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BANK DETAILS

Name of the bank

Address of the bank

No of branches
Deposits
Advances
Gross Profit
Net Profit
NPA
International Business
1.
Export Finance
2.
Letter of Credit
3.
Bank Guarantee
4.
Buyers Credit

Head Office Details

Andheri Branch Details

Thane Janata Sahakari

Thane Janata Sahakari Bank Ltd.

Bank Ltd.
TJSB Sahakari bank

(International Business Division)


Andheri Branch, Shop no 8, Ajay

LTD, TJSB House, plot

Mittal industrial premises CHS

no B5, Road no 2,

Ltd., Andheri Kurla road,

Wagle Estate,

Andheri (East), Mumbai -

Thane(west) - 400604
115
8122.05 Cr
4756.80 Cr
142.23 Cr
100.34
4.73%
1750 Cr
-

400059
1
47.25 Cr
114.09Cr
2.20 Cr
11.96 Cr
6.68Cr +
$ 2,35,000
4.279 Cr
$ 2,14,500
$ 3,57,411

INTERNATIONAL TRANSACTIONS
Export Finance
Pre Shipment
Post Shipment
Letter of Credit

ACCOUNT HOLDERS NAME


Krina Exports
Krina Exports
Sanjay Enterprise

Bank Guarantee
Buyers Credit

Gini Gopal Boats


Finicas Solution
Micro Scan Computers
R G Paper Corporation
H&H
Miraj Ceramics
Micro Scan Computers

IMPORT SERVICE
NON FUND BASED BUSINESS:
Banks extend two types of credit facilities to the borrowers. They are namely
fund based facilities and non-fund based facilities. In fund based facilities the bank
actually parts with the funds i.e. actual funds are made available to the borrower
subject to terms and conditions of the borrowing arrangement. But in non-fund based
facility or limit funds are not actually lend or made available immediately.

The Non-Fund based facilities are namely:1. LETTER OF CREDIT


2. BANK GUARANTEES

LETTER OF CREDIT
An importer of credit (L/C) is an unconditional undertaking, given by a bank
(issuing bank) at the request of a customer (applicant) to pay a seller (beneficiary)
against stipulated documents provided all the terms and conditions of the credit are
compiled with in a letter of credit arrangement, the issuing bank can:

Undertake to make payment to or to the order of the beneficiary or to accept


and pay bills of exchange drawn by the beneficiary.

Authorize another bank to effect such payment or to accept and pay such Bills
of exchange.

Authorize another bank to negotiate against stipulated documents.


In other words a documentary credit is an undertaking issued by a bank, on

behalf of the buyer (the importer), to the seller (exporter) to pay for goods and
services provided that the seller presents documents which comply with the terms and
conditions of the documentary credit.

PARTIES TO THE LC:There are number of parties involved in LC transactions.


1.
2.
3.
4.

Applicant :
Beneficiary:
Issuing bank:
Advising bank:

The buyer who applies for LC


The seller who supplies goods/services.
The bank which opens/establishes the LC.
The bank which advises the LC to the beneficiary
through

his

bank/directly

after

confirming

the

5. Negotiating bank:
6. Confirming bank:
7. Reimbursing bank:
8. Second beneficiary:

authenticity of LC document.
The bank which negotiate the documents presented by
the beneficiary/seller as per LC terms and conditions.
The bank which adds its confirmation to the LC.
The bank which reimburses the amount of bills/LC to
the negotiating bank.
The additional beneficiary in case of transferable LCs

BENEFITS

Letter of credit substitutes the credit of the issuing bank for that of the buyer.

The importer is assured that goods are shipped before payment under the letter
of credit.

Security that a payment is not made until the documents conform to the terms
and conditions of the credit.

Importer maintains control over the transactions through the letter of credit
mechanism with the seller.

Ability for importers to negotiate pricing discounts or extended payment terms


because of assurance of payment.

TJSB Bank's International business department (IBD) services provides you


with protection against seller risk by obtaining credit reports

MECHANISM OF A LETTER OF CREDIT


Banks Deal in documents, and not with goods, services on performance to which the
documents may relate

OPENS AND SENDS L/C TO

SANCTION OF L/C LIMITS:


The Assessment of L/C limit depends on the following factors:A.
B.
C.
D.

Appropriate value of purchases made under the LC for the year.


Maximum expected outstanding LCs at any one time.
Stocking period and usuance period.
Lead time including transit time.

Example: - Purchase under L/C during year: Rs.1200.00 lacs


I.
II.
III.

Usuance period of LCs


Stocking period

: 3 Months
: 2 Months requirement

Lead time

: 1 Month

DOCUMENTS REQUIRE FOR LETTER OF CREDIT AT TJSB BANK


1.

Import LC Issue Advice (Charges Advise)


LC Amount Total LC Amount

*****

Exchange Rate

$=

*****

2.
3.
4.
5.

