresh exposure on should be obtained for fresh exposure on exporterexporter

Quantum of incentives receivables to Quantum of incentives receivables to be taken into account in assessmentbe taken into account in assessment

Capacity of exporter to execute orders Capacity of exporter to execute orders as per time schedule to be assessed in as per time schedule to be assessed in relation to the installed capacity, raw relation to the installed capacity, raw material availability etc.material availability etc.

Depending upon the risk factor, ECGC Depending upon the risk factor, ECGC cover to be takencover to be taken

QUANTUM OF FINANCEQUANTUM OF FINANCE

Quantum of finance to be fixed on “need Quantum of finance to be fixed on “need based approach”based approach”At the time of sanction/renewal of credit At the time of sanction/renewal of credit facilities, EPC limits also assessed as facilities, EPC limits also assessed as part of overall credit requirementspart of overall credit requirementsIn case of exporters having both In case of exporters having both domestic and export sales, export credit domestic and export sales, export credit facility should be commensurate with facility should be commensurate with the past and projected volume of export the past and projected volume of export businessbusinessInterchangeability between cash credit Interchangeability between cash credit and EPC, and also between pre and post and EPC, and also between pre and post shipment credit should be permitted as shipment credit should be permitted as warrantedwarranted

Contd…..Contd…..

QUANTUM OF FINANCEQUANTUM OF FINANCEEPC advances are generally granted to EPC advances are generally granted to the extent of 90% of FOB value of exportsthe extent of 90% of FOB value of exportsRelaxations in respect of NWC, current Relaxations in respect of NWC, current ratio can be permitted if exporter has ratio can be permitted if exporter has otherwise acceptable levels of otherwise acceptable levels of profitability and cash flowsprofitability and cash flowsPre shipment and post shipment finance Pre shipment and post shipment finance may be provided to exporters of services may be provided to exporters of services Exporters of services qualify for working Exporters of services qualify for working capital export credit (pre and post capital export credit (pre and post shipment) for consumables, wages, shipment) for consumables, wages, supplies etc.supplies etc.

CONDUCT AND SUPERVISION OF CONDUCT AND SUPERVISION OF EPCEPC

Two types of accounting are in vogue when it Two types of accounting are in vogue when it comes to dispensing the credit under EPC comes to dispensing the credit under EPC Order-by-order accounting Order-by-order accounting EPC is made available on an order basis. EPC is made available on an order basis. Individual EPC A/c are maintained order wiseIndividual EPC A/c are maintained order wise

Running accountRunning accountIn case of exporters with good track record In case of exporters with good track record (whose outstanding overdue bills do not (whose outstanding overdue bills do not exceed 5% of average annual export exceed 5% of average annual export realization during the previous 3 years), realization during the previous 3 years), running account facility is made available running account facility is made available (excepting indirect exporters). Under this (excepting indirect exporters). Under this facility,facility,


CONDUCT AND SUPERVISION CONDUCT AND SUPERVISION OF EPCOF EPC

One single EPC account is One single EPC account is maintained which accommodates maintained which accommodates drawls and credits in respect of drawls and credits in respect of various orders received from time to various orders received from time to timetime

LC or firm order need not be LC or firm order need not be produced by exporter before availing produced by exporter before availing EPC. A monthly statement detailing EPC. A monthly statement detailing all LCs / Orders covering the all LCs / Orders covering the outstanding in EPC account should outstanding in EPC account should be submitted by the exporterbe submitted by the exporter

LIQUIDATION OF EPCLIQUIDATION OF EPCEPC may be liquidated with the bill proceeds out of EPC may be liquidated with the bill proceeds out of negotiation/purchase/discount. This could be with negotiation/purchase/discount. This could be with export documents relating to any other order covering export documents relating to any other order covering the same or any other commodity exported by the the same or any other commodity exported by the exporter, with proceeds of export documents against exporter, with proceeds of export documents against which no packing credit has been drawn, with transfers which no packing credit has been drawn, with transfers from the EEFC accounts of the exporter as also from from the EEFC accounts of the exporter as also from rupee resources of the exporter to the extent export rupee resources of the exporter to the extent export have actually taken placehave actually taken placeThe payment for deemed exports have to be realized in The payment for deemed exports have to be realized in foreign currency or rupee remittances backed by foreign currency or rupee remittances backed by inward remittance certificatesinward remittance certificatesWhile extending EPC to indirect exporter, a letter of While extending EPC to indirect exporter, a letter of undertaking from the Export Order Holder (EOH) and undertaking from the Export Order Holder (EOH) and his banker that EPC would not be enjoyed at their end his banker that EPC would not be enjoyed at their end for the same purpose during the course of the EPC for the same purpose during the course of the EPC being outstanding against the indirect exporter being outstanding against the indirect exporter


