EXPORT CREDIT.docx

Screen TitleObjectivesScreen TextOn completion of this module, you will be able to:

Describe the need for export List the advantages of Export over FDI Capitalise on the advantages of export finance

ExplanationThis module introduces you to the basics of export finance and the need for export finance for our country. It also familiarises you with the benefits of export finance for the Bank and for the exporter.

Screen TitleIndia and World Trade OrganisationScreen TextIn response to the continuous pressure from the World Trade Organisation (WTO) to further liberalise trade across countries, India has:

Progressively been bringing down the barriers to the inflow of goods (imports) To gear up in terms of technology and efficiency, to exploit emerging

opportunities in the world markets Thus, the country has to increase exports while maintaining imports at a healthy level. TIPSIndia became a member of WTO in 1995.ExplanationIn adherence to World Trade Organisation, India liberalised its import policies. At the same time, being a member nation it can take advantages to increase exports and subsequently the forex reserves. That in turn calls for various regulatory and facilitating institutions to promote exports from India.

Screen TitleIndia and World TradeScreen TextIndia's position in world trade is as follows:

In 2005, India’s market share stood at 1.1%. The current share of service in Gross Domestic Product (GDP) is over 50% .

Thus, the country has to increase exports while maintaining import at a healthy level.ExplanationAs per the report given by Goldman Sachs, the export trends of Brazil, Russia, India and China (BRIC) show that they will be the leading countries of the world by 2050.

Screen TitleAdvantages of Export over FDIScreen TextAt present, India has around $170 billion reserves. A country can build and bank on its own savings only through exports. A significant portion of country's reserve is:

Either borrowed at a high cost, or Short Term Foreign Institutional Investment (FII) In the form of Foreign Direct Investment (FDI), of relatively longer duration.

Though the forex reserve of the country is large, it is quite modest when compared to the reserves held by some of the other Asian nations. TIPSCountries like Japan, Taiwan, have taken the export route and built significant reserves, bulk of which, therefore, is earned and not borrowed.ExplanationThough the forex reserve of the country is large, it is quite modest when compared to the reserves held by some of the other Asian nations.

Screen TitleNeed to ExportScreen TextIndia needs to increase exports to:

Bring down the trade deficit Increase its share in world trade Make more Indian companies into global players to get a profitable return on the

surplus goods and services produced in the country.ExplanationImporting oil and technology is a high priority of the country, for which forex reserve is needed more through earnings than borrowed funds. Promoting exports provides job opportunities to the qualified and skilled manpower.

Screen TitleNeed to ExportScreen TextThe country's policy makers have realised the importance of exports and taken appropriate measures to make exports competitive by providing incentives and finance. These incentives and subsidies:

Compensate for the losses occurring on account of the country's infrastructural deficiencies

Counter the competitive advantages enjoyed by overseas competitors on account of access to better technology, work practices, low-cost capital and borrowed funds

TIPSThe refinance provided by the RBI to commercial banks is on certain terms and conditions and up to certain limits.ExplanationIt is a regulatory requirement that commercial banks like SBI support export activity by providing subsidised finance to the deserving exporters. In turn the Reserve Bank of India provides refinance to such banks at concessional rates to compensate for the cost incurred on account of subsidised lending.

Screen TitleBank's Growth in Export CreditScreen TextThe Bank's export credit is not keeping pace with the country's exports growth. Some

data for the same: RBI's benchmark for commercial banks for export credit is 12% of net bank

credit whereas SBI's relative figures for export credit dispensed stood at 8.70% in March 2005 and 8.95% in March 2006.

Country's current exports growth is 20% and growing, while Bank's ratio of Export Credit to Net Bank Credit is less than 12%.

To increase market share new budgets for export credit has been given to the functionaries of the Bank. TIPSRBI's directive is to have need based finance to the export sector that the Bank needs to utilise. ExplanationThe Bank's export credit is not keeping pace with the country's exports growth. Therefore, there is a lot of potential which the Bank has to tap. If the Bank increases export credit it will have enough funds for country's infrastructure development and purchase of capital goods to make exports more competitive in international market besides earning a handsome remuneration for itself.

Screen TitleDimensions of Export FinanceScreen TextFour dimensions of export finance are:

Credit FEX Insurance Regulatory

CreditCredit to be given to the exporter as the working capital limits to be sanctioned i.e. how much loan to be given to the exporter.

FEXForeign Exchange or exchange control aspects of export are given by RBI and supplemented by State Bank. InsuranceThe commercial and political risks associated with exports and its mitigation i.e. how to reduce the risk. Marine (transit) risk is also to be covered.

RegulatoryThe trade policy i.e. whether the exports are as per the trade policy of the�� country.ExplanationAn understanding of export finance requires the study of issues relating to the functional areas of credit, forex and insurance on one hand and regulatory matters that concern trade control and management of foreign exchange on the other. Listed on the screen are the dimensions of export finance. Click on the bulleted text to learn more.

Screen TitleCharacteristics of Export FinanceScreen TextThe characteristics of export finance are:

Self liquidation

Export order/Letters of Credit (LC) Monitoring of End use Country Risk Correspondent Bank Risk Importing Country Regulations Adherence to time and quality Price Competitiveness Opinion Reports on buyer Coverage of political and commercial risks

ExplanationListed on the screen are the characteristics of export finance. Let us take a look at each one, click on the next button to begin.


Self liquidation Export order/Letters of Credit (LC) Monitoring of End use Country Risk Correspondent Bank Risk Importing Country Regulations Adherence to time and quality Price Competitiveness Opinion Reports on buyer Coverage of political and commercial risks

ExplanationDomestic credit is not self-liquidating but export finance can be liquidated by discounting/purchasing the shipment documents by the exporter related to the export credit. Click on the 'Next' button to continue



ExplanationLC is more common in export finance than domestic credit. Click on the 'Next' button to continue.


Self liquidation

Export order/Letters of Credit (LC) Monitoring of End use Country Risk Correspondent Bank Risk Importing Country Regulations Adherence to time and quality Price Competitiveness Opinion Reports on buyer Coverage of political and commercial risks

ExplanationAs the credit is given at a concessional rate, the bank has to look into the usage of credit to check whether it is used for the purpose it is taken for (the way end-user uses funds).� Click on the 'Next' button to continue.



ExplanationCountries are placed in/removed from the caution list by the Bank from time to time due to changing risk perceptions. Click on the 'Next' button to continue.



ExplanationSBI deals with its own branch abroad or through a correspondent bank. Click on the 'Next' button to continue.


Self liquidation Export order/Letters of Credit (LC)

Monitoring of End use Country Risk Correspondent Bank Risk Importing Country Regulations Adherence to time and quality Price Competitiveness Opinion Reports on buyer Coverage of political and commercial risks

ExplanationThe exporter needs to be clear that the product he exports is allowed to be imported in the respective country. Also, as the USA is our major trading partner the exporter needs to be aware of the US import regulations before exporting, that has gained significance after 11th September 2001. The exporter needs to be sure that he is not dealing with persons and organisations that are banned. The Bank circulates list of persons and banned organisations.Click on the 'Next' button to continue.