LC Equivalent
Swift charges

*****
*****

Servicer tax

*****

Foreign currency conversion tax

*****

Swach Bharat tax


Application Form
Proforma invoice/Commercial invoice
Declaration furnished by Applicant
Foreign department Circular

*****

CHARGES BREAKUP FOE LETTER OF CREDIT AT TJSB BANK


LC ISSUANCE CHARGES
1. Commission Charges
2. Usance Charges Upto 90 Days
3. Usance Charges Above 90 Days
OTHER LC CHARGES
4. Renewal with in 3 month from
the date of expiry
5. SWIFT charges
6. LC Cancellation charges

0.15% Commission per quarter or part thereof


with minimum RS 500/0.30% omission with minimum Rs 750/0.075% for every additional month
Commitment +Usance Charges from date of
expiry to the new date of expiry
Rs 1500/for LC Issuance Rs 750/- for LC
Amendments
Rs 500/-

SBLC/FBG
7. Insurance
8. Amendment
9. SWFT charges

2% P.a.; minimum Rs 1000/2% P.a.; minimum Rs 500/Rs 1000/- For insurance ;


Rs 500/- Amendment

REVOCABLE CREDIT:
A Revocable Credit is one which can be cancelled (revoked) or amended by
the issuing bank at any time without prior notice to the beneficiary. The cancellation
or amendment, however takes effect against the negotiating bank which negotiated
bills under the credit only on receipt of notice of such cancellation / amendments. The
issuing bank is liable to the negotiating bank for payment of bills negotiated in
conformity of the credit terms before the notice of revocation/amendment was
received by the negotiating bank. There is not much of a benefit to the exporter/seller
under such credit, since there is no definite undertaking by the issuing bank.

IRREVOCABLE CREDITS:
An Irrevocable Credit constitutes a definite undertaking of the issuing bank to
accept and / or to pay bills drawn on it or on another bank and make payment (without
a bill) provided the terms and conditions of the credit are complied with. An
irrevocable credit cannot be cancelled or amended without the agreement of all the
parties concerned.

TRANSFERABLE CREDIT:
A transferable credit is one under which the exporter has a right to make the
credit available to third parties. The exporter may be only an intermediary who
procures the goods from the suppliers and arranges them to be sent to the importer.
For example, M/s. Amir Handloom Exporter India Ltd may enter into an agreement
with foreign importer for various types/varieties of handloom goods to be supplied.
They will get transferable credit for total order opened in their favour and will procure
goods from manufacturers. To enable such manufactures to get banking facilities, for
the export, M/s. Amir Handloom Exporters India Ltd., may get the credit transferred
to the manufacturers.

BANK GUARANTEES
A contract of guarantee is defined as a contract to perform the promise or discharge
the liability of a third person (principal creditor) in case of his default. The parties to
the contract of guarantee are:
a. APPLICANT: The principal debtor person at whose request the guarantee is
executed.
b. BENEFICIARY: Person to whom the guarantee is given and who can enforce
it in case of default.
c. GUARANTOR: The person who undertakes to discharge the obligations of the
applicant in case of his default.

A Bank Guarantee constitutes a legal contract wherein the bank undertake, as


the principal surety, on behalf of their customer, to pay a defined sum of money to the
beneficiary within the expiry period of the guarantee in case of default on the part of
the customer.
Bank Guarantees are of two types
A. Financial Guarantee i.e. for cash substitute.
B. Non-financial Guarantee i.e. for performance of any kind.

TJSB Bank issues guarantees favouring a beneficiary within India and through
branches/correspondents favouring a beneficiary outside India for various
purposes as mentioned below:

Performance guarantees

Bid-bonds

Bonds of Earnest Money

Advance Payments made by foreign buyers, etc.

Counter guarantees in favour of branches/correspondents to enable them to


issue guarantee in favour of beneficiaries.

To public authorities (courts, customs, excise etc.) to substitute cash deposits,


for waiver duty payments etc.

PURPOSE OF BANK GUARANTEES:Guarantees are generally issued for the following purposes:a. In lieu of security deposit / earnest money deposits for participating in tenders
b. Mobilisation advance or advance money before commencement of the project
by the contractor and for money to be received in various stages like plant
layout, design / drawings in project finance;
c. In respect of raw material supplies or for advances by the buyers;
d. In respect of due performance of specific contracts by the borrowers and for
obtaining full payment of the bills;

e. Performance guarantee for warranty period on completion of contract which


would enable the supplier the proceeds without waiting for warranty period to
be over;
f. To allow units to draw funds from time to time from the concerned indentors
against part execution of contracts, etc.
g. Bid bonds on behalf of exporters,
h. Export performance guarantees on behalf of exporters favouring the Customs
Department. Under Export Promotion Capital Goods (EPCG) Scheme.

BANK REQUIREMENTS

A sanctioned credit limit for issuance of Guarantees.

Application for the Bank Guarantee to be submitted in the Bank standard


format.

A Counter Indemnity, duly stamped (supplied by the bank) and executed by


the authorised signatures of the company.

The text of the guarantee should clearly specify the amount, validity (both
expiry and claim dates), purposes of issue and the specific event which could
lead to invocation of the guarantee. The guarantee should also bear the banks
standard limitation clause.

REGULATORY REQUIREMENTS
Certain type of guarantee cannot be issued, such as:

Guarantee for unlimited period and amount except for certain exceptions.

Guarantees to steamer companies to cover issuance of bill of lading without


surrender of mates receipt.

Guarantees to customs to cover delivery of goods without production of


import licence.

Issuance of guarantee involving foreign exchange is subject to prior RBI


approval unless specific provision is made under FEMA.

Guarantees favouring overseas beneficiaries and through banks abroad can be


issue only for commodity exports and have to be performance by nature.

Beneficiaries of Bank Guarantees are required to lodge their claims or requests


for extension of time in writing on or before the expiry.

The liability of the bank under a guarantee is primary and the bank is expected
to pay for with upon demand by the beneficiary, without reference to the
customer. Banks have been specifically directed by the Reserve Bank of India
to honour claim immediately on receipt of original guarantee along with claim,
without any delay.

The original guarantees bonds should be returned to the Bank, duly discharged
by the beneficiary after the expiry or after termination/fulfilment of the
underlying contract.

