Trade

Finance

Exports/EDP
MS/ECIB/AC
U FEMA Exports

1 Abraham George, Faculty, IBS

 Export, Exporter & Exporter Obligation

Section 2(l) of the FEMA of 1999 defines

export as the act of sending out goods or
services from India & includes the
following:
• Goods: Sending out goods by land, sea, or
air, for sale, lease, or hire-purchase
• Services: Providing services to a person
outside of India
• Software: Sending software electronically

2 Abraham George, Faculty

 EXPORTS & IMPORTS - General
Goods & Services

Regulator Goods : DGFT, functioning under Ministry of

Commerce & Industries
Services: Services Export Promotion
Council(SEPC), functioning under Ministry of
Commerce & Industries
Software: Software Technology Park of
India(STPI) functioning under Ministry of
Electronics & IT
Policy/Act Foreign Trade Policy (FTP)
Current FTP : 2023 - 28
(01.04.2023 – 31.03.2028)
Foreign Exchange Management Act 1999
w.e.f 01.06.2000

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 Trade & Exchange Control Guidelines
 Importer-Exporter Code Number(IEC Number) : 10 digit number
issued by DGFT. After the introduction of GST, PAN is allotted as
IEC Number.
 Export of Services: Obtain Registration cum membership
Certificate from Services Export Promotion Council
(SEPC)/Federation of the Indian Exporters Organization(FIEO)
 Export of software : Registration with Software Technology Park
of India (STPI)
 All Importer/Exporter should quote IEC number & the registration
number in all their declarations/forms
 Export Declaration Forms
 All the goods and services exported from India to be declared to
Customs authority to the effect that the full value of exports will
be realized within the prescribed period & in the prescribed
manner .

4 Abraham George, Faculty

 Trade & Exchange Control Guidelines
EDF Form SOFTEX Form
Exports other than software Export of software in non-
made by all modes physical form

Computerization of Customs Offices- Introduction of Electronic

Data Interchange(EDI)System in Customs Office enable them to
process the shipping bills electronically. Thus, earlier GR form is
replaced by EDF which should be submitted in duplicate by
Exporter and after verification, the “exchange control copy” of
the shipping bill will be given to the exporter for submission to AP
along with other documents.
Declaration in Form EDF: Declaration in form EDF shall be submitted in
duplicate to the Commissioner of Customs.
Declaration in Form SOFTEX: Declaration in Form SOFTEX in respect of
export of computer software shall be submitted in triplicate to the
designated official of Ministry of Information Technology, at STPI or at the
FTZs or SEZ
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 EDF – Exemptions / Waiver
Submission of export declaration forms are exempted in the
following cases:
 Trade samples & publicity material sent free of cost
 Personal effects of travellers, whether accompanied or unaccompanied
 Gift worth not exceeding Rs 5 lacs
 Trade fair and exhibition purposes
 Aircrafts/aircraft engines & spares for repairing/overhauling
 Goods imported free of cost on re-export basis
 Goods exported for testing on re-import basis
 Defective goods sent outside India for repair & re-import
 Status Holders/SEZ Units can avail EDF waiver up to 2 % of average export
realization during preceding 3 licensing years
 Gems & Jewellary/Gold & precious stones- Rs 1 Cr or 2% of average annual
export realizations whichever is lower
 Pharma companies – 8 % of average annual export realizations
 Exports permitted by RBI, on application made to it

6 Abraham George, Faculty

 Set Off of Export Receivable against Import Payable
 Exporters are eligible to set off import bills & export bills
 Both export & import should have taken during the same
calendar year and through same AD Bank
 Set-off of export receivables against goods shall not be
allowed against import payables for services and vice
versa
 Overseas buyer & supplier should be the same and
consent from the parties should be obtained
 AD Bank should obtain documentary evidences for both
export & import
 EDF will be released only after adjustment of entire
export proceeds

7 Abraham George, Faculty

 Netting of Export Receivables against Import
Payables

 Exporters located in SEZ are eligible to set off

 Allowed for both goods & services
 Indian entity & overseas buyer/supplier should be the
same
 Netting off will be done on the date of balance sheet
 EDF will be released only after adjustment of entire
export proceeds
 AD Bank should be satisfied with the documentary
evidences of export/import made

8 Abraham George, Faculty

 EDPMS
 IT based platform launched by RBI w.e.f 01.03.2014 to monitor
the export of goods & services.
 EDPMS simplifies the procedure for filing returns on a single
platform and for better monitoring; to integrate the returns related
to
a) handling of shipping bills for caution listed exporters;
b) delayed utilisation of advances received for exports; and
c) exports outstanding beyond the stipulated period
 Flow of data :
Customs Dept (approve shipment)Authorised Dealer
(Negotiation) and (Realisation)
 XOS : Export Bills Outstanding Statement – dispensed with from
01.03.2014. However, exports bills prior to 01.03.2014,
submission of XOS is required.