ExplanationTime and quality is to be maintained, failing� which, the entire consignment can be rejected or the order may be cancelled. Export Inspection Council of India certifies the goods/services fit for export. Click on the 'Next' button to continue.



ExplanationAdherence to time and quality


Self liquidation Export order/Letters of Credit (LC)

Monitoring of End use Country Risk Correspondent Bank Risk Importing Country Regulations Adherence to time and quality Price Competitiveness Opinion Reports on buyer Coverage of political and commercial risks

ExplanationOpinion reports give opinion on the buyer's (importer's) credentials, bona fide reports stating the credit worthiness of the buyer. It also gives information whether the company exists abroad, its constitution and its payment records, etc. Click on the 'Next' button to continue.�



ExplanationAn outbreak of war, a civil war, a coup or an insurrection may block or delay payment for goods exported. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Click on the ‘Next’ button for the advantages of export finance.

Screen TitleAdvantages of Export FinanceScreen TextFor the Bank, Export Finance has the advantages of:

Self liquidation Profit through foreign exchange Income from other related business Refinance from RBI Export Credit Guarantee Corporation of India Ltd. (ECGC) Cover

ExplanationListed on the screen are the advantages of export finance over other credit and advance facilities. Let us look at each one of them.



ExplanationI am back to explain the various advantage of Export Finance, so lets start ... Export credit is liquidated by discounting/purchasing the shipment documents related to the export credit, submitted by the exporter. Click on the 'Next' button to continue.



ExplanationWhile converting export proceeds into rupees, the profit margin is built into the exchange rate i.e. it is lower than the usual market rate. Click on the 'Next' button to continue.



ExplanationBesides interest income on export finance and commission on export bills on income can be derived from related business like import of raw material, machines, etc., which add value to the export product and issue of bank guarantees. Click on the ‘Next’ button to continue.



ExplanationAs an incentive, RBI refinances the Bank with whatever the Bank has financed to the exporter. Click on the 'Next' button to continue.



ExplanationECGC covers the risk of exporters and financing bankers. It gives policies for exporters and guarantees to banks.Bank can be liberal with regard to obtaining collateral , in case the export credit is covered by ECGC.That’s the end of my discussion on the advantages of export finance. Click on the ‘Next’ button to continue…

Screen TitleState Bank of India's Loan Policy (July 2004) on Export CreditScreen TextThe Bank's Loan Policy on Export Credit states that:

Export sector has been recognised as a thrust area considering the importance and contribution of this sector to the economy. Therefore, the sector is being presently extended finance at concessional rates, with flexibility in financing norms.

No formula to determine quantum of finance under this policy. The guiding principle is need-based finance, depending upon the exporter's requirement.

The period for which the Bank gives export credit under this policy depends upon the manufacturing/trade cycle or specific requirement of the individual export, normally not exceeding 180 days.

ExplanationListed on the screen are State Bank of India's Loan policy decisions on export credit. There is a lot of potential which the Bank has to tap so as to increase its market share.

Screen TitleFacilities for ExportersScreen TextIn export finance, the facilities given to exporter are as follows:

Pre-shipment finance in rupees Post-shipment finance in rupees Pre-shipment credit in foreign currency (PCFC) Export Bills Rediscounting (EBR) SBI Exporters Gold Card Scheme Execution of Bid Bonds Advance Payments Bank Guarantee Performance Guarantees Establishment of Letters of Credit Arranging lines of credit in foreign countries Export Credit to AEZ units Trade Information Services Forex Advisory Services

ExplanationListed on the screen are the facilities that SBI provides for exporters. Each one is discussed in subsequent modules.

Screen TitleWhy Should the Bank Finance Exports?Screen TextReasons why Bank should provide finance to exports are:

The increase of components like bill financing, export negotiations, demand loans etc. in the Bank's asset portfolio improves the Bank's ability to manage Asset-Liability mismatches more efficiently.

Increased opportunities become available at the branch level to earn interest and other income through negotiation of bills, advising incoming LCs etc.

With inherent short term and time-bounded nature of export finance, one can learn of possible defaults earlier than in the normal Cash Credit type of advances.

ExplanationThe promotion of export finance that is maturity-driven is in sync with the general industry consensus to move gradually towards loan model of financing, which imparts better discipline on the borrower and is also relatively easier to supervise and control.

Screen TitleBranches that Handle Export-Related TransactionsScreen TextBranches equipped to handle the entire range of export related transactions are:

All the ‘A’ and ‘B’ category branches Trade Finance CPCs

ExplanationApart from A and B category branches, non-IB branches that are credit intensive (in either network) may also handle the pre-shipment credit for their customers, provided they have the resources and formalised arrangement with an A or B category branch to handle the range of post-shipment transactions and connected regulatory formalities.

Screen TitleSummaryScreen TextHaving completed the module, you should be able to:

Describe the need for export List the advantages of Export over FDI Capitalise on the advantages of export finance

ExplanationThis module introduced you to the basics of export finance, the need for export finance for our country and the benefits of export finance available to the Bank and the exporter.

Institutional Framework for Delivering Export Finance


Classify institutions as regulatory and facilitating List all regulatory institutions Describe the function of both regulatory and facilitating institutions

ExplanationThis module introduces you to different institutions connected with export finance, and their functions.

Screen TitleTypes of InstitutionsScreen TextThe conduct of the country's export activity is regulated, monitored, promoted and financed by various institutional arrangements having distinct functions to perform. These institutions have been classified into:

Regulatory institutions Facilitating Institutions

ExplanationThe regulatory and facilitating institutions together provide the enabling environment to carry out export and its related activities. This classification of institutions is based on the exact nature of role performed by such institutions.

Screen TitleRegulatory InstitutionsScreen TextThe export activity of the country is regulated by the various provisions issued by:

Government of India (Ministry of Finance) Reserve Bank of India (RBI) Director General of Foreign Trade (DGFT) under the Ministry of Commerce. Foreign Exchange Dealers Association of India (FEDAI)

ExplanationListed on the screen are institutions that regulate the export activity in the country. The subsequent screens discuss each one in detail.

Screen TitleRegulatory Institutions - Government of India (Ministry of Finance)Screen TextThe export activity of the country is regulated by the various provisions issued by:

Government of India (Ministry of Finance) Reserve Bank of India (RBI) Director General of Foreign Trade (DGFT) under the Ministry of Commerce. Foreign Exchange Dealers Association of India (FEDAI)

ExplanationThe customs, on behalf of Govt. of India (ministry of Finance), clears the export consignments. Click on the 'Next' button to continue.


Government of India (Ministry of Finance) Director General of Foreign Trade (DGFT) under the Ministry of Commerce. Foreign Exchange Dealers Association of India (FEDAI)

ExplanationForeign Exchange Management Act, 1999 authorises RBI to frame rules for the conduct of the foreign exchange business. The RBI's directions to the Authorised Dealers (ADs), on the conduct of Export activity are contained in AP (DIR) circulars issued from time to time. These are also summarised in "Master circulars" available at their site - www.rbi.org.in. Click on the 'Next' button to continue.