BENEFITS

A bank guarantee provides substantial comfort to the beneficiary for


establishing contracts with suppliers and contractors.

Bid Bonds enable exporters to compete in international markets for contracts.

Advance payment guarantee enables exporters to receive advance payment in


preparation of good for export.

APPRAISAL OF BANK GUARANTEE LIMIT


The proposals for guarantees should be appraised with the same diligence as in
the case of fund-based limits. The adequate cover by way of margin and security so as
to prevent default on payments when guarantees are invoked should be obtained.
Whenever an application for the issue and bank guarantee (or sanction of a regular
bank guarantee limit as part of a working capital limits) is received, branches should
examine and satisfy themselves thoroughly about the following aspects:
a. The need for the bank guarantee and whether it is related to the applicants
normal trade / business.
b. Whether the requirement is one-time or on a regular basis.

c. The nature of bank guarantee i.e. financial or performance.


d. Applicants financial strength / capacity (through an analysis of his financial
statements, cash / funds flow position and opinion reports) to meet the liability
/ obligation under the bank guarantee in case of invocation.
e. Past record of the applicant in respect of bank guarantees issued earlier; e.g.,
instances of invocation of bank guarantees, the reasons thereof, the customers
response to the invocation etc.
f. Present outstanding on account of bank guarantees already issued.
g. Margin.
h. Collateral security offered.
DOCUMENTS REQUIRE FOR BANK GUARANTEE AT TJSB BANK
1.
2.
3.
4.

Foreign outward Remittance Advice


Acknowledgement of a guarantee/ Standby Message
Exchange Rate from Forex Dealing room
Application Form

CHARGES BREAKUP FOE BANK GUARANTEE AT TJSB BANK


1. SWIFT
2. Usance Charges

RS 1000/2% PA

EXCEPTIONS ARE PERMITTED IN THE FOLLOWING CASES


BY RESERVE BANK OF INDIA.
a)Issue of guarantee in favour of another bank in cases where a bank is unable to
take its additional share in consortium account due to a liquidity strain and has
temporarily transferred the share to another bank in the consortium along with
issuing a guarantee in its favour.
b)
Issue of guarantee in favour of Industrial Development Bank of India
(IDBI), in the case of import of technical know-how by way of drawing and
designs under the Technical Development Scheme of IDBI under certain
circumstances where no tangible security is available to IDBI.
c)Issue of guarantee in favour of different Development Agencies / Boards like
Indian Renewable Energy Development Agency, National Horticulture Board,
Sugar Development Fund, etc., on behalf of their clients / customers for
obtaining soft loans and / or other forms of development assistance from such

Agencies / Boards. However, such sanctions should be subject to the following


conditions :
I.
Banks should satisfy themselves, on the basis of credit appraisal,
regarding the technical feasibility, financial viability and bankability of
individual projects and / or loan proposals i.e., the standard of such
appraisal should be the same, as is done in the case of a loan proposal
II.

seeking sanction of term finance / loan.


Banks should conform to the prudential exposure norms prescribed from

III.

time to time for an individual borrower / group of borrowers.


Banks should conform to the ceilings prescribed form time to time for

IV.

sanction of term finance / loans from the banking systems.


Banks should suitably secure themselves before extending such
guarantees.

EXPORT SERVICES
Export Finance is a working capital facility provided to the exporter at concessional
rates of interest, determined by the Reserve Bank of India. This finance which is
strictly purpose oriented and need based is available both at pre-shipment and postshipment stages for the following categories of manufactures/exporters,

Manufacturing Exporters

Merchant Exporters

Sub-suppliers to the main exporters

Exporters of various services, including consultancy

Deemed exports

PRE-SHIPMENT FINANCE
Exports play an import role in building the economy of country. The need for
increase in exports need not be emphasised. The exports of our country should

increase in quantitative as well as in monetary terms i.e. both in volume and value.
Simultaneously our aim should be to maintain imports at a healthy level.
Government has put in place various measures with the purpose of making
countrys exports competitive. They are with regard to incentives and subsidies. These
make export product competitive by compensating for additional costs incurred due to
countrys infrastructural deficiencies and lack of access to better technology and work
practices unlike overseas competitors.

DEFINITION
A Pre-shipment or Packing Credit Advance is any loan or Advance, granted to
an exporter for financing the purchase / Procurement processing, manufacturing and
packing of the goods meant for export or working capital expenses towards rendering
of services abroad

THE

NEED

FOR

INCREASE

IN

EXPORTS

AND

ITS

ADVANTAGES:
1. As a long term strategy to build a strong foundation for Foreign Exchange savings
through exports. Geographically smaller countries than us such as Japan, Taiwan
etc. have built significant Foreign Exchange reserves only through high level of
Export growth. The major of their reserves is earned and not borrowed.
2. Exports provide additional job opportunities to our qualified and skilled work
force.
3. Promotion of Export requires / results in upgradation of technology to remain
competitive in the international market. This development also helps domestic
markets, industries.
4. Exports need efficient production technology. This has a positive effect in
development of technology in domestic ancillary industries also which indirectly
supports export production.
5. Exports enable the country to improve the Balance of Payment and Balance of
Trade position.

Pre-shipment finance is provided to the exporter in Rupees under the Rupee Export
Credit Scheme of the Reserve Bank of India. The charges in the Government policy
are published by means of Public Notices issued by the Director General of Foreign
Trade.
The goods may be classified under any of the following categories:
i. Free Items which can be exported without any restriction ;
ii. Restricted Items which can be exported only under a licence or permission;
iii. State Trading Items, export of which can be done only through the specified
State Trading Enterprise;
iv. Prohibited Items which cannot be exported at all.
After Liberalisation policy and opening of economy since 1991, most of the items
fall under the category of free goods.

