Acknowledgement New1

EXPORT-IMPORT FINANCE BY BANK
Executive Summary
After globalization and liberalization there was an enormous growth in foreign trade in Indian economy. Thus to this there was a tremendous growth in export import finance. Initially importer did` t gets any finance facility form financial institute. They only got a letter of credit from the financial Institutions. In India there are 27 nationalized banks which are playing a major role in financing each and every sector. Initially public sector banks were providing few facilities to the exporter and importer but globalization banks and government started providing more facilities to the exporter and importer Export is the major commercial activity which offers many advantages to the economy. In financial system export finance is divided in two parts 1) Pre-shipment 2) Post-shipment finance. In per-shipment export finance exporter gets facility like packaging facility, like packaging facility, Advance against incentives and finance in foreign currency. where as in post-shipment finance exporter get facilities negotiation export bill under letter of credit; purchase/ discounting of foreign bill, advance against bill sent on collection, advance against goods sent on consignment, advance against export incentive, advances against retention money advance against undrawn balance, post shipment in foreign currency etc. Similarly import is also useful for country. The major facility which importer gets from bank is letter of credit than importers also get facilities like financing bills under collection, financing against deferred payment, financing under foreign currency etc.
INDEX
Ch. No 1. 2. Particulars Introduction Export Import Finance in India 1.The Role of the Collecting Bank
2.The Role of Bank in Export Import Finance Page No.
06. 07.
3.
Export Import Bank of India

Operation of EXIM Bank Finance and Services
11.
4.
Export Credit & Guarantee Corporation

Major Functions of E.C.G.C.
13.
5. 6. 7. 8.
i) ii)
Export Finance By Bank Importance of Export Finance Mode of Bank Finance to Exporter Stages of Export Finance
Pre-shipment Finance Post-shipment Finance
15. 17. 18. 19.
9. 10. 11.
Recent Development in Export Finance Import Finance By Bank Methods of Import Finance Types of Letter of Credit.
2
35. 38. 43.
EXPORT-IMPORT FINANCE BY BANK 12. 13. 14. 15. Payment Method in Export & Import Trade Document used in Foreign Trade Foreign Trade Policy Limitations & Conclusion 47. 49. 53. 59.
DESIGN OF STUDY
SCOPE
Limited only to public sector bank. Limited to financial services which are taken against document. RBI schemes and EXIM facilities are not covered. 3
OBJECTIVE
To study export import service by public sector bank in India Procedure of how bank finance To know which type of document are used and against which exporter and
importer can take loan or finance. To understand all the dimensions of import & export finance. To learn about the strategies & techniques used by banks to finance the
importer & exporter. To find various types of import export finance.
RESEARCH METHODOLOGY
Planning: Firstly I planned to make the project and which topic should cover & design the outline of project. Research work: Then I search books and Website to collect information. The information is collected partly from book and web. 4

Visit: After that I visit the public sector bank in Mulund & Export Import Bank of India Head Office in Mumbai and collect primary data. Presentation: Then I have combined the data& made the project.
CHAPTER 1
INTRODUCTION
The statutory basis for control of imports into India is found in the Foreign Trade Act, 1992 which empowers the Central Government to prohibit or otherwise control imports. Import and export financing provides importers who have orders from customers in the United States, or foreign customers backed 5

by a letter of credit, with the necessary financial backing to provide their overseas supplier with a letter of credit to guarantee payment of goods. The whole process works because the importer will supply you with basic information on the import company and their customers. For each of the approved customers, the importer will supply us with copies of purchase orders that are to be filled. Financing can be arranged to cover 100% of the transaction. This provides the importer with sufficient financial strength to sell larger orders than they would be able to on their own financial strength. Depending on the strength of the buyer, this may be done on open account with the domestic buyer, allowing the buyer to increase their purchasing power. Export finance is a short term working capital finance allowed to an exporter. An exporter may avail financial assistance from any bank, which is taking care of the following factors: Funds should be available to the exporter at the required time to ensure availability of funds to eligible borrowers. Reserve Bank has prescribed time schedule to Commercial banks for speedy sanctioning of export credit limits. Further, banks are advised that 12% of their total credit should be for export finance CHAPTER 2
EXPORT IMPORT FINANCE IN INDIA

The statutory basis for regulation of exports from India is the Foreign Trade (Development and Regulation) Act 1992. The Government is empowered to ban the export of certain goods from India and/ or restrict export in quantity, value etc. Export from the country is generally free. 6

Finance for exports is available from commercial banks under two categories1.) Pre-shipment finance (or packing credit) 2.) Post shipment finance.
Financing of Export and Import of Goods and Services

Exports are a subject of significance to every economy whether developing or developed because they represent the biggest source of earning foreign exchange. The need is all the more acute for a developing economy, which mostly experiences deficit on its current account as well as capital account. Increasing exports enable the economy to earn foreign exchange, enhance foreign exchange reserves, improve balance of trade, balance of payments, correct deficits in Balance Of Payments (BOP), and improve exchange value of its currency. The share of Indias exports in world trade is below 1% and along with the persistent deficits in its BOD necessitates the need for a major thrust on exports. However, over the years the exports have grown well and more so the compositions of exports (goods & services exported) have undergone a charge. The Government has treated on this objective by announcing the following incentives to an exporter: 1. Cheaper rates of interest on Bank finance (export rates today hover around 8% to 8.50% compared to non-export rates of 2. Duty concessions on imports for exports 3. Cash Incentives for exports viz. Tax breaks for export units, duty drawback schemes. 4. Providing Infrastructure facilities viz. Free trade Zones Export Zones etc. 5. Establishing of EXPORT IMPORT BANK OF INDIA bank to promote exports. 7

6. Establishing Export Credit Guarantee Corporation- EXPORT CREDIT AND GURANTEE CORPORATION to provide a protective shelter to exports against inherent international trade risks
The Role of the Collecting Bank.

Act as the remitting bank's agent Present the bill to the buyer for payment or acceptance. Release the documents to the buyer when the exporter's instructions have been followed. Remit the proceeds of the bill according to the Remitting Bank's schedule instructions. If the bill is unpaid / unaccepted, the collecting bank : May arrange storage and insurance for the goods as per remitting bank instructions on the schedule. Protests on behalf of the remitting bank (if the Remitting Bank's schedule states Protest) Requests further instruction from the remitting bank, if there is a problem that is not covered by the instructions in the schedule. Once payment is received from the importer, the collecting bank remits the proceeds promptly to the remitting bank less its charges.
ROLE OF BANKS IN EXPORT AND IMPORT FINANCE

Along with public sector banks, the foreign banks also provide financial assistance to Indian exporters. They offer financial facilities to exporters and thereby contribute for export promotion. In addition, the exchange banks also provide banking and financial facilities to importers from their respective countries. 8

It is a fact that foreign exchange banks are in a better position to offer finance to exporters due to their worldwide banking contacts, huge financial resources and expert staff. Foreign banks are banks incorporated in foreign countries (UK, USA, France, Japan, etc.) but are functioning in India through their branches or branch offices opened at important commercial centers such as Mumbai, Chennai, Calcutta, and Delhi and so on. Foreign banks operate under the supervision of the RESERVE BANK OF INDIA and have to function as per the provision made in the Banking Regulation Act, 1949. These banks provide financial support to international trade as per the policies of the government. In addition, they also conduct other banking functions and offer banking and financial services to their customers (exporters) Foreign banks operating in India include Lloyds Bank, Standard Chartered Bank, Citi Bank, Grind lays Bank, and so on. These banks have their offices at important commercial centers in India. Foreign banks offer various financial services to exporters from their home country. For example, they issue letter of credit to their clients and also provide financial facilities. They collect payment for goods imported and arrange to make payment to Indian exporters by completing the necessary formalities and procedures. The documentary bills of exchange may be sent to these banks and collect payment for the goods.