Government of India (Ministry of Finance) Reserve Bank of India (RBI) Director General of Foreign Trade (DGFT) “under the Ministry of

Commerce”. Foreign Exchange Dealers Association of India (FEDAI)

ExplanationDirector General of Foreign Trade (DGFT) implements the Foreign Trade Policy framed by the Ministry of Commerce of Government of India. Click on the 'Next' button to continue.


Government of India (Ministry of Finance) Reserve Bank of India (RBI) Director General of Foreign Trade (DGFT) “under the Ministry of Commerce”. Foreign Exchange Dealers Association of India (FEDAI)

TIPSWith liberalisation and upon the recommendation of Sodhani committee, the role of FEDAI has been reconfigured, with members getting the freedom to determine their service charges, etc. Other than this, the rules of FEDAI continue to govern various forex activities including conduct of Derivative business by Banks.

ExplanationForeign Exchange Dealers Association of India FEDAI is a� association of all authorised dealers such as Public Sector Undertaking (PSU) banks, foreign banks, private sector banks, cooperative banks, and financial institutions. It lays down the ground rules, based on RBI's directions, for the day-to-day conduct of foreign exchange activity by ADs. It acts as facilitator between member banks and the RBI, Export Organisations/ Chambers of Commerce and other bodies and also among the members.

Now that you have learnt about the regulatory institutions, click on the 'Next' button to check your understanding on regulatory institutions.

Screen TitleFacilitating InstitutionsScreen TextVarious institutions that facilitate export activity in the country are:

EXIM Bank Export Credit Guarantee Corporation General Insurance Corporations (GIC) Export Promotion Councils (EPC) International Chamber of Commerce (ICC) Dun and Bradstreet Federation of India Exporters Organisation (FIEO) Confederation of Indian Industry (CII) Federation of Indian Chamber of Commerce and Industry (FICCI)

ExplanationListed on the screen are institutions that facilitate the export activity in the country. The subsequent screens discuss each one in detail.

Screen TitleFacilitating Institutions - EXIM BankScreen TextVarious institutions that facilitate export activity in the country are:

EXIM Bank Export Credit Guarantee Corporation General Insurance Corporations (GIC) Export Promotion Councils (EPC) International Chamber of Commerce (ICC) Dun and Bradstreet Federation of India Exporters Organisation (FIEO) Confederation of Indian Industry (CII)

Federation of Indian Chamber of Commerce and Industry (FICCI)

TIPSGovernment of India established EXIM Bank in 1982.

ExplanationEXIM Bank promotes and facilitates foreign trade for India. It coordinates work of various agencies engaged in financing exports and imports. It provides finance to foreign governments, financial institutions and companies.

For commercial banks, it rediscounts short-term export bills and refinances Indian companies on deferred payment terms. It also issues guarantees such as Advance Payment Guarantees, Performance Guarantees, Guarantee for borrowings etc. Click on the 'Next' button to proceed.

Screen TitleFacilitating Institutions - Export Credit Guarantee CorporationScreen TextVarious institutions that facilitate export activity in the country are:


TIPSThe Government of India set up the Export Risks Insurance Corporation (ERIC) in July 1957. It was transformed into Export Credit & Guarantee Corporation Limited (ECGC) in 1964. To bring the Indian identity into sharper focus, the Corporation's name was once again changed to the present Export Credit Guarantee Corporation of India Limited in 1983. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid up capital of the company is Rs.50040 Crores, which is expected to be enhanced to Rs.800 crores by the year 2005.

ExplanationExport Credit Guarantee Corporation of India Limited (ECGC) functions under the administrative control of the Ministry of Commerce and is managed by a Board of Directors representing Government, Banking, Insurance, Trade, Industry, etc. It covers risks of exporters and financing bankers.

Screen TitleFacilitating Institutions - GICScreen TextVarious institutions that facilitate export activity in the country are:


ExplanationGeneral Insurance Corporations provide the transit insurance cover to exporters. It is commonly known as marine insurance cover. Click on the 'Next' button to proceed.

Screen TitleFacilitating Institutions - EPCScreen TextVarious institutions that facilitate export activity in the country are:


ExplanationMinistry of Commerce set up Export Promotion Councils to promote exports of different commodities. Export Promotion Councils help to interface with the ministry on matters affecting their members and also represent their viewpoints to help formulate policies and the country's response at international trade forums. It is compulsory for every exporter to be a member of a council concerning his commodity of export. Click on the 'Next' button to continue.

Screen TitleFacilitating Institutions - ICCScreen TextVarious institutions that facilitate export activity in the country are:

EXIM Bank Export Credit Guarantee Corporation General Insurance Corporations (GIC) Export Promotion Councils (EPC) International Chamber of Commerce (ICC)

Dun and Bradstreet Federation of India Exporters Organisation (FIEO) Confederation of Indian Industry (CII) Federation of Indian Chamber of Commerce and Industry (FICCI)

ExplanationInternational Chamber of Commerce frames Uniform Rules for Collection (URC) for handling Bills under Collection i.e. other than those under Letters of Credit. It frames Uniform Rules for bank-to-bank Reimbursement (URR) for reimbursements between banks for payments made under letters of credit.

It also frames Uniform Customs and Practices on Documentary Credits that are guidelines to settle payments through the Documentary Credit. The current practices are as per the publication numbered ICC 500. The RBI's rules issued under Foreign Exchange Management Act (FEMA) have provided specifically that Letters of Credit are to be issued under the provision of UCPDC 500. Click on the 'Next' button to continue.

Screen TitleFacilitating Institutions - Dun and BradstreetScreen TextVarious institutions that facilitate export activity in the country are:


ExplanationDun and Bradstreet is an international agency with whom SBI has a strategic alliance to provide its branches with opinion reports on request, on foreign buyers.

The obtention of such reports is preferred if the bills are not drawn under Letters of Credit. Such reports are also required to be taken for all high value LCs. Click on the 'Next' button to proceed.

Screen TitleFacilitating Institutions - FIEOScreen TextVarious institutions that facilitate export activity in the country are:

EXIM Bank Export Credit Guarantee Corporation General Insurance Corporations (GIC) Export Promotion Councils (EPC) International Chamber of Commerce (ICC)

Dun and Bradstreet Federation of India Exporters Organisation (FIEO) Confederation of Indian Industry (CII) Federation of Indian Chamber of Commerce and Industry (FICCI)

ExplanationFIEO is the leading exporter's umbrella group in the country representing their interests. It is also the apex body for all Export Promotion Councils. It also provides trade information services to exporters and helps the member exporters in expanding export volumes.

Screen TitleFacilitating Institutions � CIIScreen TextVarious institutions that facilitate export activity in the country are:


ExplanationConfederation of Indian Industry (CII) is the apex body for Indian industry supporting Indian business. Click on the 'Next' button to proceed.

Screen TitleFacilitating Institutions - FICCIScreen TextVarious institutions that facilitate export activity in the country are:


ExplanationFederation of Indian Chamber of Commerce and Industry (FICCI) is a national organisation that represents and aggregates multiple chambers of commerce.