9 Abraham George, Faculty

 Asian Clearing Union (ACU)
Mechanism
 Asian Clearing Union established in 1974. Headquartered in
Tehran, Iran at the initiative of United Nations Economic & Social
Commission for Asia Pacific (ESCAP). ACU Countires: India,
Bangladesh,Pakistan,SriLanka,Nepal,Bhutan, Iran, Maldives &
Myanmar.
 ACU countries other than Nepal & Bhutan, should be settled
through ACU USD/ACU EUR/ACU JPY accounts maintained by
Indian Banks in their correspondent Banks in these countries.
 Export proceeds from Nepal and Bhutan will be in rupees and
from Myanmar the payment can be in any convertible currency,
in addition to the ACU mechanism.
 For exports to Iran, receipt may be allowed in any freely
convertible currency and/or in accordance with the directions of
RBI from time to time

10 Abraham George, Faculty

 Export value of goods/software/ services -
Document submission to AD & Period of realization
 Documents pertaining to export shall be submitted to the AD
mentioned in the EDF, within 21 days from the date of export, or
from the date of certification of the SOFTEX form.
 Where exporters’ present documents after the prescribed period
of 21 days from date of export, banks may handle them without
prior approval of the RBI, provided they are satisfied with the
reasons for the delay.
 Export value of goods / software/ services exported shall be
realised and repatriated to India within 3nine months from the
date of export & for exports to warehouse within15 Months.
 Date of export in case of export of software in other than
physical form, shall be the date of invoice covering such export.

11 Abraham George, Faculty

 Advance Payment against Exports

 Exporter who receives advance payment (with or without

interest), from a buyer / third party named in the EDF made by
the exporter, the exporter shall be under an obligation to ensure
that
 Shipment of goods is made within one year from the date of
receipt of advance payment.
 ROI, if any, payable by the AP shall not exceed 100 basis points
above ARR (LIBOR). Alternative Reference Rates (ARRs) are
Risk Free Rates (RFRs) published by various authorities. Risk
Free Rates are Overnight rates and based on significant
transaction volumes compared to the underlying market used in
the LIBOR calculation
 Documents covering the shipment are routed through the AD
through whom the advance payment is received.

12 Abraham George, Faculty

 Direct dispatch of documents by the
exporter
 Banks should normally dispatch shipping documents to their overseas
branches/correspondents expeditiously. However, they may dispatch shipping
documents direct to the consignees resident in the country of final destination of
goods in cases where:
 a) Advance payment or an irrevocable LC has been received for the full value of
the export & the underlying sale contract/letter of credit provides for dispatch of
documents direct to the consignee or his agent resident in the country of final
destination of goods.
 b) Banks may also accede to the request of the exporter provided the exporter is
a regular customer and the bank is satisfied, on the basis of standing and track
record of the exporter and arrangements have been made for realization of
export proceeds.
 (ii) Banks may also permit 'Status Holder Exporters and units in SEZ to dispatch
the export documents to the consignees outside India subject to the terms and
conditions that:
 The export proceeds are repatriated through the AD banks named in the EDF.

 Duplicate copy of the EDF is submitted to the AD , by the exporters within 21

days from the date of shipment of export

13 Abraham George, Faculty

 Reduction in invoice value
 If, after a bill has been negotiated or sent for collection, its
amount is to be reduced for any reason, AD may approve such
reduction, if satisfied about genuineness of the request,
provided:
 Reduction does not exceed 25 per cent of invoice value:
 Does not relate to export of commodities subject to floor price
stipulations
 Exporter is not on the exporters’ caution list of the RBI.

Exporters who are in the export business for more than three
years, reduction in invoice value may be allowed, without any
percentage ceiling, subject to the above conditions as also subject
to their track record being satisfactory, i.e., the export outstanding
do not exceed 5 per cent of the average annual export realization
during the preceding three financial years.

14 Abraham George, Faculty

 Extension of Time

 RBI has permitted the AD to extend the period of realization of

export proceeds beyond stipulated period of realization, up to a
period of six months, at a time, irrespective of the invoice value
of the export subject to the following.
 Export transactions covered by the invoices are not under
investigation by Dir. of Enforcement / CBI or other agencies,
 AD is satisfied that the exporter has not been able to realise
export proceeds for reasons beyond his control.
 Exporter submits a declaration that the export proceeds will
be realized during the extended period,
 While considering extension beyond one year from the date of
export, the total outstanding of the exporter does not exceed
USD one million or 10 per cent of the average export realizations
during the preceding three financial years, whichever is higher.

15 Abraham George, Faculty

 Write-off of unrealized export bills

 Exporter who has not been able to realise the outstanding export
dues despite best efforts, may either self-write off or approach
the AD who had handled the shipping documents, with
appropriate documentary evidence. The limits prescribed for
write-of
Particulars Limit Limit(%) in relation to
Self-write-off by an 5%
exporter Total export
(Other than the Status proceeds realised during the
Holder Exporter) calendar year preceding the
Self-write-off by Status year in which the write-off is
10%
Holder Exporter being done
Write-off by AD Category-1
Above limits of self-write-off 10%
and write-off by the AD shall be
Bank
reckoned cumulatively and shall be available subject to the
following conditions:
 a) The relevant amount has remained outstanding for more than
one year;
16 Abraham George, Faculty
 Write-off of unrealized export bills

 Documentary evidence is furnished indicating that the exporter

had made all efforts to realise the export proceeds;
 Exporter is a regular customer of the bank for a period of at least
6 months, is fully compliant with KYC/AML guidelines AD is
satisfied with the bonafides of the transaction.
 Case falls under any of the undernoted categories:

i. Overseas buyer has been declared insolvent and a certificate

from the official liquidator, indicating that there is no possibility of
recovery of export proceeds, has been produced.
ii. Goods exported have been auctioned or destroyed by the Port /
Customs / Health authorities in the importing country;
iii. Overseas buyer is not traceable over a reasonably long period of
time.

