Export finance

 Need for such type of finance?
 The institutions which provides the credit,
 EXIM BANK
 COMMERCIAL BANK
 ECGC

 RBI ensures a free flow of financial assistance
to exporters at a concessional rate of interest
against export order
 The commercial banks provide the loan at a
reduced interest
 Commercial banks get re-finance facility by
RBI and EXIM bank against the loan extended
by them to the exporters

 Pre-shipment finance
 Post-shipment finance

 Provides working capital finance to an exporter
 Basic purpose is to enable the eligible exporters
to procure raw materials, supplies, process or
manufacture, warehouse or ship the goods
meant for exports

 Packing credit
 Advance against incentives receivables from
govt. covered by ECGC guarantee
 Advance against cheque /drafts received as
advance payment

 Enables an exporter to pack the goods meant
for exports
 Includes loan/advance/credit granted by a
bank to an exporter to buy raw materials,
supplies, etc. required for processing,
manufacturing, packing of goods for exports
 Facility can be shared with supporting
manufacturer or the sub-supplier

 Pre-shipment finance is granted for a short
period of time as it is essentially a working
capital finance.
 Initially it is 180 days subject to lead time
 In case of unforeseen circumstances the bank
may give a 90 days extension
 Max. period is 270 days.

PERIOD OF CREDIT RATE OF
INTEREST
Upto 180 days not exceeding PLR
minus
2.5 %age points.

180-270 days not exceeding PLR
plus
2.5 %age points.

270-360 days fixed by the bank.

 Exporter should:
 arrange the set of docs as stipulated in the L/C
 submit the docs. along with the Standardized Letter
to bank for collection/negotiation of docs.
 This letter to the bank provides comprehensive
coverage of the various points

 This form of finance is available after the shipment of goods
 This facility is extended to the exporters in whose name the goods
were shipped OR an exporter in whose name export documents
are transferred.
 It can be short term finance or a long term finance depending
upon the nature of export.
 It is essentially a working capital finance granted on the strength
of accounts receivables.
 This facility is extended only against the shipping documents
which evidence that the goods have been shipped
 Credit is extended to finance export receivables for the period
commencing from the date of submission of docs. to the bank to
the date of realisation of export proceeds.
 The post shipment credit is essentially a form of fund based
financing
 The concessional rate of interest is charged upto a maximum
period of 6 months from the date of shipment of goods

 Negotiation/Payment/Acceptance of export docs.
under L/C
 Purchase/ Discount of export docs under
confirmed orders/ export contracts etc.
 Advances against export bills sent on collection
basis
 Advances against undrawn balance of exports
 Advances against receivables from GOI
 Advances against retention money relating to
exports
 Advances against approved deemed exports

Export finance

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Editor's Notes