WHY SHOULD BANKS FINANCE EXPORTS?


Banks derive various benefits as under by extending finance to the exporters:
a) Increase in opportunities to earn interest income and others income through
negotiation of export bills, advising letters of credit etc.
b) The export finance portfolio is short term in nature and payment of this
finance is time bound. Therefore possible defaults if any are noticed earlier
than in the case of normal cash credit advances.
c) In addition to the earnings at branch level, the treasury department of the Bank
also makes profit by setting off exports and imports of similar maturities /
currencies to the extent possible. This also enables the Bank to the extent
possible, to retain margins in both export and import transactions.

BENEFITS

Regulated interest rates, which are lower than cash credit interest rates.

Exporter can avail of forward premium on the post shipment leg of the
transaction.

Sharing of the export credit between the Merchant Exporters and


Manufactures is allowed.

Available for certain deemed exports.

Can be availed even when export orders are yet be received i.e. anticipated
orders.

DEFINITION
A Pre-shipment or Packing Credit Advance is any loan or
Advance, granted to an exporter for financing the purchase / Procurement processing,
manufacturing and packing of the goods meant for export or working capital expenses
towards rendering of services abroad (invisible exports ).

REGULATORY GUIDELINES

Pre-shipment finance can be granted upto shipment date, subject to a maximum


period of 270 days at concessive rates determined by RBI Guidelines.

The pre-shipment advance granted to exporters should not exceed the FOB value
of goods or the domestic market value of goods whichever is lower. Thus the loan
amount is to be disbursed net of insurance, freight and profit margins.

Pre-shipment finance can be granted on a running account basis to exporters with


good track record. The statement of outstanding export orders, which should be in
line with the Packing credit outstanding, is to be submitted on calendar quarter
ends. In other cases, pre-shipment finance is distributed on order to order basis.

In case of delay in shipment, the exporter should immediately inform the bank the
reasons for delay and apply for extension of the loan prior to the due date,
together with LC extension/order extension from the overseas buyer. Substitution
of frustrated or cancelled export order with a new export order is allowed only
for physical exports.

The loan taken against an export order which is subsequently cancelled can be
adjusted with the proceeds of an export bill of any commodity provided no

advance has been availed against this new order. This facility of substitution of
orders is not available for Deemed Exports.

The

pre-shipment

loan

availed

should

be

liquidated

by

purchase/discount/negotiation of export documents in Indian Rupees/Foreign


Currency or by proceeds of a post-shipment loan granted against an export bill. It
can also be liquidated by proceeds of payments receivables from the Govt. Of
India e.g. Duty drawback. Pre-shipment loan should not remain outstanding once
the relative goods are exported and documents are tendered to the bank.

Pre-shipment credit can also be repaid from the balances in the EEFC Indian
Rupees accounts to the extent that the exports have taken place.

In case multiple packing credits are availed under the same order, the due date of
any of the subsequent loans cannot exceed 360 days from the date of disbursal of
the first loan under that particular order.

Interest will be recovered on monthly basis.

INDIRECT EXPORTS:Indirect Exporters are those who may or may not be exporters in their own
right. It is not necessary that they should hold Importer Exporter Code. The following
conditions need to be fulfilled for financing indirect exports:1. LC in favour of indirect exporter.
2. A letter of Undertaking from the EOH and his banker that EPC would not be
availed at their end for the same order / purpose during the course of the EPC
being outstanding against the indirect exporter.
3. Where the shipment are made to the EOH and not directly exported from the
indirect exporters end (i.e. when such bills are not accompanied by Bill of
Lading etc.) then a certificate from the EOH has to be obtained that exports
have actually taken place. Such certificates should be submitted on quarterly
basis if it is an ongoing arrangement.
A stand by line of credit (SLC) for meeting genuine contingency needs of the
exporters may be sanctioned along with regular credited limit.

SLC should be a separate limit and not a sub-limit within regular limits.
If the exporter is enjoying separate peak and non peak limit, SLC should be

arrived at separately as a percentage of peaks and non peak limits.


SLC limits are contingent limits in nature. It will therefore be outside the

consortium arrangement if any.


Being a general dispensation extended to all deserving export units, no

separate assessment / special justification is required for SLC.


The SLC limit has to be included in total regular limits and security
documents are to be obtained for such final aggregate amount.

PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC):


PCFC is a facility provided to the exporter in foreign currency at
internationally competitive rates for financing of all pre-shipment activities.

REGULATORY GUIDELINES

PCFC can be availed of in USD, GBP, JPY, EURO currencies.

Available only for exports upto 180 days tenor and on cash basis Cost of funding
is tagged with 6 months LIBOR/EUROLIBOR/EURIBOR.

PCFC can be availed for a maximum period of 180 days for amounts not
exceeding the FOB value of goods.

Forward contracts may be booked upto the date of draw down of PCFC.

PCFC can be liquidated by availing post-shipmen financing in foreign currency


only and not in Indian Rupees.

Cross currency liquidation of PCFC is also permitted and forward contracts may
also be booked for the same, but only upto the date of presentation of documents.

This facility is also available for deemed exports i.e. for supplies to projects
financed by multilateral/bilateral agencies/funds a maximum period of 30 days or
upto the date of payment by the project authorities whichever is earlier.

Other regulatory and procedural aspects are similar to those of Rupee Preshipment finance.