17 Abraham George, Faculty

 Export Contracts - Invoicing
 Export contracts and invoices shall be denominated either in freely
convertible currency or Indian rupees but proceeds shall be realised in
freely convertible currency.
 Invoicing, payment and settlement of exports and imports is also
permissible in INR. INR settlement shall take place through the Special
Rupee Vostro Accounts opened by AD banks in India.
 Third party payments for export / import transactions is permitted
subject to following conditions:
 Firm irrevocable order backed by a tripartite agreement should be in
place.
 AD bank should be satisfied with the bona-fides of the transaction and
export documents, such as, invoice / FIRC.
 Third party payment should be routed through the banking channel only;

 Exporter should declare the third party remittance in the EDF and it is
the responsibility of the Exporter to realise and repatriate the export
proceeds from such third party.

18 Abraham George, Faculty

 Export of Currency
RBI permission is required for export of Indian
currency except to the extent permitted.
Any person resident in India may take outside
India (other than to Nepal and Bhutan) currency
notes of up to Rs.25,000/- only
Any person resident outside India, not being a
citizen of Pakistan and Bangladesh may take
outside India currency notes up to Rs. 25,000
while exiting only through an airport

19 Abraham George, Faculty

 Short Shipment & Shut Out
Shipment

When shipment covered by EDF is short-shipped,

the exporter must give notice of short-shipment to
the Customs & obtain certified short-shipment
notice from the Customs.
Where a shipment has been entirely shut out and
there is delay in making arrangements to re-ship,
the exporter will give notice in duplicate to the
Customs in the form and manner prescribed,
attaching thereto the unused duplicate copy of
EDF and the shipping bill.

20 Abraham George, Faculty

 Overdue Bills – Follow-up
 Banks watch realization of bills & in cases where bills remain
outstanding, beyond the due date, the matter should be promptly
taken up with the concerned exporter. If the exporter fails to
arrange for delivery of the proceeds within the stipulated period
or seek extension of time beyond the stipulated period, the
matter should be reported to the RBI stating, where possible, the
reason for the delay in realizing the proceeds. Duplicate copies
of EDF/SOFTEX should be held by AD until the full proceeds are
realized
Change of buyer/consignee
 Approval of RBI is not required if, after goods have been
shipped, they are to be transferred to a buyer other than the
original buyer in the event of default by the latter, provided
reduction in value, if any, involved does not exceed 25 per cent
of the invoice value and realization of export proceeds is not
delayed beyond 9 months
21 Abraham George, Faculty
 Refund of export proceeds
Banks, through whom the export proceeds
were originally realised may consider
requests for refund of export proceeds of
goods exported from India and being re
imported into India on account of poor
quality.
While permitting such transactions, banks
shall:
Exercise due diligence regarding the track
record of the exporter;
Verify the bona-fides of the transactions; &
that no export incentive has been availed
by the exporter against the relevant
22 exports.
Abraham George, Faculty
 E.BRC from EDPMS
Banks are required to update the EDPMS with data of export
proceeds on as and when realised basis and are required to
generate eBRC only from the data available in EDPMS, to ensure
consistency of data in EDPMS and consolidated eBRC.
Agency commission on exports
Banks may allow payment of commission, either by remittance or
by deduction from invoice value, on application by the exporter.
Commission may be allowed subject to following conditions
Amount of commission has been declared on EDF/SOFTEX form &
accepted by the Customs. In cases where commission has not
been declared on EDF/SOFTEX form, remittance may be allowed
after satisfying reasons adduced by the exporter for not declaring
commission on EDF, provided an agreement between the
exporters and/or beneficiary for payment of commission exists.

23 Abraham George, Faculty

 Foreign Currency Accounts - Exporters

Type of Overseas FC Diamond Dollar A/c Exchange Earner’s

account Account ( DDA ) Foreign Currency Account
(OFC) (EEFC)
Eligibility Participants in Exporters-Importers A resident Indian, who is an
Intl. Trade dealing in rough/polished earner of FC can keep up to
Fair/exhibitions diamonds 100% of their earnings in FC
Conditions Funds should Should have good track Aggregate accruals of FC in
be repatriated record of at least 2 years this account in a calendar
to India within and average export month should be converted
one month of turnover of Rs 3 crores. into INR on or before the last
close of the Max 5 a/cs. day of the succeeding month
trade fair Aggregate accruals of FC
in this account in a
calendar month should be
converted into INR on or
before the last day of the
succeeding month

24 Abraham George, Faculty

 What is Export Credit

Export Credit facility - Bank sanctions exporter/sellers

required working capital before the importer pays
for the delivered goods or services.
 Let’s understand:
 Importer enters into purchase agreement with the
exporter/seller.
 Both agree on the payment terms to pay on the
specified date.
 Exporter ships the goods, & he will not receive any
payment from the importer until the invoice is due.
At this point, Export finance helps them in the cash
flow for day-to-day business.

