INSTITUTIONAL FRAMEWORK FOR EXPORT FINANCE

Financial benefits available to Indian exporters

INTRODUCTION
Export business is capital consuming. Sound financial framework is created by our government to meet the requirements of this priority sector of the economy. To accelerate the flow of credit financial institutions have been established in our country.

1) RESERVE BANK OF INDIA Central bank. Apex body of all financial institutions of the country. It does not provide directly export finance to the exporters. It provides refinance facilities to the commercial banks and other financial institutions against their term loan commitment.

The objective of RBIs policy is to Free export sector from the impact of its policy of restricting the domestic credit so that exporters do not suffer due to scarcity of finance. RBI has taken several measures to encourage the commercial banks to provide liberal credit to the exporters .

These measures are classified into the following three groups 1. Fiscal and financial measures. 2. Industrial licensing policy measures. 3. Import-export policy measures.

SCHEMES ANNOUNCED BY RBI FROM TIME TO TIME WITH RESPECT TO EXPORT FINANCE Export bills credit scheme. Pre-shipment credit scheme. Export credit scheme. Refinance under DBK credit scheme. Liberal refinance facility. Concessional rate of exchange, interest, discount etc. Refinance facilities.

2) COMMERCIAL BANKS
Commercial banks provides major part of export finance. They extend financial assistance both at preshipment and post-shipment. The directives of RBI under Exchange Control Regulation Act make it obligatory for payments of exports to be settled through the medium of a bank in India authorized to deal in foreign exchange.

SERVICES

COMMERCIAL BANKS ARE DIVIDED INTO TWO

1.

Fund base assistance also known as Financial Services. Non-fund based assistance also known as non-financial assistance.

2.

Fund base assistance

These are in form of advances, credits and loans offered at various stages. 1. Pre-shipment finance 2. Post-shipment finance

NON-FUND BASED ASSISTANCE

1. Bank guarantees Bid bonds Performance guarantee Advance payments guarantee Guarantee for payment of retention money Guarantee for loans in foreign currency

2. credit ratings of importers. 3. Information about foreign exchange. 4. Dollar account 5. Invoicing in foreign currency 6. Confirmation of letters of credit 7. Forward exchange contracts

3) EXPORT-IMPORT BANK OF INDIA(EXIM)

The EXIM bank of India is a public sector financial institution established on 1st January,1982. It started operating with head office in Mumbai from 1st March,1982. It was established by an Act of Parliament, for the purpose of financing, facilitating and promoting foreign trade. This bank was mainly created for the purpose of financing medium and long term loans to exporters .

OBJECTIVES AND PURPOSE OF EXIM BANK 1. Financing of export and imports of goods and services not only of India but also of third world countries. 2. Financing of joint ventures in foreign countries. 3. Financing R &D and tecno- economic studies. 4. Co-financing global and regional development agencies. 5. Financing of Indian manufactured goods, consultancy and technological services on deferred payment terms.

OF INDIA 4)

4) SMALL INDUSTRIAL BANK INDIA (SIDBI)

SIDBI was established in April 1990 Under the Act of Parliament, the SIDBI Act 1989 as a wholly owned subsidiary of Industrial Development Bank of India. It is the premium development bank in the country.

OBJECTIVES OF SIDBI
To serve as the principal financial institution for promotion, financing and development of small scale sector. To coordinate the functions of the institutions engaged in promotion, financial or developing small scale sector.

SCHEME / ROLE OF SIDBI

Refinance assistance( seed capital scheme, tourism finance scheme, term finance scheme, equipment finance scheme) Direct finance schemes(ISO 9000, project finance scheme ) Bills schemes (direct discount schemes, bills rediscounting scheme)

GUARANTEE LTD.(ECGC)

5) EXPORT CREDIT CORPORATION OF INDIA

ECGC was established in India in 1964. ECGC plays dual role in promoting exports. It issues suitable insurance policies to the exporters against possible risks of export business It provides financial guarantees to banks and exporters against deferred credit terms.

ECGC is designed to protect exporters from the consequences of payment risks both political and and commercial. It helps the exporter in obtaining financial assistance from commercial banks and other financial institutions. It charges low rates of premium to enable exporters to effectively compete in international market.