BANK REQUIREMENTS

A sanctioned credit limit. Application for the pre-shipment loan to be submitted


in the banks standard format.

Original purchase order/original indent from overseas buyer or buyers agent


accepted by the Indian exporter (OR).

Original facsimile followed by the submission of the original order when


received (OR)

Proforma Invoice duly accepted by the overseas buyer (OR) Statement of


outstanding export orders at periodic intervals.

EXPORT FINANCE DEAL SLIP DETAILS


TRANSACTION CHARGES
OR
Outward Remittance
IR
Inward Remittance
FBR
FBP/FBN/PCFC/EBR
CRYS
Crystallization of FBN
ADJ
Realisation of FBP/FBN
FBP
LC import Slight Bill payment
UF
Under Forward
FCTL
FCTL/FCDL booking
FIBC
Import bill payment
AIBR
Crystallization of import Bill
FPB
Forward purchase Contract Booking
FSB
Forward Sale Contract Booking
FPC
Forward purchase Cancellation
FSC
Forward Sale Cancellation
FCNR
FCNR Deposit Placement
BOINY Bank of INDIA New York
SBINY
SBI New York
COBA
Commerez Bank Frankfurt
BPVI
BANCA Popalare Italy
BARC
Barclays London
NATA
National Australia Melbourne

RATE TYPE
RP Ready Purchase TT Buying
BB Ready Purchase Bill Buying
RS Ready Sale TT Buying
BS Ready Sale Bill Buying
FP Forward Purchase
FS Forward Sale
NP Notional purchase
NS Notional Sale

POST-SHIPMENT FINANCE
Post-shipment finance is a loan or advance granted or any other credit
provided by an institution at an exporter of goods from India from the date of
extending the credit after shipment of the good to the date of realisation of export
proceeds and includes any loan or advance granted to an exporter in consideration of
or on the security of any duty drawback or any receivables from the Government of
India. Post Shipment stage is that period, when the goods have been shipped out.
After the goods have been handed over to the shipping company, the exporter will get
documents of title to the goods exported viz. Bill of Lading, Airway Bill, Post Parcel
Receipt etc. depending on the mode of transport. Post Shipment phase refers to the
period when goods have been shipped out and the credit to Banks Nostro Account
with foreign bank is awaited. This waiting period would depend on the tenor of the
bill. The FEMA regulations stipulate that the exporter should tender the export
documents to the bank within a maximum period of 21 days from shipment of goods
from India.
TJSB bank offers Bank offers following facilities for post-shipment export finance.

Negotiation of Exports Bills under Letter of Credit- Export documents can be


negotiated provided they conform to the terms and condition of the Letter of Credit
and subject to internal approvals for the risk on the issuing bank and country.
Negotiation of bills will be done with full recourse to the exporter as per the
provisions of the Negotiable Instruments Act, unless the L/C is confirmed by the
bank.

Purchase /Discount of export bills- export documents may be purchased


/discounted under post-shipment credit facility offered by the bank to the exporter.

Rupee post-shipment advance granted against export bills sent on collectionExport documents are handled by the bank purely on a collection basis and a postshipment loan based on notional exchange rate is granted.
Exporters can credit a portion of their export proceeds into Exchange Earners

Foreign Currency Account. In such cases the initial post-shipment finance will be
provided net of the EEFC amount. The EEFC account is to be credited only on receipt
of the export proceeds.

SCRUTINY OF BILLS DRAWN UNDER LETTERS OF CREDIT:Bills under a Letter of Credit may be received for negotiation from a customer
of the Bank. The non-customers may also submit the export bills under LC to our
Bank when either the credit is restricted to our bank or our Bank is named as the
paying banker under the LC. The bank has to adhere to the PRINCIPLE OF STRICT
COMPLIANCE while negotiating the documents under LC.
Whenever, approached by any type of customer for negotiation of documents under a
LC, the bank should verify the following:a. The credit is valid for negotiation for a further reasonable period and has not
expired.
b. It does not attach any onerous clauses on the negotiating bank i.e. the clauses
which cannot be complied with.
c. The payment from reimbursement bank is unconditional.
The common discrepancies observed are listed below. However it should be noted
that, this list is only illustrative and not exhaustive. It should not be taken as the final
list. There may be some more / different discrepancies, which should be carefully
noted.

BILL OF EXCHANGE:
The bill is drawn on the importer instead of on the issuing bank, as required in the
credit.
Reference to the Letter of Credit is missing.
Tenor of the bill (usuance period) is different than that required under the credit.

Interest clause is missing, where stipulated.


Amount in words and figures differs.
In case of usuance bill, it is inadequately stamped / unstamped.
The name of the party is wrongly spelt.
It is not signed by the beneficiary of LC.
The bill is not drawn as payable / endorsed to the bank.

INVOICE: The invoice is not addressed to the importer.


The amount exceeds the available limit under the LC or the unit price exceeds
than that mentioned in LC.
The amount of invoice does not correspond with the amount of bill of
exchange.
The details of cost, insurance, freight and other charges are not separately

shown although required under LC.


The description of goods does not agree with the description in the LC.
It does not certify the origin of goods, where a certified invoice is required.
Charges not permitted by the term of contract are levied.
The number of copies is less than the required number.

BILL OF LADING: The full set of negotiable copies and required number of nonnegotiable copies
are not submitted. The bill of lading would mention total number of negotiable
copies issued. All negotiable copies are to be submitted.
Bill of lading is claused.
Bill of lading is not manually signed by the master or an authorised agent of
the shipping company
The number of packages / weight differs from that in invoice.
Bill of lading is issued by forwarding agent.
It is not endorsed in blank or in the name of the bank as required.