25 Abraham George, Faculty

 Why Export Credit
 Large Size – Quantum of funds is generally large
thereby increasing the branch advance portfolio.

 Self Liquidating – Export credit is in the form of pre-

shipment & post-shipment advances where pre-
shipment advance is adjusted out of the proceeds of
post-shipment advance & post-shipment advance is
adjusted by realisation of export bills.

 Shorter period – Normally adjusted within 9 months

26 Abraham George, Faculty

 Why Export Credit / Regulations
 Minimal risk as it is backed by order & letter of
credit

 Non Interest Income can be earned by way of

commission on bills discounted / negotiated.

Regulations
 RBI Guidelines -Exchange Control Regulations
(FEMA)
 Trade Control Regulations (Foreign Trade Policy,
2023 / 2015-20)
 ICC Guidelines-UCPDC-ICC 600 & URC-ICC 522
27 ECGC Guidelines
Abraham George, Faculty
 Pre-Requisites
 Importer-Exporter Code No. issued by DGFT.

 Regular, Bonafide Exporter.

 Not in RBI’s caution list.

 Goods freely exportable - Not classified as banned/

restricted.

 Country of buyer not under list of trade barrier.

 Party not under SAL (Specific Approval List of

ECGC).
28 Abraham George, Faculty
 Pre-Requisites

 Country not under Restricted Cover

Countries.

 Limit within the Discretionary limit of ECGC.

29 Abraham George, Faculty

 Other Requisites
Backed by LC (Letter of Credit) issued by Prime
Banks.

Without hazardous clause.

 Backed by Confirmed Order.

Buyer’s credentials to be established by-credit

report.

ECGC’s cover against buyer(ecgc fixes limit for

each exporter on the basis of buyer’s
worthiness).
Abraham George, Faculty
30
 Types of Export Finance
 Pre-Shipment Finance

 Packing Credit.
 PCFC (Packing credit in Foreign Currency)

 Post-Shipment Finance

 Export bills purchased / negotiated / discounted.

 Advance against bills sent on collection basis.
 Advance against exports sent on consignment basis
 Advance against undrawn balances
 Advance against duty draw backs
31 Abraham George, Faculty
 Operational Features
 Export finance can be classified into 2
categories namely Preshipment &
Postshipment finance.

Preshipment finance

 Should be a bonafide exporter & should be

in possession of export order.
 Finance granted for procuring,
manufacturing, packaging as per order &
to ship them within the stipulated time.
32 Abraham George, Faculty
 Operational Features

33 Abraham George, Faculty

 Operational Features
 Goods are then declared to the customs
authorities by submitting the export
declaration forms like GR, SDF (Shipping
Declaration Form).

 Certified by the customs the exporter is

permitted to load the goods into the ship.

 Shipping co. issues the transport

document called the bill of lading.

34 Abraham George, Faculty

 Operational Features

 Bank adjusts the pre-shipment finance by

negotiating / purchase / discount of the bill &
docs. are despatched to importers bank for
realisation of the bill.

 After realisation the post-shipment finance is

liquidated & the SDF form is certified regarding
receipt of full value of export.

35 Abraham George, Faculty

 Pre-Shipment Finance / Packing
Credit
 Bank finances an exporter for purchase,
processing, manufacturing, packing,
warehousing of goods prior to shipment.
All cost involved in making the goods are
eligible to be financed under packing
credit (P/C).

 Granted on the basis of a firm order or L/C

or any other evidence of order for export.

 P/C can be sanctioned to an exporter or to

36 supplier of goods to exporter /
Abraham George, Faculty
 Packing Credit – Eligibility
 Exporter should obtain IECN no. from DGFT.
 Should not be in RBI Caution list & in SAL list
of ECGC and should have valid export order.

 Export order should be scrutinised for

importers country so as to eliminate country
risk & should not be in ECGC restricted cover
list.
 Last date of shipment should be noted.
 Bank should keep copy of the export
order & an endorsement should be made
on the order to avoid double finance.
37 Abraham George, Faculty

 Packing Credit – Flow Chart
Sanction of Export Order /
Limits LC

Limit ID Application
for Release

Recover PCL
through Bills Opening of
Purchase / PCL / RPC
Inward
remittance
Disburseme
nt of PCL
Calculate
Interest Closure of
the account

38 Abraham George, Faculty

 Packing Credit – Period of Finance
 To enable the exporter to ship the goods, P/C
should be disbursed within last date of shipment
given in the L/C or order.

 Normal period by which P/C has to be adjusted is

180 days from date of advance. Period can be
extended upto 360 days. Concessional ROI is
allowed till 360 days.

 If P/C is not adjusted within 360 days it will

cease to qualify for concessional interest from
the date of finance ab initio.
39 Abraham George, Faculty
 Period of Finance
 Report should be made to ECGC for O/S
beyond 360 days. Extension of P/C is
allowed upto 360 days depending upon the
need without reference to ECGC.

