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WHAT IS EXPORT ACTIVITY ?

Goods/ Services are sent out of the country


Foreign exchange is received into the country

Any exception?

Types of Exporters
Manufacturer Exporters Merchant Exporters Deemed Exporters Sub-suppliers

STATUS HOLDERS Export House Star Export House Trading House Star Trading House Premier Trading House

Turnover 20 Crore 100 Crore 500 Crore 2500 Crore 10000 Crore

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

Distinct stages of finance Dimension of risks Concessive credit End use Monitoring ECGC Cover Bench mark Lending norms Refinance Better profit margins for exporters Higher income opportunity for bankers

Regulations / Guidelines
1) 2) 3) 4) 5) 6) 7) 8) 9) Foreign Trade Policy 2009-2014 RBI directives FEMA FEDAI Rules UCPDC /URC/URR procedures ECGC guidelines Banks internal guidelines Export Promotion Councils/FICCI GIC (marine insurance)

Appraisal of Export Credit


No compromise on viability/integrity Exporters capacity ( timely delivery/ tech/mange -expertise) Need-based (turn-over/cost of inputs) Opinion report on buyer Political/regulatory/financial conditions of importing country Acceptability of LC opening bank/LC conditions

Appraisal of Export Credit


RBI GUIDELINES

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 commodities Interchangeability in pre & post shipment facilities TL requirements for modernization etc Not be denied merely on collateral security considerations

Assessment
Same lines as W.C assessment Relaxations in NWC/CR /Collateral Inventory holding in no. of
EPC Particulars Export Sales estimated / projected Less: Estimated profit (10%) Export Sales after deduction of profit Average Export Sales per month Average period for which EPC runs EPC required EPC Limit requested by the Company Recommended EPC Limit days in case units with Rsof Crores 100% exports. 31.03.2009 31.03.2010 If the unit has domestic sales 21.21 23.33 also, - export production/ inventory holding 2.12 2.33levels to be arrived at in discussion with 19.09 21.00 the borrower 1.59 1.75 3 months 5.17 5.00 5.00 3 months 5.69 5.00 5.00

Assessment FBD
FBD
Particulars
Export Sales estimated / projected Average Export Sales per month Est. % of sales under Non-L/C (90%) Usance period of bills FBD (Non-L/C) required
FBD (Non-L/C) Limit requested by the Co.

Rs. Crores
31.03.2009 21.21 1.77 1.59 3 months 4.77 4.50 4.50 31.03.2010 23.33 1.94 1.75 3 months 5.25 4.50 4.50

Recommended FBD (Non-L/C) Limit

PRE-SHIPMENT FINANCE PRODUCTS

Export Packing Credit (Rupee / PCFC) Advances against cheques/drafts received as advance payment Advances 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

1. Order to order basis 2. Running Account 3. PC for export of goods meant for exhibition and sale 4. Sharing of EPC
a. Between merchant and manufacturer b. Inland LC system for suppliers to an EOH

5. 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 PC Running 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-supplier Substitution of commodity/ order/ buyer purely based on commercial necessity End use to be ensured :pay order favouring supplier where possible To 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 Remittances Export Bills negotiated / purchased / discounted / proceeds of duty drawback entitlements To be repaid depending on seasonality/WC cycle in any case not exceeding 360 days Higher rate to be charged if > 270 days but <360 days only for the addl. 90 days/ Beyond 360 days NO CONCESSIONAL INT. (Normal Interest + Penal Interest) if no export takes place normal rate + penal rate PCFC for deemed exports- should be closed by EBR within 30 days.

POST-SHIPMENT FINANCE
Any 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 receivables Finance 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 Documents Advances against bills sent on collection Advances against exports sent on consignment Advances against Govt. incentives Advances against undrawn balances / retention money Rediscounting of Export Bills Abroad (EBR)*

POST-SHIPMENT FINANCE
Separate limits for LC/non-LC bills Opinion Reports on overseas buyers (Buyer-wise limit / D&B Reports) Correspondent arrangement and Country Risk factors Standing of LC Opening Bank Negotiation of Export Documents as per UCPDC/LC Negotiation with discrepancy to have indemnity Purchase or Discount of Non- LC Bills Documents 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 rates Effective cost to exporter not to exceed 2.00% over 6 months LIBOR All 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 PCFC EBR 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