INTEREST ON POST-SHIPMENT ADVANCE:


FOR NORMAL BILLS:
Interest on post-shipment credit upto 90 days is chargeable at the rate not
exceeding BPLR minus 2.5%. For the period beyond 90 days, banks are free to fix
their own interest rates. The concessional rate of interest is applicable only up to the
notional due date / actual due date (where ascertainable) whichever is earlier. If the
bill is realised earlier than the due date, the excess interest collected should be
refunded.
The revision in interest rates made from time to time is applicable to fresh
advances as well as to the existing advances for the remaining period of advance.
FOR OVERDUE BILLS:
The rate of interest for the overdue period will be as fixed for ECNOS (Export
Credit Not Otherwise Specified) for post-shipment stage should be charged.

POST-SHIPMENT CREDIT IN RUPEES


Export bills may be negotiated or purchased discounted in Rupees under the Rupee
Export Credit Scheme of the Reserve Bank of India.

BENEFITS

Exporters are provided with upfront payment for the goods exported.

Regulated interest rates lower than cash credit interest rates.

Exporter can avail of forward premium on the post shipment leg of the
transaction.

Sharing of the export credit between the Merchant Exporters and


Manufactures is allowed

Can be used for deemed exports.

In the case of rupee post-shipment loan availed against collection bills, the
exporter retains the right to take advantage of any foreign currency
appreciation vis-a-vis the rupee.

BANK REQUIREMENTS

A sanctioned credit limit.

Application for negotiation/purchase/discount to be made in banks standard


application form.

Submission of a complete set of export documents drawn as per Letter of


Credit/contract terms together with GP/PP/Softex/SDF form.

REGULATORY GUIDELINES

Exporter should have an Importer-Exporter code number.

Exporter should submit export documents within 21 days from the date of
shipment.

In case of usance bills, due date is calculated as per terms of the LC or


contract and in case of sight bills, the notional due date is computed as per
FEDAI guidelines. The advance will be given upto due date/notional due date
subject to a maximum of 180 days from shipment date.

Advance can be provided uptp100% of the invoice value at interest rate as per
RBI policy.

In case of usance bills, due date is calculated as per terms of the LC or


contract and in case of sight bills, notional due date is computed as per FEDAI
guidelines. The advance will be given upto due date/notional due date subject
to a maximum of 180 days from shipment date.

If a negotiated/purchased bill is not paid upto the 30* day from the due date,
the bill is crystallized into Indian rupees by applicable TT selling rate on that
day. The exchange risk is to be borne by the exporter.

All negotiations are subject to the Uniform Customs and Practices for
Documentary Credits (UCPDC 600) 2007 and all purchase and discounting is
subject to Uniform rules for collection (URC 522).

EXPORT DECLARATION FORMS:


All exports from India should be declared in any of the following forms which are
appropriate:
a)GR Forms Exports otherwise then by post including export of software in
physical forms i.e. magnetic tapes / discs and paper media.
b)
SDF Form - Exports through customs offices with EDI system.
c)PP Form Export by Post.
d)
Softex Form Exports of software otherwise than in physical form.

EXEMPTIONS:
Regulation of Foreign Exchange Management Regulations, 2000, grants exemption in
the following cases for export declaration forms:
a)Trade sample of goods and publicity material supplied free of payment.
b)
Personal effect of travellers, whether accompanied or unaccompanied.
c)Ships stores, transhipment cargo and goods supplied under orders of Central
Government for deference requirements.
d)
Goods or software accompanied by a declaration by the exporters that
they are not more than USD 25000 in value
e)Gift of goods not more than Rs.5 Lakh in value.
f)Aircrafts or its parts for overhauling or repairs abroad.
g)
Goods imported free of cost on re-export basis.
h)
Goods not exceeding USD 1000 per transaction to Myanmar under
barter trade agreement.
i) Re-export of following from Export Processing Zones / Special Economic
Zones (EPZ / SEZ)
j) Replacement goods exported free of charge in accordance with the provision
of EXIM policy in force from time to time.
k)
Goods sent outside India for testing subject to re-import into India.
l) Defective goods sent outside India for repair and re-import, certified by the
authorised dealer that the export does not involve foreign exchange.
m)
Exports without declaration form permitted by RBI.

EXPORTS OTHER PROVISIONS:


METHOD OF PAYMENT Irrespective of the country of residence of the foreign buyer, the payment for export
should be received in a currency or through an account appropriate to the country of
final destination of the export as declared in GR form.
1. For Exports to Bangladesh, Myanmar, Islamic Republic of Iran, Pakistan and
Sir Lanka - Payment should be received in ACU Dollars.
2. For Export to any other country Payment can be received in any permitted
currency, including Indian Rupees. Export payments can also be received in
the following manners:
Bank draft, pay orders, Bankers / personal cheques.
Foreign currency notes / foreign currency traveller cheques given by the
buyer during his visit to India.
3. Payment out of funds in FCNR / NRE account of the buyer.
4. International Credit Cards: - When payment for exports is received from the
foreign buyer in this manner during his visit to India, the duplicates copy GR /
SDF should be released by the concerned banker only on receipt of the funds
in their NOSTRO Account.
5. Transaction between Indian residents and Nepalese residents may be settled in
Indian Rupees. But in case of export of goods to Nepal, where the importer
has been permitted by the Nepal Rashtra bank (Central Bank of Nepal) to
make payment in free foreign exchange, such payments should be routed
through the ACU mechanism.
6. Precious metals like gold / silver / platinum by the Gems & Jewellery units in
SEZs and EOUs in equivalent to the value of jewellery exported on the
condition that the sale contract provides for the same and the approximate
value of precious metals is indicated in the relevant GR / SDF / PP forms.