Amount of Finance
 Need based. Should not exceed FOB value
or domestic value of goods which ever is
lower.
 Maximum finance to the extent of 100%
of FOB value or alternatively 75% on CIF
40 value.
Abraham George, Faculty
 Amount of Finance
 P/C can be granted either in the form of
loan a/c or running a/c facility.

 Loan to be granted against export order &

controlled separately as per each order.

 Running a/c means all P/C given against

various export orders will be debited to
the same a/c like CC a/c. Sanction advice
of the limit should mention if it has to be
controlled as a running a/c.
41 Abraham George, Faculty
 ECGC Cover
 Bank has opted for the ECIB-PC (WTPCG) of ECGC.
Premium has to be remitted in advance for each
month.
Overdue PC
 P/C becomes overdue if it remains o/s beyond the
period of sanction or extended due date or 360
days whichever is earlier.

 Report must be sent to ECGC within 30 days of the

a/c becoming overdue.

 Within 4 months from due date / extended due

42
date or within 1 month from date of recalling
Abraham George, Faculty
whichever is earlier Report of Default (ROD) should
 Overdue PC
 ECGC premium should be paid upto date
& inclusive of the month in which ROD is
sent to ECGC & should be stopped
thereafter.
 Claim to be lodged within 6 months of
date of default.

43 Abraham George, Faculty

 PCFC
To make export credit at competitive interest rates,Banks are allowed to extend export
credit in Foreign Currency at Alternate Reference Rate (ARR) linked interest rate.

1. Pre-shipment Credit in Foreign Currency ( PCFC):

PCFC can be allowed in USD,GBP,EUR or JPY out of funds available with bank in
EEFC,RFC,FCNR,RFC(D) or from borrowings from banks abroad.
Period : Max 180 days & further extension can be considered on merits.
Interest : Linked to ARR & spread as advised by RBI from time to time.
Purpose : Funds can be used for acquiring domestic inputs or for imports
Liquidation : PCFC should be liquidated by discounting/rediscounting the FC bill under
EBR scheme

2.Export Bill Rediscounted Abroad (EBR)

Scheme is to finance export bills in FC, similar to financing of export bill under post-
shipment stage like; FBP/FUBD/FBN under rupee financing. Bank may utilize the FC
funds available with them to discount the usance bill and retain them in their
portfolio without resorting to rediscounting.
Banks are also allowed to rediscount export bill abroad at rates linked to international
interest rates.
Period: Max 180 days
Interest : Linked to Secured overnight financing rate (SOFR/ARR), and spread as
advised by RBI from time to time
44 Abraham George, Faculty
 Post-Shipment Credit
 Post shipment credit means any advance
granted by a bank to an exporter of goods
from India from the date of extending credit
after shipment of goods to date of
realisation of export proceeds.

 Finance is against receivables & is given

mostly against bills.
Eligibility

 To be given to the actual exporter or to an

exporter in whose name export docs are
45 transferred .
Abraham George, Faculty
 Purpose
 Finance is extended against evidence of
shipment of goods & is meant for financing
export sale receivables till the date of
realisation of export proceeds.

Form of finance
 Bill finance in the form of purchase /
discounting/ negotiating export bills.

Quantum
 100% of invoice value / bill amount
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 Postshipment Limit

47 Abraham George, Faculty

 FEDAI & RBI Guidelines
 Maximum period of finance is 365 days subject to the following.

For Demand Bills: Post Shipment Finance at concessional ROI can

be given for normal transit period (NTP) of 25 days for all bills in foreign
currency.
 . In case of usance bills, concessional credit can be granted up to
NTP + Usance period + Grace period subject to a maximum duration
of 365 days from date of shipment.

 Normal transit period: NTP is the average period normally involved

from the date of negotiation / purchase / discount till the receipt of bill
proceeds in the Nostro account of the bank concerned.

48 Abraham George, Faculty

 FEDAI & RBI Guidelines
 USANCE Bills : In case of usance bills concessional
ROI should be upto due date of the bill if it can be
ascertained at the time of negotiation of the bill
subject to maximum period of 365 days.

 If due date cannot be ascertained then we have to

calculate the notional due date & concessional ROI
will be up to notional due date. Notional due date is
arrived at by adding normal transit period &
usance period if applicable.

 Effective date of payment of an export bill is the

date of credit to banks nostro a/c irrespective of
date of vouching by the AD.
49 Abraham George, Faculty
 Types of Post-Shipment Finance

 Export bills negotiated / purchased / discounted.

 Advance against export bills sent on collection.
 Advance against exports sent on consignment basis
 Advance against undrawn balances
 Advance against duty draw backs

50 Abraham George, Faculty

 Export Bills Negotiation
 Bills drawn can be negotiated only if letter of
credit authorises the same . Negotiation means
paying value of the export bill without recourse
to the exporter.
 Negotiating bank pays the amt to the
exporter after ensuring that documents are
credit compliant.