Classify institutions as regulatory and facilitating List all regulatory institutions Describe the function of both regulatory and facilitating institutions

ExplanationThis module introduced you to different institutions connected with export finance, and their functions.

Foreign Trade Policy


List the features and objectives of Foreign Trade Policy Categorise goods and services Apply duty exemption/remission schemes to imported goods based on the

purpose for which they are importedExplanationThis module introduces you to various features and objectives of Foreign Trade Policy.

Screen TitleForeign Trade PolicyScreen TextForeign Trade Policy is India's international trade policy. Foreign Trade Policy:

Is formulated by Director General of Foreign Trade, under Ministry of Commerce and Industry, Government of India

Is given for a period of 5 years (2004 to 2009) for its broad guidelines Requires that all exporters and importers have an 'Importer Exporter Code

Number.' (IEC No.), that are allotted by the DGFT. All IEC No. holders need to declare their turnover for the previous year online to DGFT

ExplanationForeign Trade Policy is notified in Gazette of India and amendments to the policy are also given by means of Public Notices, orders and rules that are also notified in the Gazette. The policy is fine-tuned every year to respond effectively to developments

and opportunities.

Screen TitleObjectives of Foreign Trade PolicyScreen TextThe objectives of the Foreign Trade Policy are:

To double Banks percentage share of global merchandise trade within the next five years

To act as an effective instrument of economic growth by giving a thrust to employment generation)

To double Banks percentage share of global merchandise trade within the next five yearsPresently India's share is 0.8%. Among the leading developing countries:

China's share is 5.9% Singapore's share is 2.0% Korea's share is 2.6%

To act as an effective instrument of economic growth by giving a thrust to employment generation)As a large portion of the exports are contributed by the small scale and cottage industries sector, promotion of exports will provided a fillip to economic growth and employment creation

ExplanationListed on the screen are the objectives of Foreign Trade Policy. Click on the bulleted text to learn more.

Screen TitleCategorisation of Goods and ServicesScreen TextGoods and Services are categorised as:

Free Restricted Canalised Banned

ExplanationListed on the screen are the categories of goods and services. Each one is discussed in subsequent screens.



ExplanationGoods and services that come under the 'Free' category are freely exported or imported without any restriction. Click on the 'Next' button to continue.



ExplanationGoods and services that come under the 'Restricted' category are exported or imported only against license. Click on the 'Next' button to continue.



ExplanationGoods and services that come under the 'Canalised' category are exported or imported only through a canalising agency. For instance, petroleum products through M/s. Indian Oil Corporation Limited (IOCL). Click on the 'Next' button to continue.


Free

Restricted Canalised Banned

ExplanationGoods and services under the 'Banned' category cannot be exported or imported. Click on the 'Next' button to check your understanding on categories of goods and services.

Screen TitleIndia Trade Classification (Harmonised System)Screen TextInstead of ITC (HS)'s published book one can get the same information from the http://www.dgft.delhi.nic.in website.

Each list of Item of goods and services under Foreign Trade Policy have four columns as mentioned below:

ITC(HS) Code Item Description Policy Conditions(if any)

ITC(HS) Code

A eight digit code number of the ITC (HS) listed item.

Item DescriptionDescription of the ITC (HS) listed item.

PolicyCategory of the ITC (HS) listed item i.e. 'Free' or 'Restricted' or 'Canalized' or 'Banned'.

Conditions(if any)Any special condition for� the ITC (HS) listed item. Example - Actual user i.e. the person who is importing the items should actually use the items for himself/herself. This column is blank for most of the items of the ITC (HS).

ExplanationThe categorized items of goods and services under EXIM Policy are listed in ITC (HS) i.e. India Trade Classification (Harmonized System). Click on the 'Accessing the Website' button to see a demo, as to how to make a query for a particular item of goods and services under Foreign Trade Policy.

Screen TitleDuty Exemption/Remission SchemesScreen Text

Advance License DFRC DEPB EPCG

Advance Authorisation Scheme:The Advance Authorisation Scheme:

Is issued for duty free import of inputs which are used for exports Has an actual User Condition attached to it Is non-transferable

DFIASThe Duty Free Import Authorisation (DFIAS) scheme:

Is issued for import of inputs used in manufacture of goods; without payment of customs duty

Has a minimum Value Addition (VA) of 25% condition attached to it�� Value Addition i.e. the difference between the Value of Export and Import should��

�� be greater than or equal to 25%.

�� i.e.�� Export Value - Import value� x 100��25%��

�� Export Value

Is valid till the end of the Foreign Trade Policy Is freely transferable

DEPBThe Duty Entitlement Passbook Scheme (DEPB) scheme is:

Issued to neutralise the incidence of customs duty on the import content of the export product i.e. whatever custom duty was paid on the export is reimbursed by the way of a credit made

Freely transferable Currently extended up to March 2007 and not beyond as it is WTO

incompatible

EPCGThe Export Promotion Capital Goods Scheme (EPCG) scheme:

Enables the exporter to import capital goods at only 5% customs duty as compared to 12.5% regular custom duty

Has the Export Obligation attached to this i.e. the exporter has to export 8 times the duty saved within a period of 8 years (12.5% - 5% = 7.5%)

Is applicable for imports of second hand goodsExplanationUnder the incentive schemes provided in Foreign Trade Policy for the exporters, the

exporter either gets exemption or remission of custom duty on imported items used for export purpose. Click on the tabs to learn more about the schemes.

Screen TitleSummaryScreen TextHaving completed this module, you should be able to:

List the features and objectives of Foreign Trade Policy Categorise goods and services Apply Duty Exemption/Remission Schemes to imported goods based on the

purpose for which they are importedExplanationThis module introduced you to various features and objectives of Foreign Trade Policy.�

Export Finance - Pre-shipment Credit


Classify pre-shipment credit into three categories Categorise exporters eligible for packing credit Assess Export Packing Credit (EPC) requirements Monitor and control packing credit loans to ensure proper end use of the

amounts Grant pre-shipment credit in foreign currency based on various criteria

ExplanationThis module introduces you to pre-shipment finance and its types. It also introduces you to various criteria for granting such advances to exporters.

Screen TitleTypes of Export FinanceScreen TextExport finance as administered by the Bank, is by and large based on RBI directives/ guidelines. Exporters obtain financial assistance from the bank at:

Pre-shipment stage (Export Packing Credit) and/or Post-shipment stage

TIPS

Pre-shipment finance is also referred to as Export Packing Credit (EPC) or simply as Packing Credit.

ExplanationListed on the screen are the stages at which the exporters can obtain financial assistance from the Bank. Each one is discussed in detail in subsequent screen.



ExplanationPre-shipment finance is extended as working capital for purchase of raw materials, processing, packing, transportation, warehousing etc., of goods meant for exports. This module introduces you to the types of pre-shipment credit and the Bank's procedures to obtain it in detail.



ExplanationPost-shipment finance is extended after shipment to bridge the time lag between the shipment of goods and the realisation of proceeds. We will discuss post-shipment in the next module.