Along with such services, the foreign banks (also called foreign exchange banks) also provide many facilities to Indian Exporters who open the account in such banks. For example, they arrange to make payment for the goods imported. They also provide discounting facility to Indian exporters and also offer various types of guarantees. Exports proceeds are also collected on behalf of Indian exporters as a result; immediate cash is available to exports. In addition, the foreign banks provide pre-shipment and post-shipment finance to exporters. Similarly, they help Indian exporters in the remittance of money from India to other countries for different purposes subject to rules and procedures prescribed by the RESERVE BANK OF INDIA. The following are the institutions that are directly or indirectly concerned with import and export financing: 1. Commercial Banks 2. Export Import Bank of India (EXIM Bank) 3. Reserve Bank of India (RBI) 4. Export Credit Guarantee Corporation of India Ltd (ECGC)
CHAPTER 3
EXPORT IMPORT BANK OF INDIA

Role of Export Import Bank of India:
10

The Export-Import Bank of India is a public sector financial insinuation crested by an Act of Parliament, the Export-import Bank of India Act. 1981. The Bank came in existence in January 1982 and commenced operations from March 1, 1982. EXPORT IMPORT BANK OF INDIA is the principal financial institution for co-coordinating the working of institutions engaged in financing export and Import trade of India. The Business of EXPORT IMPORT BANK OF INDIA is to finance, facilitate and promote foreign trade of India. The process of industrial development in India resulted in diversification an expansion of the expert sector in the seventies Development of capabilities for export of capital goods. Engineering goods, manufactured products, projects and services as also setting up of joint industrial ventures abroad are an important outcome of this process.
Operations of Export Import Bank of India:

EXPORT IMPORT BANK OF INDIA Bank's operational philosophy comprises five major components. 1.) To make the Indian exporter internationally competitive on the count of financing terms offered by him. 2.) To Develop alternate financing solutions for an Indian Exporter in his effort to be internationally competitive. 3.) To provide information on export opportunities in new traditional exports including currency adviser to Indian manufacturers so that new export opportunities are pursued. 4.) To provide selective production, marketing, finance for making Indian manufactured products internationally competitive. 11

5.) To respond to export problems of Indian Exporters and pursue policy resolutions.
FINANCE & SERVICES:

EXPORT IMPORT BANK OF INDIA plays four-pronged role with regard to India's foreign trade: those of a co-coordinator, a source of finance, consultant and promoter. EXPORT IMPORT BANK OF INDIA is the Coordinator of the Working Group Mechanism for clearance of Project and Services Exports and Deferred Payment Exports (for amounts above a certain value currently US$ 100 million).The Working Group comprises EXPORT IMPORT BANK OF INDIA, Government of India representatives (Ministries of Finance, Commerce, External Affairs), Reserve Bank of India, Export Credit Guarantee Corporation of India Ltd. and commercial banks who are authorized foreign exchange dealers. This inters- institutional Working Group accords clearance to contracts (at the post-award stage) sponsored by commercial bank or EXPORT IMPORT BANK OF INDIA, and operates as a one-window mechanism for clearance of term export proposals. On its own, EXPORT IMPORT BANK OF INDIA can now accord clearance to project export up to US$100 million in value.
CHAPTER 4
EXPORT CREDIT AND GUARANTEE CORPORATION (ECGC)

12

Payments for export are open to risks even at the best of times. The risks have assumed large proportions due to political and economic charges in the world. A civil war in a country may block or delay the payment for exports. Economic difficulties or BOP position may also force a country to restrict payments outflow to the exporters. It is also possible that the buyer may turn insolvent or may refuse to make the payment. In light of the above, the export business though may appear lucrative is fraught with risks, With a view to protect a shelter to the exporters against the export risks, EXPORT CREDIT AND GURANTEE CORPORATION was established in 1957 by the Government of India under the administrative control of ministry of commerce. It is managed by Board of Directors comprising of representatives of the Governments, Reserve Bank of India, Banks, and Insurance and exporting community. EXPORT CREDIT AND GURANTEE CORPORATION is the fifth largest credit insurer of the world presently covers 17.31% of Indias total exports with a paid up capital of Rs 1.50 bn.
Major Functions of Export Credit and Gurantee Corporation:

1.) To provide a range of credit risk insurance covers to exporters against a loss in export of goods and services. 2.) To offer guarantees to banks and financial institutions to enable exporters obtain better facilities from them.
Export Credit and Gurantee Corporation also helps Exporters by:

Providing insurance protection to exporters against payment risks 13

Providing guidance in export related activities Providing information on creditworthiness of overseas buyers Providing information on about 180 countries with its own credit ratings Marketing it easy to obtain export finance from banks/ financing institutions Assisting exporters in recovering bad debts
MAIN ACTIVITIES OF EXPORT CREDIT AND GUARANTEE CORPORATION:
EXPORT CREDIT AND GURANTEE CORPORATION provides a wide range of credit risk insurance cover to exporters against loss in export of goods and services. It also offer guarantees to banks and financial institutions to enable the exporters to obtain better facilities from the banks.
The covers offered by Export Credit and Guarantee Corporation to the Exporters are:
i) Standard Policies to exporters to protect them against payment risks involved in exports on short term credit. ii) Specific Policies designed to protect Indian firms against payment risks involved in a.) Exports on deferred payment terms b.) Services rendered to Foreign Parties c.) Construction works and turnkey projects undertaken abroad.
CHAPTER 5
EXPORT FINANCE BY BANK

14
Export is when you sell something to another country and then ship
it. Meaning of Exporter:
The person who sends goods or commodities to a foreign country, in the way of commerce; opposed to importer. Is known as exporter. The seller ships the goods and then hands over the document related to the goods to their banks with the instruction on how and when the buyer would pay.
Exporters Bank
The exporters bank is known as the remitting bank, and they remit the bill for collection with proper instructions. The role of the remitting bank is to: Check that the documents for consistency. Send the documents to a bank in the buyer's country with instructions on collecting payment. Pay the exporter when it receives payments from the collecting bank.
Exports play a very crucial role in a developing economy and they are given a high priority in the foreign trade policy of such an economy. The Indian economy also attaches great importance to export promotion. Finance is the back bone of any trade, whether domestic or international. Export, being a part of international trade is no exception. Hence, any measure, Reserves bank of India has taken steps to ensure free flow of financial assistance to the export sector at lower rates of interest. The negotiating bank or collecting bank will buy or collect the bills after a 15

careful scrutiny of them such as the following1. Drafts are drawn on the issuing bank. 2. Buyers name and sellers name are correctly entered and proper endorsements are made. 3. The date is within the time limit of the credit. 4. The amount is within the credit limit granted. 5. Exporter has an export license it is necessary and the value of shipments falls within the limit set by the license. 6. The tenor of bill is correct. 7. Credit number is given. 8. Stamps as required by low are attached on usance bills 9. All required documents are submitted. Insurance policy but not certificate of Insurance is acceptable. 10.Bill of lading in full set must be submitted and fully examined as to the negotiability, correctness and accuracy to the satisfaction of the conditions of credit in respect of the all documents submitted.
CHAPTER 6
IMPORTANCE OF EXPORT FINANCE

Export finance is a part of global finance given to the corporate. Importance of 16

credit to exporters cannot be overemphasized. India has to compete effectively with other countries in the export markets in order to penetrate into new markets and widen its hold on the existing markets. Since many countries have been pursuing policies geared to the promotion of export through adequate export credit at low rates of interest, India has also pursued the same policy in regard to export finance. In all major industrialized countries, banks and other financial institutions are deeply involved in financing of exports on special terms. Some of them are granting mixed credit that combine export credit with foreign aid to developing countries. In all such cases, the governments and/or central banks of those countries are directly involved in subsidizing exports Example of the institution involved in such credits in foreign countries are EXIM Banks of USA and Japan. In India, starting with the Export Bills Credit Scheme of 1963, the refinance provided by the RBI has always been at concessional rate. Export credit Refinance limits have been provided by the RBI for banks on the basis of export credit, granted by them. A similar facility has also been given under preshipment or packing credit scheme of 1968 by the Industrial Development Bank of India during the 6th and 7th five- year plans greater importance was given to the export promotion measures in view of the continuing stagnancy of our exports and declining flow of foreign aid from international financial institute
CHAPTER 7
MODE OF BANK FINANCE TO EXPORTERS