 Bank claims from the l/c opening bank or any

other bank as mentioned in the l/c for
reimbursing the amt.
 Documents are also sent to the l/c opening
bank who scrutinises the documents & if
Abraham George, Faculty
51
documents are discrepant it may reject the
 Export Bills Negotiation

When documents are discrepant bank can go

for the following options

 Notify discrepancies to l/c opening bank &

ask for amendments to the l/c & then
negotiate the bill.
 Negotiate the bill under indemnity i.e. if l/c
opening bank refuses payment exporter
would pay the amt.+ interest.

 Last option is to take documents only for

52 Abraham George, Faculty
collection.
 Export Bills Negotiation
 Banks can handle export docs only if GR/SDF
(Shipping declaration form) specifies its name
to handle the documents.

 AD should verify that the exporter has

enclosed all documents mentioned in the l/c.
 Enter the bill in the export bill register. Charge
interest in case of demand bills for NTP & in
case of usance bill upto actual due date or
notional due date.

 Despatch the documents to the bank

mentioned in the l/c & endorse the
53 documents in favour of the collecting bank.
Abraham George, Faculty
 Export Bills Negotiation
 Correspondent bank will realise the bill & credit the proceeds to nostro
a/c of the bank & send advice by swift.
 If bill remains unpaid after due date bank has to follow up for
realisation of bill.
 If it remains pending for 30 days from due date, bank has to
crystallise as per FEDAI rules by converting fgn currency liability to
rupee liability on the 30th day from due date.
 Crystallisation is the process of converting the FC liability of the
customer into INR liability.
 Foreign currency Export bills outstanding beyond due date or notional
due date should be crystallised @ TT Selling rate.
 Profit or loss in crystallization should pass on to exporter only.
 If bill payment is defaulted & advance is covered under ECGC then
the bank has to claim the amount from ECGC

54 Abraham George, Faculty

 Advance against Export Bill on Collection
 Bank may be required to sanction advance
against export bill sent on collection in the
following circumstances.

 If any discrepancy is evident in the export

bill, then it cannot be negotiated & P/C
advanced cannot be covered under ECIB-PC
(WTPCG) once the export bill is raised as
per ECGC guidelines.

 As such we advance against export bill sent

on collection basis & it will be covered by
55 post-shipment
Abraham George, Faculty finance guarantee.
 Advance against Export Bill on Collection

 Even when the exporter requests to send

the bill on collection basis anticipating
strengthening of foreign currency & also
when exporter has utilised his bill purchase
limit, the bill has to be sent on collection.

56 Abraham George, Faculty

 GOLD CARD STATUS FOR
EXPORTERS
 Gold Card Scheme envisages certain additional benefits to all exporters with clean
track record.
 Exporters blacklisted by ECGC or having overdue bills in excess of 10% of previous
years turnover are not eligible for Gold Card Scheme
 Gold Card holders enjoy simpler and more efficient credit delivery mechanism
 Banks would consider waiver of collaterals & exemption from ECGC Guarantee
 Charges & fee structure including interest rates are relatively lower to gold card holders
 In principle limits will be sanctioned for a period of 3 years with automatic renewal
subject to fulfilment of sanction terms.
 Stand-by limit of not less than 20 % of the assessed limit may be additionally available
to meet urgent credit needs
 In case of unanticipated export orders, norms for inventory may be relaxed
 Gold Card holders will be given a priority in considering PCFC/FC Term Loans

Time Line for credit sanction

Type of sanction Fresh Renewal Ad-hoc

Sanction limit
Processing time 25 days 15 days 7 days
57 Abraham George, Faculty
 Booking of Forward Contracts – Deliverable/Non
Deliverable

 Limit : Based on the declaration of the exposure & past performance

up to the average of the previous three Financial Years actual
import/export turnover or the previous years actual import/export
turnover whichever is higher.
 Non-deliverable Basis : Up to 75% of the eligible limit
 Deliverable Basis : Contracts booked in excess of 75% of the eligible
limit
 Eg:
 The annual turnover of an exporter is given below:
 Year – 1: INR 20 Cr, Year – 2: INR 25 Cr, Year -3 :INR 30 Cr
 Eligible limit for booking forward contract – INR 30 Cr
 Eligible Non-deliverable forward contracts : INR 22.50 Cr
 ( Contracts booked in excess of Rs 22.50 Crs can’t be cancelled)

58 Abraham George, Faculty

 Deemed Exports
Deemed exports refers to those transactions in which
goods supplied do not leave the country and payment for
such supplies is received either in INR or in freely
convertible foreign exchange.
Categories of supply
Supply of goods funded by UN agencies
Supply of goods to nuclear power projects
Supply of goods to projects financed by multilateral or
bilateral agencies/funds
Supply of capital goods against EPCG( Export Promotion
Capital Goods) authorization
Supply of goods to EOU/STP/EHTP/BTP

59 Abraham George, Faculty

 ECIB- Overview
Issued to Banks and Financial
Institutions
To Cover the risk of non payment of
advances by exporters due to Insolvency
or protracted default
Covers can be obtained on Individual or
Whole turnover basis.
Covers available for export credits only
(Fund Based and Non Fund Based)

60 Abraham George, Faculty

 Risks Covered under ECIB

Insolvency of the Protracted Default

Exporter of the Exporter

Risks Not Covered under ECIB

Advances against
Interest payable to
Receivables such Other Debits not
the Bank by the
as Duty Draw related to Exports
Exporter
Back

61 Abraham George, Faculty

 Covers of Limit to an
Exporter

Discretionary Limit
Limit up to which the Bank can grant
advances to an exporter without prior
approval of the Corporation-DL varies
from bank to bank.