Screen TitleTypes of Pre-shipment CreditScreen TextPre-shipment credit is classified as:

Packing Credit Advance against Duty Drawback entitlements

Pre-shipment Credit in Foreign Currency (PCFC)ExplanationListed on the screen are pre-shipment credit extended to exporters. The subsequent screens discuss each one in detail. Let us first look at packing credit facility.

Screen TitlePacking Credit - Categories of ExportersScreen TextThe categories of exporters who are generally eligible for packing credit are:

These incentives and subsidies:

Manufacturer Exporter Merchant Exporter Star Export House

Manufacturer ExporterManufacturer exporter is an exporter who actually manufactures the goods and exports in his own name.

Merchant ExporterMerchant exporter is a trader (intermediary) who does not manufacture the goods himself but buys the same from another supplier (domestic or foreign) who is the actual manufacturer, and exports the same in his name. The exporter in such cases is also called the Export Order Holder (EOH).

Star Export HouseExport House is a manufacturer exporter or a merchant exporter with minimum export turnover prescribed under the prevailing trade policy.

ExplanationListed on the screen are categories of exporters to whom packing credit is granted as a general rule. Click on the bulleted text to learn more.

Screen TitleAssessment of Export Packing Credit (EPC) - Basic ConsiderationsScreen TextExport Packing Credit (EPC) is basically working capital finance. To appraise/assess a packing credit proposal, the points to be kept in view are:

Integrity and creditworthiness of the borrower Export performance for the last 2 to 3 years (where applicable)

Period for packing credit which is based on the trade/manufacturing cycle� should normally not exceed 180 days

Percentage of margin to be decided keeping in view the RBI guidelines for liberal finance to export sector and also the various incentives received by the exporter

TIPSThe assessment of EPC is to be made exactly on the lines of assessment done for normal working capital advances i.e.on the basis of operating cycle, turnover or projected balance sheet method as applicable. (I am sending a e-mail attachment to illustrate how EPC is calculated. Please insert it here or elsewhere as appropriate)

ExplanationThe concept of need-based finance is the guiding principle to decide the quantum of finance to be granted to the exporter. The period for packing credit depends upon the manufacturing cycle or specific requirements of the export, normally not exceeding 180 days. The percentage of margin is dependent on the nature of order, commodity and capability of exporter.

Screen TitleAssessment of Export Packing Credit (EPC) - Basic ConsiderationsScreen TextThe basic consideration in the assessment of EPC are:

Undertaking Confirmed export order preliminary information of contract Packing credit for a sub-supplier Security documents

UndertakingThe exporter should provide an undertaking that advance would be utilised for the specific purpose of procuring/manufacturing/shipping, etc., the goods are� meant for export only as stated in the relative confirmed export order/LC.

Confirmed export orderThe exporter should provide confirmed export order/contract or LC, etc. in original.

Preliminary information of contractIf the customer wants to avail packing credit advance against preliminary information of contract whereby at a later stage the contract or LC, as the case may be, will be received by him, an undertaking to the effect that the same will be produced to the Bank within a reasonable time(say,within a month) for verification and endorsement.

If need is of a recurring nature, we may extend running account facility to thoseexporters with good track record

Packing credit for a sub-supplierIf the customer asking for packing credit is a sub-supplier and wants to supply the goods to the Export House or Merchant Exporter, an undertaking from Export House/Merchant Exporter stating that they have not/will not avail of packing credit facility against the same transaction for the same purpose till the original packing is liquidated.

Security documentsExamples of security documents are D.P. Note, packing credit agreement, letter of guarantee where there is a guarantor or any other specified documents as stated in the sanction advice of the Bank for the purpose.

ExplanationThe eligible limit/loan amount is determined against the LC/firm order, after the application from the borrower is checked for its completeness and is signed by the authorised signatory of the firm/company. At the time of processing such proposals certain documents need to be obtained from the applicant. Click on the tabs to learn more about the documents.

Screen TitleAssessment of Export Packing Credit (EPC) - Basic ConsiderationsScreen TextBranches can make advances to exporters (suppliers) who do not have letters of credit or firm orders in their own name and are routing their exports through the Export Houses, if the branches can obtain:

A letter from the export house Inland letter of credit in favour of the supplier Bills drawn on the export house A certificate from the export house An undertaking A letter of disclaimer from Star Export House

ExplanationBranches can make advances to exporters (suppliers) who do not have letters of credit or firm orders in their own name and are routing their exports through Export Houses or agencies like the State Trading Corporation/ Minerals and Metals Trading Corporation. To provide such advances the export house or the exporters fulfil the criteria listed on the screen. Click on the 'Next' to continue.

Screen TitleAssessment of Export Packing Credit (EPC) - Basic ConsiderationsScreen TextBranches can make advances to exporters (suppliers) who do not have letters of credit or firm orders in their own name and are routing their exports through the

Export Houses, if the branches can obtain:

A letter from the export house Inland letter of credit in favour of the supplier Bills drawn on the export house A certificate from the export house An undertaking

ExplanationBranches should obtain from the export house a letter setting out the details of the export order and the portion thereof to be executed by the supplier. Branches should obtain a certificate that the export house has not obtained and will not ask for packing credit facility from any bank in respect of such portion of the export order as is to be executed by the supplier, till the sub-exporter is paid by them in full towards value of such order. Click on the 'Next' to continue.



ExplanationThe export house should open inland letter of credit in favour of the supplier giving relevant particulars of the export letters of credit/orders and the outstandings in the packing credit account should be extinguished by negotiation of bills under such inland letters of credit. Click on the 'Next' to continue.



ExplanationIf it is inconvenient for the export house to open such inland letters of credit in favour of the supplier, the latter should be allowed to draw bills on the export house in respect of the goods supplied for export and adjust packing credit advances from the

proceeds of such bills. Click on the 'Next' to continue.



ExplanationIn case, the bills drawn are not accompanied by bills of lading or other export documents, branches should obtain a certificate from the export house at the end of every quarter that the goods supplied under this arrangement have in fact been exported. This certificate should have particulars of bill date, bill amount and name of the bank through which the bills have been negotiated. Click on the 'Next' to continue.



ExplanationIn case, the bills drawn are not accompanied by bills of lading or other export documents, branches should obtain from the supplier an undertaking that the advance payment, if any, received from the export house against the export order would be credited to the packing credit account. Now that you have gone through the basic considerations in the assessment of Export Packing Credit, click on the 'Next' for a quick recall.� This is an interactive exercise for you to attempt.� Type the correct answer in the blank space provided for all and click the 'Submit' button.

Screen TitleMonitor and ControlScreen TextBranches should monitor and control packing credit loans to ensure proper end use of the amounts. This is done by disbursing advances:�

In a phased manner Directly through pay orders/drafts to suppliers To borrower's account

In a phased manner

Advances should not be disbursed in lump sum amounts; instead they should be disbursed in parts taking into account purpose and needs of the exporter, shipment schedules, production cycles and other aspects. Also the progress made by exporters in timely execution of export orders needs to be monitored.