POST-SHIPMENT FINANCE IN FOREIGN CURRENCY (PSCFC)

Export bills may be negotiated/purchased/discounted at internationally


competitive rates i.e. linked to the prevailing LIBOR of the currency of the
bill.

BENEFITS

This scheme provides finance at a considerable lower cost of interest as


compared to Rupee Financing Scheme.

Forward Premium available upto the date of discount/negotiation in case of


cross currency transactions.

REGULATORY GUIDELINES

PSCFC can be availed of in all currencies viz USD, GBP, JPY and EURO.

PSCFC can be availed of at tagged with 6 months LIBOR/EUROLIBOR/EURIBOR.


The markup is deregulated as per RBI Circular dated 04/05/2012.

PSCFC can be availed upto 100% of the invoice value upto a maximum of 180 days
from date of shipment.

BUYERS CREDIT

Buyers credit is a short term foreign currency loan arranged by the buyer
through his bankers for the purposes of financing imports at internationally
competitive rate, with the risk of payment being on the buyer or on his bankers. It is a
method of financing the buyers when the supplier is not willing to extend credit or is
willing to extend credit a comparatively higher rate of interest. Authorised Dealers are
permitted by reserve bank of India to approve proposals received for buyers credit
subject certain conditions. TJSB Bank has correspondent relationships with overseas
banks in some of the worlds largest financial markets through branches of
correspondent banks and is able to arrange offshore finance to importers at very
competitive rate
Buyers Credit refers to loans for payment of imports into India arranged on
behalf of the importer through an overseas bank. The overseas branch credits the
nostro account of the Indian bank, which uses the funds to make the payment to the
exporter bank on respective due date. The importer reflects the buyers credit as a loan
on the balance sheet.

SCOPE
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.

To define Buyers credit, its benefits, its salient features.


To fix eligibility criteria Prerequisites for beneficiary.
To provide list of documents to be executed.
To set up minimum and maximum limits.
To fix all in cost of the buyers credit.
To fix tenure of the credit or to fix repayment period of credit.
To fix process flow at IBD and B-cat IBD Centers.
To consider hedging option to cover Buyers Credit liability.
To fix responsibilities at various levels.
To fix reporting system and implementation of RBI guidelines.
Review of Buyers credit policy.

PURPOSE
a. To formulate, implement, monitor and to review strategies related to Buyers
Credit.
b. To put in place best Risk Management practices through timely and proper
Identification, measurement, monitoring and mitigation of Foreign Exchange risk.
c. To adhere to the regulatory framework and norms laid by Regulator.

d. To earn an adequate return while ensuring comfort to the clients.

BENEFITS OF BUYERS CREDIT:


Available in all convertible currencies (usually in USD/EURO/GBP/JPY).
The Supplier is independent of this process of raising finance, they do not have to
sign any documentation and receive payment as per original contract terms.
Since the rate of interest is lined to LIBOR, the financing cost can be significantly
lower than the cost of local borrowings.
Since the buyer is able to reimburse the supplier on sight basis, this facility affords
greater bargaining power to the buyer.
Importer can make use of the multi- currency option by availing of a buyers credit
in a currency other than the one in which gods are invoiced to take advantage of
differentials in interest rate and forward premia.
The exporter gets paid on due date. Whereas importer gets extended date for
making an import payment as per the CF.
The importer can deal with exporter on sight basis, negotiate a better discount and
use the buyers credit route to avail financing.
The importer can use this financing for any form of trade i.e. open account,
collections or FLCs.
The currency of imports can be different from the funding currency, which enables
importers to take a favourable view of a particular currency.
Buyers credit can be arrange irrespective of the mode of import i.e. L/C,
Collection or direct imports

BANKS REQUIREMENTs
FOR OBTAINING A QUOTE
To obtain a quote/offer from the offshore point, the importer needs to provide
details of value of the contract, number of shipments, port of the shipment,
supplier country, average value of each shipment, expected date of shipments,
period of suppliers credit if applicable,
FOR GRANTING THE APPROVAL
ECB application duly filled in by the importer.

Copy of the contract between supplier & buyer or a copy of the LC/confirmed
purchase order.
Copy of the invoice, transport document and bill of entry wherever applicable
POST APPROVAL
Letter requesting the bank to raise a loan.
Undertaking to pay principal plus interest on due date.
Undertaking to submit evidence of payment of withholding tax a applicable
REGULATORY GUIDELINES
Buyers credit can be availed only for to import of raw materials or capital
goods
Authorized dealers may approve proposal in form ECCB for buyers credit
provided : The credit is being extended for a period less than three years
The amount of the credit does not exceed USD 20 million per transaction.
The all in cost per annum payable for the credit does not exceed LIBOR
plus 350 basis points for credits beyond three years but less than five years.
For amounts in excess of USD 20 million an application in for ECB to be
forwarded to RBI for approval through authorised dealer.
The approval is valid only for three months from the date of its issue and he
draw under the facility must take place within this period

ALL-IN-COST
The existing all-in-cost ceilings are as under:
Maturity period
Up to one year
More than one year and upto three years
More than three years and upto five years