Banks can get cover by just a

Notification of Limit
62 Abraham George, Faculty
 Covers of Limit to an
Exporter
Notification
Approval

Discretionary Limit
Limit up to which the Bank can grant
advances to an exporter without prior
approval of the Corporation-DL varies
from bank to bank.

Banks can get cover by just a

63 Notification of Limit
Abraham George, Faculty
 Notification
of Limit

Exporter should
New Account Review / not be in our
Account should
or Taken Over Renewal / Specific
be Standard
Account Enhancement / Approval List
within DL Reduction within (SAL)
300 crores

Time Limit: 30 days from the date

of sanction

64 Abraham George, Faculty

 Approval of Limit
 Beyond DL:
 New Account or Taken over account Equal to or Beyond
Rs.300 crores:
 For any Exporter / Exporter Group
 If:
 Exporter is in SAL; Account is other than ‘Standard'
 Combined Limit (CC + PC)
 PC component exceeds Rs.25 crores or 25% of the
combined limit
 Per buyer exposure (PC+PS):
 Exceeds Rs.100 crores (which includes interchangeability
of the limit of PC and PS facilities permitted by the bank)
 Diversification of business:
 Exporter has diversified to an unrelated business and is
65 moreGeorge,
Abraham than Faculty
10% of the Export Turnover
 Situations which qualify for ECGC Prior
Approval
 SAL / Asset classification other than ‘Standard’
 BSAL / RCC
 Extension in Due Date of advances beyond
discretion
 Holding on Operations / Rehabilitation /
Restructuring
 OTS / Compromise Settlement
 Specific Approval List (SAL): Those ‘Exporters’
who have come under our adverse notice
 Buyer Specific Approval List (BSAL): Those
‘Buyers’ who have come under our adverse
notice
 Restricted Cover Countries (RCC){Those
66 ‘Countries’
Abraham George, Facultywho are facing serious foreign
 Declaration & Premium
Declaration
 Monthly ASAP after the end of relevant month

 Declare the account wise Outstanding and the Average

Daily Product
 Ensure no account is omitted; Submit Nil Declaration

Premium: Timely payment of premium

 Payable on the ADP
 Differential Rates:
 Varies from Bank to Bank
 Varies from Year to Year
 Varies from PC to PS

 Payable up to the month (including) of ROD

67 Abraham George, Faculty
 Extension
 If the account is Standard and some
advances are overdue, apply for
Extension in due date in the specified
format
For PC- beyond 360 days

For PS – beyond 180 days

In case of Status Holders for PS- beyond

68 360 days
Abraham George, Faculty
 Report of Default (RoD)

• Timely submission of RoD is very

important

• Delay may constitute a serious lapse

• Either within 4 months from the due

date / extended due date or within one

69
month from the date of recall
Abraham George, Faculty
 ECGC guidelines –Claims
• Recalling of advance
• Claim form

Basis for processing claim :

• Scrutiny of claim form & documents
• Compliance of terms & conditions of
cover
• Compliance of sanction terms &
conditions
• Scrutiny of internal audit reports & RBI
inspection report
70 Abraham George, Faculty
 Documents required for
Processing of claim
• Details of advances in claim in prescribed format
• Bank undertaking
• Process note
• Sanction letter/Appraisal note
• Copy of notification /approval form submitted to ECGC
and acknowledgment / letter
• Copy of registered recall notice , SARFAESI notice, legal
suit
• Any correspondence further to such notice
• Copy of unit inspection reports and internal audit
reports
• Copy of RBI inspection report, if any
• Staff accountability report
• Details of cash collaterals available and adjusted by
71 bankGeorge, Faculty
Abraham
 Further documents for Processing of
claims - PC
 Copies of ledgers for the period starting six
months prior to the date of first advance in
default.
 Stock statements for a period 12 months prior
to date of first advance in default and DP
(Drawing Power) register for the same period
 Stock inspection reports for the period of
advance and also Stock Inspection register for
the same period
 Valuation report of collateral before and after
the default
 EDPMS of the exporter
Abraham George, Faculty
72  End-use details with supporting vouchers
 Processing of claims – Post
Shipment
Copies of export documents such as
copy of orders , invoices , accepted Bills
of Exchange , AWB/Bills of Lading ,
custom certified shipping bills , non
payment advice , correspondence done
with Cargo company/Shipping lines in
case of DP bill.
Copies of credit reports received on the
overseas buyers under claim.

73 Abraham George, Faculty

 Few Basic Obligations under Post Shipment advance
• Banks to verify BSAL status of the buyer before granting PS
advance. Any PS advance granted on a bill, drawn on a
buyer who is in BSAL, will not be covered.
• Banks to take prior approval before granting any PS
advance for the buyer who is placed in RCC (High risk)
country.
• Banks to obtain recent credit report on overseas buyers
from reputed credit information Agencies, prior to
extending credit under PS .
• Report should be satisfactory and not more than one year
old.