Directly through pay orders/drafts to suppliersTo ensure, the end-use of funds, loan amount should be disbursed directly through issue of pay orders/drafts to the suppliers by taking necessary authorisation letter from the borrower. There are certain exceptions like few agricultural or marine products that demand cash payments. In such cases, the sanction accorded by the Sanctioning Authority should provide for it.

To borrower's accountWhere direct disbursals are not possible, the proceeds are credited to borrower's account and disbursals are supervised therefrom. If loan proceeds are credited to the current account or cash credit account, cash withdrawals for small payments/labour payments may be allowed.

ExplanationBranches should ensure proper end use of the amounts disbursed by the exporters, since packing credit loans are granted at concessional rates of interest and specific purpose oriented advances. Click on the bulleted text to learn more.

Screen TitleMonitor and ControlScreen TextThe borrowers should strictly adhere to all the instructions contained in the sanction letter for the limit. They should also comply with rules regarding submission of stock statement and insurance.

When disbursement is to be made in stages (depending upon the needs of the exporter), the schedule of disbursement may be called for before granting the advance.

Due date diary should be maintained showing the due dates of repayments and it should be ensured that documents are received well in time or proper extension applications are obtained from the exporter wherever necessary

Where stipulated, separate periodic stock statements for export stocks should be obtained and stocks inspected.

ECGC premium should be paid at the prescribed periodicity. Wherever applicable, it should be checked whether notification to ECGC/ ECGC approval is on record in cases of:

Reporting of defaults Nursing of accounts Exports to restricted cover countries

If export takes place and the bill is purchased/ negotiated/discounted etc. such export proceeds or any advance remittance received covering the relative export order should be adjusted through the packing credit account and the relative packing credit account should be closed. In this regard, if the exporter makes a request to adjust the proceeds otherwise, it should not be granted.

For a proper control over the pre-shipment credit granted to exporters, branches need to:

Maintain separate accounts in respect of each packing credit granted to an exporter except for those with 'running account' basis

Liquidate the pre-shipment credit from the proceeds of the relative export bill when purchased, negotiated or discounted

If the export order against which the advance is obtained is cancelled, then the exporter will be unable to tender export documents for adjustment/ liquidation of the advance by the relative export proceeds. As a result, the outstanding advance is adjusted against the export bill drawn on some other importer either in the same country or in any other country, provided the relative export bill is in respect of the same goods for which pre-shipment credit was originally granted. In certain cases of exports of ready-made garments, fabrics, etc, production of a letter of credit is not the sole criterion to grant packing credit as it is based on Quota Certificate/ allotment by Apparel Export Promotion Council (AEPC).Branches should:

Insist on exporters' to obtain Quota Certificates from the appropriate Export Promotion Council within a reasonable time of permitting drawals

Insist on exporters' to obtain Quota Certificates from the appropriate Export Promotion Council within a reasonable time of permitting drawals

Ensure that drawals are not availed entirely in anticipation of Quota Ensure that the outstandings are liquidated from the export proceeds out of

the Quota in the presence of Quota restrictions However, this restriction will no longer hold from 1/1/2005 after the quota

regime expires as part of WTO's Agreement on Textile and Clothing(ATC) to which India is a signatory.

ExplanationClick on the images provided to learn more about monitoring controls used by branches.

Screen TitleSecurityScreen TextAs a general rule, export packing credit advances should be secured by pledge or hypothecation of stocks. It may not be feasible for manufacturer-exporters having extensive domestic operations and export business to segregate stocks meant for export and pledge/hypothecate them separately to the Bank. In such cases, it is adequate if it is ensured that the aggregate outstandings in domestic cash credit account(s) and export packing credit account are fully covered by the advance value of the stocks pledged/hypothecated to the Bank.

ExplanationIn general, there should be no difficulty to obtain pledge or hypothecation of stocks to the extent of bulk of the finance normally required to procure raw materials and process them into finished goods or to purchase goods for export.

Screen TitleCollateral SecurityScreen TextBranches may obtain collateral security by means of third party guarantee/equitable mortgage of immovable property. Branches should assess export credits on the condition that:

It is need-based and not directly linked to the availability of collateral security So long as the requirement is justified, it is not denied merely on the grounds

of non-availability of collateral securityExplanationCollateral security is not mandatory. The branches may grant advance to exporters with good performance and track record even in the absence of collateral security if the requirement of credit limit is justified.

Screen TitleGuarantees and Policies of the ECGCScreen TextBank has opted out of the� 'Whole Turnover Packing Credit Guarantee' of ECGC with effect from 1/7/2003 which� earlier covered all packing credit advances. The bank should now obtain Individual Packing Credit Guarantee(IPCG) on a case-to-case basis if the obtention of such a guarantee from ECGC is part of the terms of sanction of the packing credit. Remember that, ECGC policy/guarantee mitigates the credit risk for

the Bank and sometimes obviates the need for collateral secuiry

TIPSSuch guarantees are not needed for advances granted to public sector corporations sponsored by the Central Government.

ExplanationThe details of various types of guarantees and policies that are periodically issued by ECGC are contained in Foreign Department circulars issued. Branches should be guided by the instructions contained therein.

Screen TitlePeriod for Liquidation of Pre-shipment AdvancesScreen TextThe Bank decides the period of packing credit advance depending upon the time required to:

Procure Manufacture or process (where necessary) and Ship the relative goods

However, limiting the period of packing credit to what has been prescribed in the relative LC or firm order.ExplanationThe Bank primarily decides period for which the packing credit advance may be given keeping in view various relevant circumstances and at the same time ensuring that the time is sufficient to enable the exporter to ship the goods. Normally, this period should not exceed 180 days.

Screen TitleExtension of Time Limit for Liquidation of Pre-shipment CreditScreen TextIn case of extensions of time limit for liquidation of pre-shipment credit, branches should:

Monitor the progress made by exporters in timely fulfillment of export orders so that the period of credit does not exceed the actual requirement the borrower and

The pre-shipment credit does not remain locked up for unnecessarily long period

ExplanationExtensions in the period for liquidation are to be allowed only to genuine cases and for valid reasons. These extensions are subject to certain conditions discussed in the next screen.

Screen TitleExtension of Time Limit for Liquidation of Pre-shipment CreditScreen TextBranches may extend time to liquidate pre-shipment credit subject to conditions. The conditions for extension are:

Reasons for Extension Production Cycle Deferred Exports

Reasons for ExtensionExtension of pre-shipment credit for period beyond 180 days up to 270 days (further period of 90 days) is granted provided the reasons for extension are due to circumstances beyond the control of the exporter.

Production CyclePre-shipment credit up to 270 days ab initio is granted on account of:

Longer production cycle Seasonality of the availability of raw material Time normally taken for shipment

Deferred ExportsDeferred exports are those for which realisation exceed 180. For such exports:

Normal lending rate based on the credit rating of the borrower may be charged.

EXIM Bank refinance is available against at concessional rates so that the benefit is passed on to the exporters.

All deferred exports are subject to regulatory guidelines contained in Project Export Manual (PEM) published by RBI.