PREREQUISITES

All-in-cost ceilings over


6 months LIBOR*
350 basis points

a) Applicant should have a sanctioned limit for Buyers Credit under LC / Buyers
Credit Collection Bills with specific fund based limits in the form of Cash
Credit or Term Loan.
b) Applicant must have executed documents for Buyers Credit Limit.
c) Applicant must have a definite cash generation to honour the obligations under
the Buyers Credit for payment at scheduled maturity date for payment of
Buyers Credit.
d) Applicant must have a hedging option to cover Buyers Credit by way of normal
receipts in Foreign Currency (FC) by way of Export realization or balances held
in EEFC account or the exposure may be hedged by way of undertaking
Forward Contract or any sum equivalent to exchange rate fluctuation (normally
the premium between spot rate and future rate) to cover the additional cost in
INR determined at the time of taking up Buyers Credit transaction.
e) Applicant must fulfil the obligations pertaining to import at the time of entering
Buyers Credit transaction like submission of FEMA declaration, A1 form, OGL
declaration or Import License copy and undertaking for submission of Bill of
Entry within stipulated time as per FEMA.
f) Also at the time of Buyers credit transaction the applicant must submit form A2
(for payment of Buyers credit plus interest), Form 15 CA and 15 CB towards
TDS deduction and payment to Income Tax Dpt., Govt. of India.

AMOUNT
AD banks are permitted to approve trade credits for imports into India up to
USD 20 million per import transaction for imports permissible under the current
Foreign Trade Policy of the DGFT with a maturity period up to one year (from the
date of shipment). For import of capital goods as classified by DGFT, AD banks may
approve trade credits up to USD 20 million per import transaction with a maturity
period of more than one year and less than three years (from the date of shipment). No
roll-over/extension will be permitted beyond the permissible period.

DOCUMENTATI1N
The applicant must have executed documents for Buyers Credit Limit as per list of
documents namely

a)IBD-6 Undertaking / Indemnity for Letter of Credit (present stamp duty


Rs.100/- or as applicable from time to time)
b)
IBD-7 Counter Indemnity for Buyers Credit (present stamp duty
Rs.100/- or as applicable from time to time)
c)IBD-8 Trust Receipt (present stamp duty Rs.100/- or as applicable from time
to time)
d)
IBD-9 Undertaking for FWD Booking (present stamp duty Rs.100/- or
as applicable from time to time)
e)IBD-15 Undertaking for FWD Booking / margin Placement (present stamp
duty Rs.100/- or as applicable from time to time)
f)LD-17- Counter Indemnity stamp duty Rs.200/- or as applicable from time to
time.
g)

Application to make payment under Buyers Credit (present stamp

duty Rs.100/- or as applicable from time to time)


CHARGES BREAKUP FOE BUYERS CREDIT AT TJSB BANK
1. Commission
2. Usance Charges
3. SWIFT

2% PA
0.07% PM
RS 1000/-

SALIENT FEATURES OF BUYERS CREDIT:


The documents should comply with the RBI guidelines issued from time to time,
presently which are as follows:
1. Buyers credit is not allowed for import of services and for advance import
payment transactions.
2. Buyers credit cannot be given for Merchanting Trade transactions / intermediary
transaction.
3. The amount of trade credit the amount disbursed per import transaction should
not exceed USD 20 Million. If it does, RBI approval shall be required before
processing the transaction. This as per extant RBI guidelines (that is subject to
change as per changes in the guidelines).
4. Buyers credit can also be sanctioned for direct import transactions.
5. In case of an import bill presented with varied transport dates the earliest
shipment date to be considered for tenor calculation.

6. The tenor of loan should not exceed 1 year for non capital goods from the date of
shipment whereas the tenor for capital goods should be less than 3 years from the
date of shipment and 90 days for import of gold from the date of shipment. Thus
to check the earliest shipment date in case of multiple shipment dates and date of
shipment in case of single shipment to calculate the tenor of buyers credit. If the
tenor of buyers credit is 3 years or exceeds 3 years it shall be an ECB and the
relevant guidelines of ECB need to be adhered.
7. The all in cost should not exceed 6 months LIBOR + 350 bps for Trade credit up
to 3 years or as per extant RBI guidelines and is subject to change as per the
change in the guidelines. The all in cost includes arranger fee, upfront fee and
management fee, handling /processing charges, out-of pocket expense and legal
expenses. This limit is all what can be charged in foreign currency and no
handling charges, upfront fees or processing fees are allowed over and above this
limit to be remitted to the overseas lender. The above-mentioned all in cost
ceiling is subject to RBI guidelines issued from time to time.

PROCEDURE OF BUYERS CREDIT


Step 1
Step 2
Step 3

Request for Buyers credit


Interest Amount of earlier Buys credit and approx upfront fee to be
conveyed to branch
Obtain branch recommendation and Buyers credits Documents as under
Documents Rs 100/- Franking
In case of rollover following documents to be obtained for interest

payment of earlier buyers credit


1.
FEMA
2.
Form 2A
3.
15 CA
4.
15 CB
Step 4 Intimation to Head office with details of Buyers credit and earlier financials
Step 5 Send letter of undertaking
Step 6 Payment to be done on buyers credit disbursement date
Step 7 Buyers credit distribution message to be mailed to the customer and branch.
Step 8 FOREX turnover update
Step 9 Due ate noting in register, dairy outlook
Step 10 CLBYCR Noting
DOCUMENTS REQUIRE FOR BUYERS CREDIT AT TJSB BANK
1.

Incoming note

2. Process note
3. Outgoing note
4. Request Application From client
a) Documentary remittance
b) Commercial Invoice
c) Transport bill of ladding
d) Cargo transport insurance Policy
e) Certificate of Origin
f) Packing list