74 Abraham George, Faculty

 Do’s and Don’ts - Do’s
1. Sanction/Pre-disbursal Terms
 Comply with all pre-disbursal conditions stipulated in the sanction
before disbursement of advances
 Obtain necessary approvals from competent authority of your bank for
any deviations/dilutions in banks’ sanction terms.
2. Notification/approval of limits
3. Premium and Declaration- Before 10th of subsequent month
4. Monitoring of Accounts
 Ensure to route all Bills through PC account in case of Running Account
 Ensure availability of stocks for the outstanding advances, Validity of
orders/LCs etc.
 Obtained periodical stock statement, order/LC copies and conduct
stock/unit inspection, stock audit as per sanction terms.
 Ensure DP at the time of release of PC
5. Extension/Nursing/Restructuring
6. Default/claim
7. Recovery/OTS
75 Abraham George, Faculty
 Do’s and Don’ts - Dont’s
1. Sanction/Pre-disbursal Terms
 Do not disburse advances without proper approvals/delegation.
 Do not deviate bank’s own sanction terms.
2. Notification/approval of limits- Do not fail to notify/prior
approval of limits.
3. Premium and Declaration- Do not exclude any account in the
monthly declaration unless specifically agreed to be excluded at
the time of obtention/renewal
4. Monitoring of Accounts
 Do not discount/purchase/negotiate bills on buyers where
earlier bills drawn on them are overdue.
 Do not grant advance when earlier advance are overdue.
 Do not advance when firm or their management/sister concern
in SAL.
5. OTS/CDR
 Do not enter into OTS/CDR etc. without the concurrence of
76 Abraham
ECGC.George, Faculty
 ECGC – Recovery guideline
Any recovery made by bank has to be
shared with ECGC in the same
proportion in which the loss is borne by
the ECGC within 30 days from the date
of recovery.

Recovery= (Amt Recd. minus expenses

incurred)*claim paid/Total OS

Any delay on the part of the bank in

sharing the recoveries shall attract
77 penal
Abraham interest
George, Faculty
 MCQs
 Exchange Earners Foreign Currency Account can be
maintained in
a. Only in the form of Term Deposit Account
b. Only in the form of SB account
c. Only in the form of non-interest bearing Current Account
d. All of the above

 The following is not a post-shipment finance

a. Negotiation of an export bill drawn under L/C

b. Purchase of a Foreign Currency Bill
c. Advance against an export bill sent on collection basis
d. None of the above

78 Abraham George, Faculty

 MCQs
 A packing credit was sanctioned against an export order, but the
export could not take place.
a. The matter should be reported to RBI
b. The exported should be black-listed
c. Interest on the packing credit facility should be charged @
applicable for domestic trade
d. Claim should be preferred with ECGC

 Which of the following is considered as the date of realization of

an export bill where the bill is drawn in foreign currency
a. Date of receipt of the Draft by the bank
b. Date of credit of the amount to the Nostro account of the bank
c. Date of intimation of the credit to the nostro account
d. None of the above.

79 Abraham George, Faculty

 MCQs
 The advantage to an exporter of availing “ running account
facility” is
a. Submission of firm order/LC is completely waived
b. Submission of firm order/LC is waived immediately, but it must
be presented within a reasonable time
c. The interest rate for the credit facility is low
d. None of the above
 A straight bill of lading is one

a. Which is sent directly to the consignee

b. The goods covered by the Bill of Lading are deliverable to the
consignee
c. The goods are transported in water transport
d. None of the above

80 Abraham George, Faculty

 MCQs
 Which copy of the export declaration form should be submitted to the Bank along
with other shipping documents for negotiation.
a. Foreign Control Copy
b. Exchange control copy
c. Currency control copy
d. Trade control copy
 The prescribed methods of payment of export proceeds are

 1) DD/Pay Order/Inward Remittance etc from abroad or credit to exporter’s

Bank’s nostro account
 2) Foreign Currency Notes/TC from the buyer
 3) Payment from NRE/FCNR account of the buyer
 4) Through International Credit Cards

a. 1,2,& 3 only c. 2,3 & 4 only

b. 1 & 2 only
d. 1,2,3 & 4

81 Abraham George, Faculty

 MCQs
 Export of computer software in non-physical form should be declared in

a. GR form
b. PP Form
c. Softex Form
d. EDF Form

 Who among the following governs broad parameters of the guidelines for export
& import trade in India

a. RBI
b. DGFT
c. FEDAI
d. IBA

82 Abraham George, Faculty

 MCQs
 Which of the following is not true with regard to time line for realisation
of export proceeds by the exporter in India

a. Normal exporters - 9 months

b. Warehouse exporters - 15 months
c. Units located in SEZ – no limit
d. Status Holders – 9 months

83 Abraham George, Faculty

 MCQs
A bank may refuse to accept an export bill on
collection basis
a. When the customer has sufficient limits under
bills purchasing/discounting facility
b. When the documents are discrepant as
compared to the L/C
c. When the documents are received from a
non-customer
d. None of the above

84 Abraham George, Faculty

 ENJOY
Learning

85 Abraham George, Faculty