LIQUIDATION OF EPCLIQUIDATION OF EPCWhere shipment are made to EOH and not directly Where shipment are made to EOH and not directly exported from the indirect exporter’s end (i.e. exported from the indirect exporter’s end (i.e. when such bills are not accompanied by Bill of when such bills are not accompanied by Bill of Lading etc.) then a certificate from the EOH has to Lading etc.) then a certificate from the EOH has to be obtained that exports have actually taken be obtained that exports have actually taken place. Such certificates should be submitted on a place. Such certificates should be submitted on a quarterly basis if it is an ongoing arrangement. quarterly basis if it is an ongoing arrangement. When bills are negotiated by other banks, When bills are negotiated by other banks, proceeds should be remitted to us along with FIRCproceeds should be remitted to us along with FIRCIf pre shipment advances are not adjusted by If pre shipment advances are not adjusted by submission of export documents within 360 days submission of export documents within 360 days from the date of advance, the advance will cease from the date of advance, the advance will cease to qualify for concessive rate of interest to the to qualify for concessive rate of interest to the exporter ab initioexporter ab initio

EXPORT Credit IN FOREIGN CURRENCY

PRE – SHIPMENT CREDIT IN FOREIGN CURRENCY PRE – SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC)(PCFC)

Eligibility Eligibility : All exporters having firm orders / : All exporters having firm orders / LCs are normally eligible for PCFC. For existing LCs are normally eligible for PCFC. For existing customers PCFC can be carved out of existing EPC customers PCFC can be carved out of existing EPC limits.limits.PCFC is available at designated branches of SBI. The PCFC is available at designated branches of SBI. The exporter customer of non designated branches can exporter customer of non designated branches can avail of PCFC at the nearest designated branch.avail of PCFC at the nearest designated branch.Rate of interest Rate of interest : 3.5 % over 6 months LIBOR.: 3.5 % over 6 months LIBOR.Existing EPC outstandings of the exporters in rupees Existing EPC outstandings of the exporters in rupees cannot be converted into PCFC advancescannot be converted into PCFC advancesExporters who have availed PCFC cannot avail rupee Exporters who have availed PCFC cannot avail rupee post shipment finance for discounting the relative post shipment finance for discounting the relative bills but EBRbills but EBR


ECGC COVERECGC COVER

Branches are required to obtain Branches are required to obtain Individual Packing Credit Guarantee Individual Packing Credit Guarantee (IPCG) cover of ECGC for pre-(IPCG) cover of ECGC for pre-shipment lendings on a case to case shipment lendings on a case to case basis. In deserving cases, basis. In deserving cases, sanctioning authority is vested with sanctioning authority is vested with the discretionary powers to waive the discretionary powers to waive IPCG. IPCG.

EXPORT Credit IN FOREIGN CURRENCY

Period Period : Maximum period of 360 days from the date of : Maximum period of 360 days from the date of first disbursement. Extension of PCFC beyond 180 first disbursement. Extension of PCFC beyond 180 days will entail interest cost of 2% plus the original days will entail interest cost of 2% plus the original spread above 6 months LIBOR prevailing at the time spread above 6 months LIBOR prevailing at the time of extension for the extended periods. If no export of extension for the extended periods. If no export takes place within 360 days, PCFC will be adjusted at takes place within 360 days, PCFC will be adjusted at the ruling TT selling rate and interest will be charged the ruling TT selling rate and interest will be charged at 2% over the rate applicable to exporter’s CC at 2% over the rate applicable to exporter’s CC account from the date of first disbursement till date account from the date of first disbursement till date of payment and interest recovered earlier at LIBOR of payment and interest recovered earlier at LIBOR related rate will be adjusted there-from.related rate will be adjusted there-from.Currencies Currencies : PCFC is available in US Dollars, Pound : PCFC is available in US Dollars, Pound Sterling, Japanese Yen and Euro.Sterling, Japanese Yen and Euro.Funding,Funding, -- Repayment,Repayment, -- Withholding Withholding taxtax