17

1.) Running an overdraft to cover miscellaneous expenses of exporters and their production costs. 2.) Pre-shipment loans for specific requirements of exporter relating to a specific order-example are packing credit for exporter to buy raw materials and up to the stage of manufacturing. 3.) Purchase of bills of exchange after shipment and providing cash against credit sales. 4.) Negotiation, accepting and collecting the bills and documents of trade, which involve examination of documents, transmitting them to the importer or his banker for collecting the proceeds, when they are due. 5.) Banks provide information on foreign countries, their markets, and their currencies and about the credit rating of the importer and his country. 6.) Banks extend introduction to parties and safeguard and protect the interest of the concerned parties. 7.) Banks provide risk coverage and safeguard the parties from currency rate fluctuations. 8.) Bank would help importers in the form of O/D, loan facilities for shipments, overseas finance (buyer credit) from exporter country or another country. CHAPTER 8
STAGES OF EXPORT FINANCE:

Export finance is broadly classified into two categories, depending upon at what 18

stage of export activity the finance is extended wiz 1. Pre-shipment Finance 2. Post-shipment Finance Financial assistance extended to the exporters, prior to shipment of goods, falls within the scope of pre-shipment finance. Financial assistance extended after the shipment of goods falls within the scope of post-shipment finance. Export Finance (both at pre-shipment and post-shipment stages) in India is governed by and large by Reserve Bank of India directives and Foreign Exchange Dealers Association of India (FEDAI) Rules.
PRE-SHIPMENT FINANCE
INTRODUCTION Pre-shipment finance is nothing but working capital finance (mainly inventory finance) extended to an exporter in anticipation of his exporting the goods. The basic purpose of extending pre-shipment finance is to enable the eligible exporters to procure raw material/process/manufacture/warehouse/ship the goods meant for export.
Forms Required for Application of Per-shipment Credit

1. Confirmed export order/contract or L/C etc. In original where it is not available, an undertaking to the effect that the same will be produced to the Bank within a reasonable time for verification and endorsement should be given. 19

2. An undertaking that the advance will be utilized for the specific purpose of procuring/manufacturing/shipping etc., of the goods meant for export only, as stated in the relative confirmed export order or the lie. 3. If you are a sub-supplier and want to supply the goods to the Export/Trading/Star Trading House or Merchant Exporter, an undertaking from the Merchant Exporter or Export/Trading/Stat Trading House stating that they have not/will not avail themselves of packing credit facility against the same transaction for the same purpose till the original packing credit is liquidated. 4. Copies of Income Tax/Wealth Tax Assessment Order for the last 2/3 years in the case of sole proprietary and partnership firm. 5. Copy of Importers Exporters Code Number. 6. Copy of a valid RCMC (Registration-cum-membership Certificate) held by you and/or the Export/Trading/Star Trading House Certificate. 7. Appropriate policy/guarantee of the ECG e.g. any other document required by the Bank
QUANTUM OF FINANCE
There is no fixed formula for determining the quantum of finance, to be granted to an exporter, against a specific order/letter of credit or an expected order. In respect of established exporters, pre-shipment credit is also allowed on running 20

account basis (i.e.) without insisting on any documentary evidence. However, exporters have to submit periodical statements of Letters of credit or export orders in hand.
PERIOD OF FINANCE
Pre-shipment finance, being working capital finance, is basically short term finance. The maximum period for which pre-shipment finance can be extended at concessive rates is to be decided by banks taking into account the production cycle of the commodity and related aspects subject to a maximum period of 180 days. This period can be extended beyond 180 days up to 270 days (i.e. 180 +90 days) by bank themselves without reference to the Reserve Bank of India.
RATE OF INTEREST
For encouraging exports, R.B.I. has instructed the banks to grant pre-shipment advance at a concessional rate of interest.
PRE-SHIPMENT ADVANCES AVAILABLE TO THE EXPORTERS:

PACKING CREDIT: 21

The basic purpose of packing credit is to enable the eligible exporters to procure process, manufacture or store the goods meant for export. Packing credit refers to any loan to an exporter for financing the purchase, processing, manufacturing or packing of goods as defamed by the Reserve Bank of India. It is a short term credit against exportable goods. Packing credit is normally granted on secured basis. ELIGIBILITY Packing credit is available to all exporters whether merchant exporter, Export/Trading/Star Trading/ Super Star Trading House and manufacturer exporter. Manufacturers of goods supplying to Export/Trading /ST/SST House and Merchant exporters are eligible for packing credit. The-foreign buyer through the medium of a reputed bank gives the credit to eligible exporters, for specified purposes against irrevocable letter of credit RUNNING ACCOUNT FACILITY The RBI has permitted banks to grant packing credit advances even without lodgement of-L/C or firm-order/contract under the scheme of Running Account Facility subject to, the following conditions. The facility may be extended, as per the need for Running Account Facility has been established by the exporters to the satisfaction of the bank The bank may extend this facility only to those exporters whose track record has been good. L/C or firm order is produced within a reasonable period of time. For 22

Commodities under selective credit control, banks should insist on production of LICs or firm orders within one month from the date of sanction.
AMOUNT:
The loan amount is decided on the basis of export order and the credit rating of the exporter by the bank. Generally the amount of packing credit will not exceed FOB value of the export goods or their domestic value whichever is less.
PERIOD
The packing credit can be granted for a maximum period of 180 days from the date of disbursement. The banks are authorized period of 180 days from the date of disbursement. The banks are authorised by RBI to extend this period. This period can be extended for a further period of 90 days, in case of nonshipment of goods within 180 days
RATE OF INTEREST
The interest payable on pre-shipment finance is usually lower than the normal rate, provided the credit is extinguished by lodging the export bills on remittances from abroad. If the exporter fails to do so they would not be able to avail concessional rate of interest. In order to avail the packing credit; exporters are expected to make a formal application to the bank giving details of credit requirements along with the required documents.
ADVANCE AGAINST INCENTIVES
23

When the value of the materials to be procured for export is more than FOB value of the contract, the exporters may get packing credit advance more than the FOB value of the goods. The excess of cost of production over the FOB value of the contract represent incentives receivables.
PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC)

In order to help the exporters to avail of export credit at internationally competitive rates, the Reserve Bank of India, in November 1993, introduced a scheme called Pre-shipment Credit in Foreign Currency (PCFC). The facility is an additional window along with the existing facility of Pre-shipment Rupee Credit. Banks can extend pre-shipment Credit in Foreign Currency in all convertible currencies. Banks may source their funds from balances available under Exchange Earners Foreign Currency (EEFC) Accounts, Residents Foreign Currency (RFC) Accounts (Banks) and by means of lines of credit arranged abroad; prior permission of the Reserve Bank of India For raising the lines of credit abroad is not required so long as the cost of borrowing abroad does not exceed 1 per cent over LIBOR. The pre-shipment credit in foreign currency has to be made available to the exporters presently at a cost not exceeding one per cent over the appropriate LIBOR, EUROLIBOR, and EURIBOR excluding withholding tax up to 180 days. On pre-shipment credit in foreign currency beyond 180 days and up to 360 . This is an additional window to rupee packing credit scheme. This credit is available to cover both the domestic and imported inputs of the goods exported from India. The facility is available in any of the convertible currencies. The credit will e self-liquidating in nature and accordingly after the shipment of 24

goods the bills will be eligible discounting/rediscounting or for pre-shipment credit in foreign currency. The exporters can avail this finance under the following two options. i. The exporters may avail pre-shipment credit in rupees and, then, the postshipment credit either in rupees or in foreign currency denominated credit or discounting/rediscounting of the export bills. ii. The exporters may avail pre-shipment credit in foreign currency and discounting/rediscounting of the export bills in foreign currency PCFC credit will also be available both to the supplier units of EPZ/EOU and the receiver units of EPZ/EOU. The credit in foreign currency shall also be available on exports to Asian Clearing Union (ACU) Countries. This will be extended L/Cs. The Running Account Facility will not be available under the scheme
POST-SHIPMENT FINANCE
Post-shipment finance is defined as any loan or advance granted or any other credit provided by an institution to an exporter of goods from India from the date of extending the credit after shipment of the goods to the date of realizations of export proceeds and includes any loan or advance granted to an exporter in consideration of or on the security of any duty draw back or any receivables from Government of India. Post-shipment finance can be classified as a finance granted on negotiation/ acceptance of export documents under letter of credit/ purchase/ discount of export documents under confirmed orders/export contracts, etc. and advances 25

against export bills sent on collection basis/export on consignment basis/against undrawn balance on exports/receivables from Government of India/relation money relating to exports/approved deemed exports.
Persons Eligible for Post-shipment Finance:

As a general rule, in case of physical exports, post-shipment finance is extended to the actual exporter who has exported the goods or to an exporter in whose name the export documents are transferred. In case of deemed exports, finance is extended to the suppliers of goods who supply goods to the designated agencies. In the case of export of capital goods and project exports, credit is sometimes extended to the overseas buyer (importer of the goods/Services), by banks/financial institutions in India and the exporter realizes the export value in Indian rupees straightaway from the banks/financial institutions extending such credit. Such credit is referred to as buyers Credit. Buyers credit is extended under Buyers Credit Scheme of EXIM Bank and requires prior approval of the Working Group and the Reserve Bank of India. Purpose of Finance: Post-shipment Finance, being basically an export sales Finance, is meant for financing export sales receivables after the shipment of goods to the date of realization of export proceeds. In the case of deemed export, it is extended to finance the receivables against supplies made to designated agencies. Form of Finance Post-shipment finance can be secured or unsecured. Since the Finance is extended against evidence of export and banks obtain the documents of title to 26

goods, the finance is secured and self-liquidating. In a few cases like advances against undrawn balances etc., it is unsecured in nature. Further, the finance is mostly funded in advance. In the case of financing of project exports, facilities such as bid bond guarantees, performance guarantees, retention money guarantees are also extended. Quantum of Finance Post-shipment finance can be extended up to 100 per cent of invoice value of goods. However, where the domestic value of goods exceeds the value of export order/invoice value, finance for the price difference can also be extended if such price difference covered by receivables from Government and such finance is not already extended at the pre-shipment stage. Banks can also finance undrawn balances. But in such cases normally margin stipulations are made. Banks are free to stipulate margin requirements as per their usual lending norms. Period of Finance Post-shipment finance though basically bill finance can be short term finance or long term finance depending upon payment terms offered by Indian exporters to overseas buyers. In the case of cash exports, maximum period allowed for realization of export proceeds is 6 months from the date of shipment in terms of foreign Exchange Management (Export if Goods and Services) Regulations, 2000 made under Foreign Exchange Management Act, 1999. Banks can extend post-shipment finance at interest rates prescribed by the Reserve Bank of India up to normal transit period (NTP) Notional due dates. Post-shipment finance can be extended at free rates up to the approved periods. 27

Rates of Interest The post-shipment credit interest is applicable period-wise on slab basis, as per interest rate directive issued from time to time.
VARIOUS POST-SHIPMENT AVAILABLE TO EXPORTER 1) Negotiation of Export Documents Under Letters of Credit
Where the exports are under letter of credit arrangements, the banks will negotiate the export bills provided it is drawn in conformity with the letter of credit. When documents are presented to the Bank for negotiation under L/C they should be scrutinized carefully taking into account all the terms and conditions of the credit. All the documents tendered should be strictly in accordance with the L/C terms. It is to be noted that the L/C issuing bank undertakes to honour its commitment only if the beneficiary submits the stipulated documents. Even the slightest deviation from those specified in the L/C can give an bank excuse to the issuing bank of refusing the reimbursement of the payment that might have been already made by the negotiating.
2) Purchase/Discount of Foreign Bills:

Purchase or discount facilities in respect of export bills drawn under confirmed export order are generally granted to the customers who are enjoying Bill Purchase/Discounting limits from the Bank. As in case of purchase or discounting of export documents drawn under export order, the security offered under L/C by way of substitution of credit-worthiness of the buyer by the issuing bank is not available, the bank financing is totally dependent upon the 28

credit worthiness of the buyer, i.e. the importer, as well as that of the exporter or the beneficiary.
3)Advance against Bills Sent on Collection:

It may sometimes be possible to avail advance against export bills sent on collection. In such cases the export bills are sent by the bank on collection basis as against their purchase/discounting by the bank. Advance against such bills is granted by way of a 'separate loan' usually termed as 'post-shipment loan'. This facility is, in fact, another form of post- shipment advance and is sanctioned by the bank on the same terms and conditions as applicable to the facility of Negotiation/Purchase/Discount of export bills. A margin of 10 to 25% is, however, stipulated in such cases. The rates of interest etc., chargeable on this facility are also governed by the same rules. This type of facility is, however, not very popular and most of the advances against export bills are made by the bank by way of negotiation/purchase/discount. .
4)Advance against Goods Sent on Consignment:

Sometimes exports are affected on consignment basis. In such condition payment is receivable to sale of goods. Goods are exported at the risk of exporter for sale. The banks may finance against such purpose. The overseas branch/correspondent of the bank are instructed to deliver documents against Trust Receipt. When the goods are exported on consignment basis at the risk of the exporter for sale and eventual remittance of sale proceeds to him by the agent/consignee, bank may finance against such transaction subject to the customer enjoying specific limit to that effect. However, the bank should ensure while forwarding 29

shipping documents to its overseas branch/correspondent to instruct the latter to deliver the document only against Trust Receipt/Undertaking to deliver the sale proceeds by specified date, which should be within the prescribed date even if according to the practice in certain trades a bill for part of the estimated value is drawn in advance against the exports.
5)Advance against Export Incentives:

Advances against the export incentives are given at the pre-shipment stage as well as the post-shipment stage. However, the major part of the advance is given at the post-shipment stage. The advance is granted to an exporter in consideration of or on the security of any duty drawback incentives receivable from the Government. The banks follow their own procedure in granting the advance. The most common practice is to obtain a power of attorney from the exporter executed in their favor by the banks. It is sent to the concerned government department like the Director General of Foreign Trade, Commissioner of Customs, etc. These advances are extended to the exporter by the same bank.
6)Advance against Undrawn Balance:

In some of the export business, it is the trade practice that the bills are not drawn for the full invoice value of the goods. A small part of the bills is left undrawn for payment after adjustments due to difference in weight quality, etc. Advances are granted against such undrawn balances. In this case the export proceeds must be realized within 90 days. The advances are granted provided the undrawn subject to a maximum of 5% of the full export value. The
30

exporters are supposed to give an undertaking that they will surrender the balance proceeds within 6 months from the date of shipment.
7) Advance against Retention Money:

Banks grant advances against retention money, which is payable within one year from the date of shipment. The advances are granted up to 90 days. If such advance which are also eligible for concessional rate of interest? Banks also grant advances against retention money, which is payable within one year from the date of shipment, at a concessional rate of interest up to 90 days. If such advances extend beyond one year, they are treated as deferred payment advances which are also eligible for concessional rate of interest.
8)Post-shipment Export Credit Guarantee and Export Finance Guarantee:

Post-shipment finance given to exporters by banks though purchase, negotiation or discount of export bills or advances against such bills qualifies for this guarantee. Exporters are expected to hold appropriate shipment or contracts policy of ECGC to cover the overseas credit risks. Export Finance Guarantee cover post-shipment advances granted by banks to exporters against export incentives receivables in the form of duty drawback, etc.
9)Purchase of Export Documents drawn under Export Order:

Purchase or discount facilities in respect of export bills drawn under Confirmed export order are generally granted to the customers who are enjoying Bill Purchase/Discounting limits from the bank. As in case of Purchase or 31

Discounting of export documents drawn under export order, the security offered under UC by way of substitution of credit-worthiness of the buyer by the issuing bank is not available, the bank financing is totally dependent upon the credit worthiness of the buyer, i.e. the importer, as well as that of the exporter or the beneficiary.
Post-shipment Export Credit denominated in Foreign Currency