Screen TitleAdjustment of Pre-shipment CreditScreen TextThe table below shows adjustment of pre-shipment credit not adjusted.

Pre-shipment Advances not Adjusted by Submission of Export Documents

Basis for Charging Interest Rate for Advance Granted

Within 180 days

Higher interest rate for the period exceeding 180 days up to 270 days

Shipment takes place after 360 days from the date of advance

� Advance ceases to qualify for concessive rate of interest ab initio

� Interest rate applicable to 'Export Credit Not Otherwise Specified' to be charged from the date of advance

Exports do not materialise at all

Charge on the relative packing credit = domestic lending rate + penal interest not exceeding 2% per annum (from the date of advance)

Screen TitleRunning Account Facility - ConditionsScreen TextBranches may extend pre-shipment credit on "Running Account" basis subject to the following conditions.

Need for such facility Satisfactory track record Letter of Credit/Confirmed order Marked off export bills Amount of pre-shipment credit exceeds the value of export order Reserve Bank refinance Frequent Review of drawals

Running Account FacilityIn a running account basis, the first debit in the account is adjusted/repaid against the first credit to the account. This is irrespective of the fact, that the packing credit loan pertaining to the first debit may not relate to the export order under which the export bill is submitted for negotiation/ purchase/ discount, etc.

ExplanationBranches may extend pre-shipment credit on "Running Account" basis for any commodity subject to a few conditions listed on the screen. Let us look at each one in detail. Click on the 'Next' to continue


Need for such facility Satisfactory track record Letter of Credit/Confirmed order

Marked off export bills Amount of pre-shipment credit exceeds the value of export order Reserve Bank refinance Frequent Review of drawals

ExplanationThe exporter ascertains the need for such facility to the satisfaction of the branch concerned. Click on the 'Next' to continue.


Need for such facility Satisfactory track record Letter of Credit/Confirmed order Marked off export bills Amount of pre-shipment credit exceeds the value of export order Reserve Bank refinance Frequent Review of drawal

ExplanationThe facility is made available only to those exporters whose track record has been satisfactory/good. A exporter of good track record is one whose overdue(i.e. unpaid) export bills does not exceed 5% of the average annual export realisation of the preceding three calendar years.This status can be certified by a Chartered Accountant and needs to be obtained every year. Click on the 'Next' to continue.



ExplanationThe exporter should submit relative Letter of Credit/Confirmed order in a reasonable time after availing pre-shipment finance. In case the commodity in question is covered by the selective credit control, it is necessary that the production of such letter/ order be within one month from the date of availment. Click on the 'Next' to continue.



Explanationhe individual export bills should be marked off, whenever they are received for negotiation and collection, against the earliest outstanding pre-shipment credit on "First-in-First-out" basis. In any case, concessional credit should not be permitted to exceed the prescribed period of 180 days. Click on the 'Next' to continue.



ExplanationThere are instances wherein the amount of pre-shipment credit exceeds the value of export order. For instance, to procure the raw materials required to execute the export order as in the case of HPS ground nuts, de-oiled cakes etc. Then the excess amount should be adjusted either in cash or by sale of non-exportable by-products, within a period of 30 days from the date of advance. Click on 'Next' button� to continue.


Need for such facility Satisfactory track record Letter of Credit/Confirmed order Marked off export bills

Amount of pre-shipment credit exceeds the value of export order Reserve Bank refinance Frequent Review of drawals

ExplanationReserve Bank refinance is available only for the export finance not exceeding 180 days.



ExplanationBranches should constantly review the drawals in the account vis-�-vis the export bills tendered for negotiation/collection to adjust the pre-shipment credit and ensure that the exporter does not misuse the facility by drawing funds in excess of their genuine requirement for inventory build-up/other purposes. The facility should be withdrawn immediately if it is mis-used and branches should insist on production of firm order/ LC before granting further pre-shipment advances.

Screen TitlePacking Credit for Export Consultancy Services and Computer SoftwareScreen TextIn case of consultancy services and computer software the pre-shipment finance at concessional rate of interest is extended to exporters to enable them to undertake preliminary arrangements such as:

Mobilising technical and other staff Training staff or For purchase of any materials required

ExplanationExports may not involve actual movement of goods in case of consultancy services and computer software. While deciding about the pre-shipment facilities, branches must take into account the advance payments received against the contract.

Screen TitleFinance Against Goods for Exhibition and Sale AbroadScreen TextBranches may provide finance against goods for exhibition and sale abroad in the normal course at pre-shipment stage and after the sale is completed.

ExplanationBranches thus allow the benefit of concessional rate of interest on such advances both at the pre-shipment stage and the post-shipment stage, up to the stipulated period, by way of rebate.

Screen TitlePacking Credit to Sub-suppliersScreen TextThe facility of concessional export finance can be shared with sub-supplier or a supporting manufacturer if a merchant exporter or an export house having received a confirmed order or LC, needs to procure goods and get the same processed/ manufactured by another supplier or manufacturer. In such a case, the manufacturer/sub-supplier normally avails the export packing credit and supplies goods to the merchant exporter/export house against payment or against an inland LC or any other similar arrangement.

ExplanationThe facility of sharing concessional export finance with supporting manufacturer/sub-supplier is subject to normal exchange control regulations relating to exports. Click on the 'Next' button for broad details and guidelines to grant packing credit to sub-suppliers.

Screen TitlePacking Credit to Sub-suppliersScreen TextPacking credit granted to sub-suppliers covers the LC or export order received in favour of Export House/Trading House/Star Trading House etc. or manufacturer exporters only.ExplanationPacking credit advance is granted to exporters with good track record.

Screen TitlePacking Credit to Sub-suppliersScreen TextWhen the packing credit is granted, branches should ensure that:

There is no double financing of the export order and the relative Letter of Credit under the arrangement

The total finance associated to the execution of the export order and the period of export packing credit is shared between the manufacturer (supplier)

and the export house/merchant exporter (EOH) Any advance payment made by the EOH to the manufacturer/ sub-supplier is

taken into account to assess the working capital requirements of the manufacturer/ sub-supplier

ExplanationTo share the facility of packing credit, the EOH has to give a disclaimer letter to the effect that he would not avail any export packing credit to the extent availed by the manufacturer/ supplier.

Screen TitlePacking Credit to Sub-suppliersScreen TextRunning Account facility should not be given to the sub-supplier or a supporting manufacturer.

ExplanationContent needed from SME

Screen TitlePacking Credit to Sub-suppliersScreen TextWith the approval of banker/leader of consortium of banks of EOH, the EOH can open any number of LCs for components required within the overall value limit of the order/LC received by him. The LC opening bank fixes the minimum amount for opening such LCs taking into account the operational convenience.

ExampleIf a sub-supplier avails packing credit to manufacture goods and again the merchant exporter avails finance to further process/ pack/ ship the same goods, the Bank should ensure that total period for which both parties avail packing credit does not exceed the maximum period permitted for concessional finance. The total period is computed from the date of first drawal of packing credit by any one of the sub-suppliers to the date of submission of export documents by EOH.