POST – SHIPMENT CREDITPOST – SHIPMENT CREDITPost shipment credit means any advance granted Post shipment credit means any advance granted by the bank to exporter of goods after shipment of by the bank to exporter of goods after shipment of goods to the date of realization of export goods to the date of realization of export proceeds.proceeds.Post shipment finance is usually by way of:Post shipment finance is usually by way of:Export bills purchased/ discounted / negotiatedExport bills purchased/ discounted / negotiatedAdvances against bills sent on collection basisAdvances against bills sent on collection basisAdvances against goods sent on consignment Advances against goods sent on consignment basisbasisAdvances against incentives receivable from Govt.Advances against incentives receivable from Govt.Advances against undrawn balances on export Advances against undrawn balances on export billsbillsAdvances against retention moneyAdvances against retention moneyExport bill rediscountingExport bill rediscounting

SBI EXPORTERS GOLD CARD SCHEME

SBI Exporters Gold Card scheme has SBI Exporters Gold Card scheme has been worked out for credit worthy been worked out for credit worthy exporters with good track record for easy exporters with good track record for easy availability of export credit on best terms. availability of export credit on best terms. The scheme envisages certain additional The scheme envisages certain additional benefits based on the record of benefits based on the record of performance of the exporters. The gold performance of the exporters. The gold card holder would enjoy simpler and card holder would enjoy simpler and more efficient credit delivery mechanism more efficient credit delivery mechanism in recognition of his good track record.in recognition of his good track record.

ELIGIBILITYELIGIBILITY

Accounts classified as ‘standard assets’ continuously for Accounts classified as ‘standard assets’ continuously for a period of last three yearsa period of last three yearsNo irregularities / adverse features observed in the No irregularities / adverse features observed in the conduct of the accounts. However, occasional conduct of the accounts. However, occasional overdrawings should not be construed as an adverse overdrawings should not be construed as an adverse feature.feature.The exporter has not been blacklisted by ECGC and / or The exporter has not been blacklisted by ECGC and / or included in RBI defaulters’ list / caution listincluded in RBI defaulters’ list / caution listThe unit has not incurred losses during the past three The unit has not incurred losses during the past three yearsyearsOverdue export bills of the unit are not in excess of 10% Overdue export bills of the unit are not in excess of 10% of the previous year’s turnover (waived till 31.03.2010).of the previous year’s turnover (waived till 31.03.2010).Greenfield projects may also be considered under the Greenfield projects may also be considered under the schemescheme

ASSESSMENTASSESSMENTIf projected export turnover is upto Rs. 100 crore – If projected export turnover is upto Rs. 100 crore – turnover methodturnover methodSoftware exports – cash budget methodSoftware exports – cash budget methodIf projected export turnover is above Rs. 100 crore – PBS If projected export turnover is above Rs. 100 crore – PBS or cash budget methodor cash budget method Standby limit of 20% will be sanctioned over and above Standby limit of 20% will be sanctioned over and above the assessed fund based and non-fund based limits, to the assessed fund based and non-fund based limits, to meet credit demand arising out of receipt of sudden meet credit demand arising out of receipt of sudden orders etc. (for max. period of 180 days in one instance; orders etc. (for max. period of 180 days in one instance; any number of times) any number of times)Credit limits, as above, sanctioned under the scheme will Credit limits, as above, sanctioned under the scheme will be valid for a period of 3 years. Branch heads to review be valid for a period of 3 years. Branch heads to review the credit facilities at the end of 1the credit facilities at the end of 1stst and 2 and 2ndnd year and year and accordingly step up by 10%, both fund based and non-accordingly step up by 10%, both fund based and non-fund based as well as stand-by credit facilities, subject fund based as well as stand-by credit facilities, subject to fulfillment of the terms and conditions of sanction.to fulfillment of the terms and conditions of sanction.


Requests from card holders would be processed Requests from card holders would be processed quickly by banks within 25 days / 15 days and 7 quickly by banks within 25 days / 15 days and 7 days for fresh applications / renewal of limits and days for fresh applications / renewal of limits and ad hoc limits respectively.ad hoc limits respectively.Gold card holders would be given preference in Gold card holders would be given preference in the matter of granting of PCFC.the matter of granting of PCFC.In respect of gold card holders, the concessive In respect of gold card holders, the concessive r.o.i. on post-shipment rupee export credit r.o.i. on post-shipment rupee export credit applicable upto 90 days to be extended for a applicable upto 90 days to be extended for a maximum period of 365 days.maximum period of 365 days.

ASSESSMENTASSESSMENT

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Documents

Presentation on Export Credit