A scheme of Post-shipment Export credit denominated in Foreign Currency (PSCFC) was introduced with effect from January 1, 1992, with a view to enabling exporter to avail of post-shipment credit denominated in foreign currency and to pay interest at rates applicable to the foreign currency concerned. US dollar denominated export credit was provided at interest rates linked to international rates. Banks were also allowed refinance facility under the scheme. Consequently on introduced of a regular scheme for providing post-shipment credit in foreign currency, viz. the Export bills rediscounting (EBR) scheme, the post-shipment Export credit denominated in US dollars (PSCFC) was discontinued effective February8, 1996. The exporter has the option of availing of export credit at the post- shipment stage either in rupee or in foreign currency. The credit is granted under the rediscounting of Export Bills Abroad Scheme (EBR) at LIBOR linked interest rates. The scheme 32

covers export bills with usance period up to 180 days from the date of shipment. Discounting if bills beyond 180 days requires prior approval from RBI. The exporters have the option to avail of pre-shipment credit and post-shipment credit either in rupees or in foreign currency. If pre-shipment credit has been availed of in foreign currency, the post-shipment credit necessarily to be under the EBR scheme. This is done because the foreign currency pre-shipment credit has to be liquidated in foreign currency. Rediscounting of export bills abroad This facility was introduced as an additional window available to exporter along with the existing rupee post-shipment finance from october1993. The facility is available in all convertible currencies and covers export bills up to 180 days from date of shipment (inclusive of normal transit period and grace period). Under the scheme, authorized dealer have the freedom to utilize the foreign exchange resources available with them in Exporter Currency Earners Foreign Currency Accounts (EEFC), Resident Foreign Currency Account (RFC), foreign currency (N on Resident) Account (Banks) scheme to discount usance bills and retain them in their portfolio without resorting to rediscounting. It is also to them to rediscount the bills with an overseas banks or rediscounting agency or any other agency such as factoring agency as also to raise funds from such agencies through Bankers Acceptance Facility (BAF). Prior 33

permission of the Reserve Bank of India is not requires for arranging the rediscounting or BAF facility abroad so long as he spreads does not exceed one per cent over the six months LIBOR. Exporter on their own are also allowed to arrange a line credit worth an overseas banks/agency through a bank in India in the case of rediscounting facility arranged by the exporter on his own; in such a case, the rate of remuneration for the banks is to be decided between the bank and the exporter.
EXPOERS UNDER DEFERRED PAYMENT

All export proceeds must be surrendered to an authorized dealer within 10 days from the date of shipment. Exporters are requires to obtain permission from the Reserve Bank through authorized dealer in the events of non- realization of export proceeds within the prescribed period. However, realizing the special needs of exports of engineering goods and projects, Reserve Bank has formulated special schemes permitting deferred credit arrangements. This will enable realization of export proceeds over a period exceeding six months. Hence, contracts for export of goods and services against payment to be secured partly or fully beyond 180 days are treated as deferred payment exports. The credit extended is termed as deferred payment term credit Commercial banks that are authorized dealers in foreign exchange in principle clearance
34

for contracts valued up to Rs.25 crores. They can avail refinance from EXIM bank.
CHAPTER 9
RECENT DEVELOPMENTS IN EXPORT FINANCING

As stated earlier, offer of attractive credit terms is a crucial factor in winning export contracts. Hence, financial institutions are offering several innovative financial services to exporters. Some of these services are discussed below: Factoring: it is an attractive way of providing export finance to exporters. In this system, factor bears the complete credit risk. Who is a factor? A factor is a special type of agent who, depending upon the type of agreement, offers a variety of services, these services include coverage of credit risk, collection of export proceeds, and maintenance of accounts receivables and advance of funds. Purchase of receivables of its clients without recourse is the most important service of the factor, a big advantage to the exporter is that it is without recourse financing. This means that the risk of non-payment by the importer is to be borne entirely by the factor. In India, international export factoring services on with recourse basis have been approved by the RBI. it provides a new dimension to management of export receivables, SBI factors and commercial services Pt. Ltd., Bombay has been permitted to provide international export factoring, IN this system, the exporter enters into an export factoring agreement with exporters factor, the exporters ship goods to approved foreign buyers. 35

Exporters factor will make prepayment to the export against approved export receivables. On receipt of payments from the importer on due date of invoice, importers factor. The exporters factor pays to the exporter after deducting the amount of prepayments. Reserve bank has now permitted the authorized dealers (bank) to arrange forfeiting of medium term export receivables on the same lines as per the scheme of EXIM bank and many international forfeiting agencies have now become active in Indian market. Forfeiting may be usefully employed as an additional window of export finance particularly for exports to those countries for which normal export credit is not intended by commercial banks. It must be noted that charges of forfeiting are eventually to be passed on to the ultimate buyer and should, therefore, be so declared on relative export declaration forms. Forfeiting: forfeiting refers to the non-recourse discounting of export receivable . it is a mechanism of financing exports that involves less risk and enhances international competitiveness. It converts a credit sale into cash sale for an exporter. In this system forfeiting agency discounts international trade receivables of the exporter. The forfeiter pays the exporter in cash and undertakes the risk associated with the export deal. The exporter surrenders, without recourse to him, his rights to claim for payment on goods delivered to an importer.
GOLD CARD SCHEME FOR EXPORTERS

The gold card facility is provide by bank toothier regular customer whos annual term over is more than 10 lacks such facility is allowed by bank after taking permission of head office. In such facility the bank charge 20% less 36

commission and interest rate s also less as compared to normal facility. The silent features of the scheme are (i) all creditworthy exporter, including those in small and medium sectors with good track record would be eligible for issue of gold card by individual banks as per the criteria to be laid down by the latter; (ii) banks would clearly specify the benefits they would be offering to gold cardholders ; (iii) requests from card holders would be processed quickly by banks within 25 days/I 5 days and 7 days for fresh application/renewal of limits and ad hoe limits , respectively; (iv) in-principle limits would be set for a period of 3 years with a provision for stand-by limit of 20 per cent to meet urgent credit needs; (v) card holders would be given preference in the matter of granting of packing credit in foreign currency; (vi) bank would consider waiver of collaterals and exemption from ECGC guarantee schemes on the basis of card holders creditworthiness and track record, and (vii) the concessive rat of interest on post-shipment rupee export credit applicable up to 90 days may be extended for a maximum period up to 365 days.
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CHAPTER 10
IMPORT FINANCE BY BANK

Import is when you buy something from another country and get it shipped to you.
Meaning of Importer:
The person who brings or carry in from an outside source, especially to bring in (goods or materials) from a foreign country for trade or sale is known as importer. The buyer / importer are the drawee of the Bill. The role of the importer is to: Pay the bill as mention in the agreement (or promise to pay later). Take the shipping documents (unless it is a clean bill) and clear the goods.
Importer's Bank:
This is a bank in the importer's country: usually a branch or correspondent bank of the remitting bank but any other bank can also be used on the request of exporter The collecting bank act as the remitting bank's agent and clearly follows the instructions on the remitting bank's covering schedule. However the collecting bank does not guarantee payment of the bills except in very unusual circumstance for undoubted customer, which is called availing. Importer's bank is known as the collecting / presenting bank. 38
Imports play an important role in the economy of every country, rich and poor alike. Rich countries need to import capital goods, raw materials and technology to ensure an optimum utilization of their production capacity. They need to import a wide variety of consumer goods to enable their people to enjoy a high standard of living. Poor countries needs to import technology and capital equipment and sometime strategic raw materials to develop industries for accelerating pace of their development, in India In the case of consignment sales, banks enter into transactions as remitting or collecting agents, in the case of documentary credits, they act either as paying agents or as collecting or negotiating agents for the exporter. So far as the importer is concerned, the bank issues the L/C, revocable or irrevocable, confirmed or unconfirmed. The buyer makes a request on an application form for opening of; \c in favour of a foreign party. The buyer is a customer of the bank and if the foreign party is not known to him, the former requests his bank to make enquiries about the partys credit standing abroad, this service is rendered for a nominal charge, the banker has to see before opening the L\C: (i)whether import is covered under the import license, which is current and unexpired; (ii) Whether the import value is within the limits set by the import license. (iii) Whether arrangements are made for warehousing and storing of goods in good condition until sold; (iv) Whether specific mention is made of the documents to be collected from exporter such as invoice, weight certificate, certificate of origin, bill of lading, insurance policy, etc. 39

The bank issuing the L\C has an obligation to pay in terms of L\C agreement to the exporters bank if all the necessary documents are received. In case it is payment against documents accepted. It is paid immediately on sight or within a grace period of two days. If the bill is a usance bill, on the expiry of the period, the payment is made by the importers bank as the bank has an obligation that all formalities are observed before payment, the bank observes all these formalities are observed before payment, the band observes all these formalities before debiting the importer.
THE REGULATORY FRAME WORK

