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Export Finance in India

Export Finance in India provides pre-shipment and post-shipment financing to exporters. Pre-shipment financing includes working capital advances to purchase raw materials and finance production, and can take the form of clean export packing credit, packing credit loans, or back-to-back letters of credit. Post-shipment financing includes purchasing or discounting export bills, advances against bills for collection, and advances against duty drawback receivables from the government.

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443 views6 pages

Export Finance in India

Export Finance in India provides pre-shipment and post-shipment financing to exporters. Pre-shipment financing includes working capital advances to purchase raw materials and finance production, and can take the form of clean export packing credit, packing credit loans, or back-to-back letters of credit. Post-shipment financing includes purchasing or discounting export bills, advances against bills for collection, and advances against duty drawback receivables from the government.

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adil.abrar3504
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Export Finance in India

Export Finance is made available to exporters for the specific purpose of procuring/ purchase, processing/ production/ manufacturing, packing and shipment of goods meant for exports Mainly working capital advance extended to exporters to meet their pre and post shipment requirements

Pre-shipment Export Finance


This is extended to the customers for procuring goods, purchase of raw materials, processing them and converting them into finished goods for the purpose of exports The type of limit depends upon the nature of production and procurement system concerning the commodity to be exported

Clean Export Packing Credit (EPC) can be granted when first class clients have to give advance payment to the suppliers

Pre-shipment Export Finance


The clean advance is converted to EPC hypothecation/ pledge or secured shipping loan depending upon the nature of the commodity. Packing credit hypothecation is extended where raw materials, work-in-process and finished goods meant for exports are available as security. The processing/ manufacturing may be undertaken by the exporter himself or through subcontractors as captive units.

Pre-shipment Export Finance

Sometimes exporters have to obtain the raw materials in bunched lots or the material procured may be sizeable in nature. In such cases packing credit loan can be granted in the form of pledge. Once the goods are ready for shipment and the exporter/ supplier has handed over the goods to the transporter/ clearing and forwarding agents for effecting the shipment, the advance can be granted as secured shipping loan.

Pre-shipment Export Finance


Where the exporter procures goods from subsuppliers, back to back L/C facility can be extended. EPC can be granted to subsuppliers. EPC is usually released on the basis of L/Cs or a confirmed order. If EPC is granted on the

basis of a cable or telex message from the overseas buyer, then the exporter has to submit the original L/C or order once it is received. The L/C or order is stamped with the Banks stamp in order to prevent the exporter from availing of EPC from another source.

Pre-shipment Export Finance


Pre-shipment advance is usually granted up to a maximum of 180 days or expiry of relative LC or order, whichever is earlier. In some cases EPC can go up to 360 days. Pre-shipment Credit can be in Indian Rupees or in Foreign Currency. This facility was given as exporters complained that interest in India was high. All pre-shipment finance is self-liquidating in nature from post-shipment finance. If pre-shipment advances are not adjusted by submission of export documents, the advances will cease to qualify for concessional rate of interest ab initio.

Ordinarily, each packing credit sanctioned should be maintained as a separate account for the purpose of monitoring of sanction and end-use of funds.

Pre-shipment Export Finance


Banks may release the packing credit in one lump-sum or in stages as per requirements In the case of clients with good track record banks may extend Pre-shipment Credit Running Account facility, without insisting on prior lodgement of letters of credit/firm export orders. However, letters of credit/firm orders should be produced within a reasonable period of time to be decided by the banks. Banks should mark off individual export bills, as and when they are received for negotiation/collection, against the earliest outstanding preshipment credit on 'First In First Out' (FIFO) basis.

Post Shipment Export Finance


Post-shipment finance means any credit provided

by a bank to an exporter from the date of extending the credit after shipment of goods to the date of realisation of sale proceeds. Post-shipment advance mainly take the form of (i) Export bills purchased/ discounted/ negotiated (ii) Advances against bills for collection (iii) Advances against duty drawback receivable from Government

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