The principal objective of Indias export import policy is to accelerate the countrys transaction to as international oriented economy with a view to derive maximum benefit from the expanding global market. Various policy objectives are achieved basically through three legislations these are: 1. Foreign trade (development & regulation) act, 1993 administered by director general, foreign trade ( DGFT) replacing the earlier legislation import & export (control) act, 1947, administered by the chief controller if imports & export (CCIE) 2. Foreign exchange management act 1999 administered by the department of economic affairs, ministry of finance and the exchange control development of the reserve bank of India. FEMA has been brought is place of foreign exchange regulation act. 3. Indian customs and excise act, 1962 administered by central board of excise and customs, the foreign exchange dealers association of India (FEDAI) frames the rules and operational procedures and changes relating to imports. In addition, uniform customs & practice for documentary credit (UPDC) formulated by 40

international chamber of commerce, Paris that has a global acceptance, is indispensable to cover transactions under documentary credits.
EXCHANGE CONTROL REGULATIONS ON EARNING IMPORTS

Exchanges control regulations refer to rules and regulations frames and administered by the reserve band if India (RBI) under the provisions of foreign exchange management act, 1999. These regulations aim at pooling resource for national development in the best interest of the country. under the provisions of the act, RBI regulates sale and purchase of foreign currencies; commercial bank with a license to deal in foreign currencies, called authorized dealers (Ads) buy and sell foreign currencies in accordance with the guidance provided by the RBI. Let us learn various regulations regarding payment of imports. Mode of payment: exchange control regulations govern sales of foreign currencies to non-residents against import of goods from any country except Nepal and Bhutan. It may be pointed out that residents for the purposes of exchange control regulations; hence, Ads cannot sell any foreign exchange for financing import from these two countries. Under the existing regulations. Ads provide foreign currencies to importer: For remittance to foreign supplies as advance payments. ii) Paying the foreign supplies in compliance of their undertaking under the letter of credit. iii) Discounting on purchasing except documents iv) Advances against shipping documents. Authorizes dealers can open a letter of credit (L\C) to facilitate imports, subject to 41

FOLLOWING REGULATIONS: A) Letters of credit may be opened by banks only on behalf of their customer who maintain account with them. B) L\c should be opened in favour of overseas suppliers of shipper of goods. Application for L\C must be accompanied by sale contract and other documentary evidence relating to the order and its confirmation and import license, if any. Authorized dealers have been permitted to sell foreign currencies for making payment towards imports into India. For this purpose, importers have to submit an application in form a gibing the necessary details including classification of goods based on harmonized system. It is also obligatory on the part of an importer to submit exchange control copy of customs bill of entry to the authorized dealer through whom the relative remittance was made have actually been imported into India within three months from the date of remittance. In respect of imports by post parcel, postal wrappers are required to be submitted as documentary evidence in support of imports into India.
CHAPTER 11
METHODS OF IMPORT FINANCE

42

The methods of import financing include: financing under L\C financing against bills under collection, financing against deferred payment, financing under foreign credit and finance by EXIM bank of India. Let us discuss them in detail. 1. Financing import under letter of credit Letter of credit can be defined as a commitment of bank to pay the seller of goods or services a certain amount provided he presents stipulated documents evidencing the shipment of goods or the performance of services within a prescribed period of time. As a credit instrument and as a means of making and securing payment, the letter of credit is an essential instrument for conducting world trade today. it fulfils all the requirements provided the conditions regarding its use are stated in clear and unambiguous stages: i) ii) Requesting bank to open a letter of credit Retiring documents under letter of credit
iii) Import trust receipt facility. Each time a L\C is opened, the importer has to file a formal stamped letter of credit application and agreement in the prescribed form? The application should set forth the precise; terms and conditions under which the importer wishes his bank to establish the credit, and describe the documents covering the goods purchased which the bank is to receive in exchange for payments. L/C is sent by the issuing bank to a bank in the suppliers country with a request to deliver the same to the supplier, called the beneficiary. If the beneficiary is satisfied with terms and conditions mentioned in L/C he ships the goods, obtains the require documents and submits them to bank, usually his own, unless a name has been specified in the credit. Bank scrutinizes the documents 43

and if he finds them in conformity with the L/C and the reimbursement instructions, he pays the suppliers. Thereafter he sends the documents to the issuing banker who again scrutinizes the documents with reference to the terms of the credit. If he is satisfied, he pays the negotiating banker. After pays the negotiating banker the issuing banker releases documents of title to the importer on his executing a stamped Letter of Trust. It means that the importer undertakes to deposit with the bank the sale proceeds immediately on realization but in no case later then period stipulated in the trust letter. The banks give the import trust receipts facility to first class customers only.
Types of Letter of Credit

A letter of credit may be revocable or irrevocable. If there is no indication of this reference, the credit will be deemed as irrevocable. A revocable credit may be amended or cancelled at any moment without prior notice to the beneficiary. However, the issuing bank is bound to reimburse for the negotiation made prior to receipt of such notice.
1. Confirmed Credit:
When another bank adds its confirmation to the irrevocable letter of the credit it becomes a confirmed credit and it constitutes a definite undertaking of the confirming bank in addition to the issuing bank.
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EXPORT-IMPORT FINANCE BY BANK 2. Transferable Credit:

A letter of credit is transferable only if it is expressly designated by the issuing bank. The beneficiary of such a credit has the right to request the nominated bank to transfer the credit to another party or more than one party if partial shipment is permitted
3. Red Clause credit:

Red clause credit enables the beneficiary to avail pre-shipment credit from the nominated bank. This credit bears normally a clause in red authorizing the nominated bank to make an advance to the seller prior to shipment
4. Bank to Bank Credit:

When the exporter used his export letter of credit as a cover for issuing a credit in favor of his supplier, the second credit is called back-to-back credit.
5. Revolving Credit:
In a revolving credit the amount of drawing is reinstated and made available to the beneficiary again after a period of time on notification of payment by the applicant or merely the fact that shipment has been made.
6. Deferred Payment Credits and Acceptance Credits:

Under deferred payment credit the amount is payable in installments for a stipulated longer period. Usually a part is paid in advance
Other types of letter of credit.

45

1) Transit Credit. 2) Fixed Credit.. 3) The Sight Credit. 4) The Credit Available against Time Draft (Usance Credit). 5) Acceptance Credit. 6) Anticipatory Credit. 7) Restricted and Unrestricted Credit. 8) Fixed Credit. 9) Clean Credit
CHAPTER 12
PAYMENT METHOD IN EXPORT & IMPORT TRADE

There are 3 standard ways of payment methods in the export import trade international trade market: 1. Clean Payment 46

2.Collection of Bills 3.Letters of Credit
Clean Payments :
In clean payment method, all shipping documents, including title documents are handled directly between the trading partners. The role of banks is limited to clearing amounts as required. Clean payment method offers a relatively cheap and uncomplicated method of payment for both importers and exporters.
There are basically two types of clean payments: 1.)Advance Payment:

In advance payment method the exporter is trusted to ship the goods after receiving payment from the importer.
2.)Open Account:
In open account method the importer is trusted to pay the exporter after receipt of goods. The main drawback of open account method is that exporter assumes all the risks while the importer get the advantage over the delay use of companys cash resources and is also not responsible for the risk associated with goods.
Payment Collection of Bills in International Trade:

The Payment Collection of Bills also called Uniform Rules for Collections is published by International Chamber of Commerce (ICC) under the document number 522 (URC522) and is followed by more than 90% of the world's banks.
In this method of payment in international trade the exporter entrusts the handling of commercial and often financial documents to banks and gives the 47

banks necessary instructions concerning the release of these documents to the Importer
There are two methods of collections of bill: Documents Against Payment:

In this case documents are released to the importer only when the payment has been done.
Documents Against Acceptance:

In this case documents are released to the importer only against acceptance of a draft.
Letter of Credit:
Letter of Credit also known as Documentary Credit is a written undertaking by the importers bank known as the issuing bank on behalf of its customer, the importer, promising to effect payment in favor of the exporter (beneficiary) up to a stated sum of money, within a prescribed time limit. CHAPTER13
DOCUMENTS USED IN FOREIGN TRADE

Documents are used to record a written evidence of having carried out a transaction in both local and international trade. This section deals with the documents used in international trade where there is fairly large number of documents required to satisfy the two basic requirements, viz.
Nostro Account:
The Demand Draft Deposit account belonging to a domestic bank maintained in an overseas bank denominated in foreign currency is nostro account. 48
EXPORT-IMPORT FINANCE BY BANK Vostro Account:

The Demand Draft Deposit account belonging to a domestic bank maintained in an domestic bank denominated in domestic currency is vostro account.
A list of the various document required in cross border trade is given below:
Commercial Invoice Bills of Lading/Airway Bill Marine Insurance Policy and Certificate Bills of Exchange Consular Invoice Customs Invoice Certificate of Origin Inspection Certificate Packing List 1. Commercial Invoice: It is the sellers bill for the merchandise. It contains a description of the goods, the price per unit at a particular location and total value of the goods, packing specifications, terms of sale, teams of payment, identification markers of the packages, bill of lading number, etc.
2. Bill of Landing/Airway Bill:

This document is an evidence of shipment the goods. It is a receipt duly signed and issued by a shipping company acknowledging that the goods mentioned in the document have been shipped or received for shipment and an undertaking to 49

deliver the goods at the agreed destination. Bill of Lending is the most important document in foreign trade. A Bill of Lending serves the following proposes. A)It is a document of title to goods: - The Bill of Landing is a document giving ownership rights to the goods and the possession of a Bill of Landing entitle the holder to the and is transferable by endorsement. Transfer of the Bill of Landing after appropriate endorsement is tantamount to the transfer of goods. b) It is a receipt from the shipping company: - It constitutes evidence that the goods have been received by the shipping company. As a receipt it is only an evidence of the number and sizes of packages involved and does not guarantee the contents of the packages. c)It is an evidence of contract for the carriage or transportation of goods: The freight contract between the shipping company and the exporter is usually mentioned in the Bill of Landing except in the case of a charter ship where the contract of charter incorporates the freight payable by the shipper.
3. Marine Insurance Policy and Certificate:

In International trade it is customary to insure the goods against the risks of loss or damage. Whether the insurance will be taken by the exporter on his own account or on the account of the overseas buyer depends on the terms of sale. A marine insurance policy can take either by an open policy or a specific policy. Open policy is taken by exporters who have continuous shipments to make and the insurance policy is issued as an open cover, which can be used for insurance of all consignments to one or more destinations.
4. Bill of Exchange:
50

A bill of exchange is an unconditional order in writing, addressed by the drawer (exporter/shipper) to the drawer (importer/buyer) requiring the drawer to pay on demand a stated sum of money to the bearer/specified person or organization. A bill of exchange is a negotiable instrument and is payable to the bearer or to the person in whose favor it is endorsed. In International Trade the normal practice is to send documents in two sets as such bill of exchange is also generally drawn in two sets, one each to be sent along with each set of document. When drawn in two sets, each one bears an exclusion clause making the other invalid. 5. Consular Invoice: A consular invoice is a special type of invoice required by some countries for their imports. Such invoices are required by the USA, Canada, Philippines and some Middle East countries, etc. a consular invoice is made out on a prescribed format certified by the consulate of the importing country stationed in the exporters country. The main purpose of the consular invoice to the importing country is to have authenticated particulars of the goods that are importing into their country.
6. Customs Invoice:
Certain countries such as Canada and the USA need customs invoice. Canada has prescribed a specific from of customs invoice for allowing entry of merchandise at preferential tariff rates. The USA, in addition to the special customs invoice, requires a particular annex to the invoice, for Cotton Manufacturers. The forms are supplied by the consular office of the respective importers country and are to be duly filled in and signed by the shipper. 51
EXPORT-IMPORT FINANCE BY BANK 7. Certificate of Origin:

In many countries, permission to import is refused unless a certificate of origin is produced by the buyer. This document may form part of the invoice itself. The essential feature is certification of the country of origin indicating where the goods were originally produced and/or manufactured.
8. Inspection Certificate:
Inspection certificate by an established inspection Authority is needed under some contracts or by some countries. This certificate is issued by one of the authorized inspection agencies in the exporters country by the agency nominated by the importer.
CHAPTER14
FOREIGN TRADE POLICY

The new (FOREIGN TRADE POLICY) takes an integrated view of the overall development of India's foreign trade and. goes beyond the traditional focus on pure exports. This would be clear in itself, but a means to economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity."
OBJECTIVES AND STRATEGY OF FOREIDN TRADE POLICY, 2009-14:

In line with the above focus, the FOREIDN TRADE POLICY lays down two major objectives: 52

I. To double our percentage share of global merchandise trade within the next five years; II. . To act as an effective instrument of economic growth by giving a thrust to Employment generation.
MAIN FEATURES OF FOREIGN TRADE POLICY, 2009-14:

The main features of FOREIGN TRADE POLICY, 2009-014, are as follows:
1. Doubling share of global merchandise trade: FOREIGN TRADE

POLICY (2009-14) envisaged a doubling of India's share in world exports from 0.75 per cent to 1.5 per cent by 2014.
2. Five thrust sectors: Sectors with significant export prospects coupled

with potential for employment generation in semi-urban and rural areas were identified as thrust sectors. FOREIGN TRADE POLICY announced specific strategies (termed 'Special Focus Initiatives') for five such sectors: Agriculture, Handicrafts, Handlooms, Gems and Jeweler, and Leather and Footwear sector. Main strategies announced for the five sectors outlined in the FOREIGN TRADE POLICY are as follows: (i) In agriculture, a new scheme called Vishesh Krishi Upaj Yojana was introduced to boost exports of fruits, vegetables, flowers, minor forest produce and their value added products. Export of these products would qualify for duty free credit entitlement equivalent to 5 per cent of the value of exports. In addition, the policy made capital goods imported for agriculture under the Export Promotion Capital Goods (EPCG) scheme duty free. 53

(ii) The package for gems and jeweler sector includes: (a) Duty free import of consumables for metals other than gold and platinum up to 2 per cent of the value of exports; (ii) duty free re-import entitlement for rejected jeweler up to 2 per cent of the value of exports; (iii) duty free import of commercial samples of jeweler increased to Rs. 1 lakh; and (iv) allowing import of gold of 18 carat and above under the replenishment scheme. (iii) As far as the handlooms and handicrafts sector is concerned, the FOREIGN TRADE POLICY announced that a new Handicraft Special Economic Zone would be established. In addition, duty sops for trimmings and embellishments imported by handlooms and handicraft producers were increased to 5 per cent of the value of exports. (iv) In the leather and footwear sector, the duty-free entitlements of import trimmings, embellishments and footwear components were increased to 3 percent. This is expected to help the leather and footwear sector save up to 5 per cent of its import costs. In addition, duty free import of specified items for leather sector was increased to 5 per cent of the value of exports.
3. 'Served from India' to be Built as a Brand:

Presently services contribute more than 50 per cent of the country's GDP. To provide a thrust to service exports, FOREIDN TRADE POLICY advocated a number of steps. These include: (i) Served from India brand will be created to catapult India the world over as a major global services hub. 54

(ii) An exclusive Export Promotion Council for services would be set up in order to map opportunities in key markets, and develop strategic market access programmer. (iii) Individual service providers who earn foreign exchange of at least Rs. 5 lakh, and other service providers who earn foreign exchange of at least Rs. 10 lakh would be eligible for a duty credit entitlement of 10 per cent of total foreign exchange earned by them. (iv) Stand-alone restaurants would be entitled to duty credit equivalent to 20 per cent of the foreign exchange Earned. In the case of hotels, the entitlement would be 5 per cent. (v) Healthcare and educational institutions would be entitled to duty credit of 10 per cent of the foreign exchange earned.
4. New categories of star houses:

The FOREIDN TRADE POLICY announced a new categorization of status holders. Under the new scheme, export houses were divided into five categories depending upon their export performance in three years. The categories were (i) One Star (export of Rs. 15 crores) (ii) Two Star (export of Rs. 100 crores) (iii) Three Star (export of Rs. 500 crores) (iv) Four Star (export of Rs. 1,500 crores); and (v) Five Star (export of Rs. 5,000 crores).a star export house was entitled to get license, certificate, permissions and customs clearances for both imports and exports on self-declaration basis. The star export house was also granted the benefit of 100 per cent retention of foreign exchange in Export Earners Foreign Currency (EEFC) account. It was also to be eligible for consideration under the Target plus Scheme and enjoy a number of other privileges 55
EXPORT-IMPORT FINANCE BY BANK 5. "Target Plus' Scheme:

Exporters who exceed the annual export target were to be rewarded under the Target plus Scheme. This reward was in terms of entitlement to duty-free credit based on incremental export earnings. With the target for 2004-05 being fixed at 16 per cent, the lower limit for qualifying for these rewards was pegged at 20 per cent. Target plus scheme was abandoned in the second supplement to Foreign Trade Policy announced on April 7, 2006.
6. Setting up of Free Trade and Warehousing Zones (FTWZs):

The FOREIDN TRADE POLICY introduced a new scheme to establish Free Trade and Warehousing Zones to create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency. This is aimed at making India into a global trading hub. Each zone would have minimum outlay of Rs. 100 crores and 5, 00,000 square meters built-up area. Foreign direct investment would be permitted up to 100 per cent in the development and establishment of the zones and their infrastructural facilities.
7. Scopes for Export oriented units:

The FOREIGN TRADE POLICY announced a number of benefits for the export- oriented units. These include: (i) Export Oriented Units to be exempted from service- tax in proportion to their exported goods and services; (ii) Export Oriented Units to be permitted to retain 100 per cent of export earnings in EEFC accounts; (iii) Income tax benefits on plant and machinery to be extended to Domestic Tariff Areas that converting Export Oriented Units; and (iv) Import of capital goods to be on self- certification basis for Export Oriented Units. 56
EXPORT-IMPORT FINANCE BY BANK 8. Reducing transactional costs and simplifying procedures:

The FOREIGN TRADE POLICY announced a number of rationalization measures' to reduce transactional costs and simplify procedures. These include: (i) All exporters with minimum turnover of Rs. 5 crore exempted from furnishing bank guarantee ii) Import of second-hand capital goods permitted without any age restrictions; (iii) Minimum depreciated value for plant and machinery to be located into India reduced from Rs. 50 crore to Rs. 25 be filed reduced; (vii) Time bound introduction of Electronic Data Interface for export transactions, etc
9. Focus on infrastructure development Some:

special measures announced for infrastructure development in the FOREIGN TRADE POLICY are: (i) The threshold limit of designate Towns of Export Excellence' has been reduced from Rs.1000 crores to Rs. 250 crores in the five thrust-sectors announced (ii) Funds from Assistance to States for infrastructure Development of Exports used for development of Agra Export Zones also, (iii) establishment of common facility center will be encouraged for use by housebased service providers; and (,v) Pragati Maiden at Delhi will be transformed into a world-class complex.
10. Other measures:

Of the various other measure announced in the FOREIGN TRADE POLICY. The following deserve specific mention (i) Biotechnology Parks to be set up in the country having all the facilities of 100 per cent EXPORT ORIENTED UNITs. (ii) The Board of Trade to be revamped and given a clear and dynamic role. 57

(iii) Financial assistance to be provided to export for meeting their costs and legal expenses related to trade matters like anti-dumping action and countervailing duties in other countries. (iv) Although the DEPB (Duty Entitlement and Pass book Scheme) is as it Covers 52 per cent of India's exports and is easy to administer.
CHAPTER 15
LIMITATIONS
Export Import finance is a vast and big subject and time frame of two months is not sufficient to understand the whole gamut of export & import Credit & finance.
Export credit is regulated and controlled by various regulators and It is not possible to understand all the guidelines comprehensively with the limited amount of access to such information.
Export-Import bank of India do not provide detail information about their activities.
Some bank does not provide information about their activity of export-import. . 58
CONCLUSION
Export Import Finance is a very important study & understands the overall gamut of the international finance market.Credit and finance is the life and blood of any business whether domestic or international. The payment terms however depend upon the availability of finance to exporters in relation to its quantum; cost and the period at pre-shipment and post-shipment stage. The providers of export and import finance also extend advisory and planning assistance to the importers and exporters. The Government of India and RBI has conceived various schemes to stimulate and support exports and imports.. The biggest benefit of import and export financing is that the company will get the working capital needed for growth The financing solutions will enhance a companys cash flow by ensuring that the company and its suppliers are paid in a timely fashion. The funding will help in taking on new opportunities, both locally and internationally. Benefits include: 1. Commercial trade credit verification services and help to establish credit limits for national and international customers.
59

2. Predictable cash flow: Advancing funds against invoices, providing working capital to pay employees and suppliers. 3. Financing to pay suppliers - allowing the company to deliver its large purchase orders. 4. For Importers: Import financing / purchase order financing handles supplier payments for large purchase orders enabling to take on orders and deliver orders that in the past would have exceeded its working capital capability
ANNEXURE
QUESTIONNAIRE FOR MANAGER
1. Does your bank provide Export-Import Finance to Customer? Yes No
2. What is the rate of Interest charged? i. ii. iii. iv. 5%-10% 10%-15% 15%-20% More than 20%
3. Which document does bank take from the applicant?

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4. Do you collect import bills on behalf of your customer? Yes No
5. should importer & exporter maintain nostro account with you to enable international trade? Yes No
6. Do you discount bill drawn under letter of credit as well as outside it? Yes No
7. Is their scope for default in loan repayment by exporter & importer? Yes No
8. Do you hold any charge/Mortgage/pledge over their assets through which you can recover your outstanding loan? Yes
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No
EXPORT-IMPORT FINANCE BY BANK 9. Do you avail export bills rediscounting facility& refinance of export credit from RBI and EXIM Bank? Yes 10. well? Yes 11. No No
Are you giving bill discounting facility to non-bank customers as
If yes, what are the general guidelines for the same?
BIBLOGRAPHY
Export-What, where & How International Finance Export Marketing How to Export How to Import Export-Import Bank of India International banking and Finance Paras Ram. B.P.Varma. Michael Vaz. Nabhis Publication Nabhis Publication Annual Report Vipul Publication
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WEBLOGRAPHY www.rbiorg.com
WWW.Google.com WWW.Yahoo.com WWW.eximbankindia.com WWW.economictimes.com WWW.foreignexchange.com
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EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

Export Import Bank of India

Export Credit & Guarantee Corporation

15. 17. 18. 19.

35. 38. 43.

EXPORT-IMPORT FINANCE BY BANK

importer & exporter. To find various types of import export finance.

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

EXPORT IMPORT FINANCE IN INDIA

EXPORT-IMPORT FINANCE BY BANK

Financing of Export and Import of Goods and Services

EXPORT-IMPORT FINANCE BY BANK

The Role of the Collecting Bank.

ROLE OF BANKS IN EXPORT AND IMPORT FINANCE

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

EXPORT IMPORT BANK OF INDIA

EXPORT-IMPORT FINANCE BY BANK

Operations of Export Import Bank of India:

EXPORT-IMPORT FINANCE BY BANK

FINANCE & SERVICES:

EXPORT CREDIT AND GUARANTEE CORPORATION (ECGC)

EXPORT-IMPORT FINANCE BY BANK

Major Functions of Export Credit and Gurantee Corporation:

Export Credit and Gurantee Corporation also helps Exporters by:

EXPORT-IMPORT FINANCE BY BANK

EXPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

IMPORTANCE OF EXPORT FINANCE

EXPORT-IMPORT FINANCE BY BANK

MODE OF BANK FINANCE TO EXPORTERS

EXPORT-IMPORT FINANCE BY BANK

STAGES OF EXPORT FINANCE:

EXPORT-IMPORT FINANCE BY BANK

Forms Required for Application of Per-shipment Credit

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

PRE-SHIPMENT ADVANCES AVAILABLE TO THE EXPORTERS:

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

ADVANCE AGAINST INCENTIVES

EXPORT-IMPORT FINANCE BY BANK

PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC)

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

Persons Eligible for Post-shipment Finance:

EXPORT-IMPORT FINANCE BY BANK

EXPORT-IMPORT FINANCE BY BANK

2) Purchase/Discount of Foreign Bills:

EXPORT-IMPORT FINANCE BY BANK

3)Advance against Bills Sent on Collection:

4)Advance against Goods Sent on Consignment:

EXPORT-IMPORT FINANCE BY BANK

5)Advance against Export Incentives:

6)Advance against Undrawn Balance:

EXPORT-IMPORT FINANCE BY BANK

7) Advance against Retention Money:

8)Post-shipment Export Credit Guarantee and Export Finance Guarantee:

9)Purchase of Export Documents drawn under Export Order:

EXPORT-IMPORT FINANCE BY BANK

Post-shipment Export Credit denominated in Foreign Currency