ExplanationThe total period of packing credit availed by one or many sub-supplier(s) and the EOH should be within normal cycle of production required to export goods. Click on the 'Example' button to learn more.

Screen TitlePacking Credit to Sub-suppliersScreen TextThe packing credit scheme granted covers only rupee packing credit. The finance

given to both the sub-supplier(s) and EOH attracts interest.

ExplanationThe interest rates for finance given to both the sub-supplier(s) and EOH are as per RBI's directives on the rates of interest for packing credit for the specified period as announced from time to time.

Screen TitlePacking Credit to Sub-suppliersScreen TextThe LC opening charges are generally borne by the EOH

ExplanationThe LC opening charges are normally sustained by the EOH. He may recover the same from his sub-suppliers depending on their terms of sale.

Screen TitlePacking Credit to Sub-suppliersScreen TextIt is the responsibility of EOH to export the goods as per export order/LC. Any delay in the process will subjects him to the penal provisions issued from time to time.

ExplanationAfter the sub-supplier has made available the goods as per terms of inland LC to the EOH, his obligation of performance under the scheme is treated as complied with. In such circumstances penal provisions are not applicable to him for delay by EOH, if any.

Screen TitlePacking Credit to Sub-suppliersScreen TextThe packing credit scheme to sub-suppliers covers only the first stage of production cycle. The scheme does not cover the suppliers of raw materials, components, etc. to such immediate suppliers.

ExplanationFirst stage of production cycle is where the manufacturer exporter is allowed to open inland LC in favour of his immediate suppliers of raw materials, components, etc. required for manufacture of exportable goods. In case, the EOH is merely a trading house, the facility is available commencing from the manufacturer to whom the order has been passed on by the trading house.

Screen TitlePacking Credit to Sub-suppliersScreen TextA supplier who wants to avail pre-shipment advance/packing credit against the export contract or LC received in the name of an Export House or any Merchant Exporter should submit to the Bank a letter from the Export House/ Merchant Exporter:

Incorporating details of the goods to be supplied Confirming that he has not availed any packing credit from any other

bank/source against the same contract/LC.RepaymentSuch advance should be repaid:

Against the proceeds of the bill drawn under Inland LC (Back-to-Back LC) opened by the Export House/Merchant Exporter in favour of the sub-supplier.

In case it is not feasible to open Back-to-Back-LC, sub- supplier can draw bills on the Export House/ Merchant Exporter and adjust the advance from the proceeds of such bills.

If the bill is not accompanied by a Bill of Lading indicating that the export is effected, a certificate should be obtained from the Export House/ Merchant Exporter stating that the goods have actually been exported.

ExplanationSupplier should submit to the Bank a letter from the Export House/ Merchant Exporter incorporating details of the goods to be supplied and confirming that he has not availed any packing credit against the same contract/LC from any other source. Click on the 'Repayment' button to learn more.

Screen TitlePacking Credit to Sub-suppliersScreen TextThe credit extended under the system is treated as export credit from the date of advance to the sub-supplier:

To the date of liquidation by EOH under the inland export LC system and To the date of liquidation of packing credit by shipment of goods by EOH

ExplanationWhen credit is extended under this system, refinance from RBI to the respective banks is made available for appropriate periods. It is necessary to ensure that no double financing of the same transaction is involved.

Screen TitlePacking Credit to Sub-suppliersScreen TextThe scheme does not envisage extending credit by a sub-supplier to the EOH/manufacturer and thus the payment to sub-suppliers has to be made against submission of documents by LC opening bank treating the payment as packing credit of the EOH. Export Oriented Units/ Export Processing Zones (EOUs/EPZ) units supplying goods to other EOU/EPZ unit for export purposes are also eligible for rupee

packing credit under this scheme.

ExplanationEOUs/EPZ units supplying goods to other EOU/EPZ unit for export purposes are also eligible for rupee packing credit provided the supplier EOU/EPZ unit will not be eligible for any post shipment facility as the scheme does not cover sale of goods on credit terms.


Packing Credit� Advance against Duty Drawback entitlements Pre-shipment Credit in Foreign Currency (PCFC)

ExplanationLet us now look at Advance against Duty Drawback entitlements. Click on the 'Next' to continue.

Screen TitleAdvance Against Duty Drawback EntitlementsScreen TextExport credit can be given at pre-shipment level for an amount in excess of export order. The excess that represents duty drawback receivable is eligible for interest at concessionary rate. If Export Production Finance Guarantee of ECGC covers the transaction, the amount of duty drawback can be:

Recovered from appropriate authorities Liquidated from Duty Drawback received

TIPSThe packing credit that is made available to the manufacturer may be higher than the export value of the order.

ExplanationThe inland LC in favour of sub-supplier can be issued for an amount higher than the relative export order or the LC from abroad as the export documents are in the name of the exporter who alone is entitled to duty drawbacks recoverable from appropriate authorities. This is to ensure that the manufacturer gets packing credit to cover full manufacturing cost.

Screen TitleAdvance Against Duty Drawback EntitlementsScreen TextOverdraft/cash credit limits sanctioned to exporters to finance their receivables on account of duty drawbacks should be secured by hypothecation of duty drawback

entitlements.ExplanationLetters of authority/powers of attorney should be obtained from the borrowers and registered with the disbursing agencies concerned, if such agencies are prepared to accept such letters in favour of the Bank and agree to pay to the Bank direct of claims lodged by the exporter. A suitable margin may be retained on the duty drawback receivables financed depending on the credit risks.

Screen TitleAdvance Against Duty Drawback EntitlementsScreen TextOverdraft/cash credit limits sanctioned to exporters to finance their receivables on account of duty drawbacks should be secured by hypothecation of duty drawback entitlements.ExplanationLetters of authority/powers of attorney should be obtained from the borrowers and registered with the disbursing agencies concerned, if such agencies are prepared to accept such letters in favour of the Bank and agree to pay to the Bank direct of claims lodged by the exporter. A suitable margin may be retained on the duty drawback receivables financed depending on the credit risks.


� Packing Credit� Advance against Duty Drawback entitlements� Pre-shipment Credit in Foreign Currency (PCFC)

ExplanationLet us now look at Pre-shipment Credit in Foreign Currency. Click on 'Next' to continue

Screen TitlePre-shipment Credit in Foreign Currency (PCFC)Screen TextThe scheme of Pre-Shipment Credit in Foreign Currency (PCFC) enables the exporters to avail packing credit at international interest rates through Authorised Persons. The Scheme covers the cost of both domestic and imported inputs of exported goods.ExplanationIn the subsequent screen, you will learn about the extant guidelines to be followed by the branches. Click on the 'Next' to continue.

Screen TitlePre-shipment Credit in Foreign Currency - Designated BranchesScreen TextThe scheme is operated only at the designated branches as advised from time to time by the International Division (Planning), IBG Corporate Centre. Exporter-customers of non-designated branches (NDBS) can avail the facility at the nearest designated branch (DB).ExplanationThe scheme of PCFC can be operated only through designated branches.

Screen TitlePre-shipment Credit in Foreign Currency - EligibilityScreen TextFor existing customers availing PCFC:

� It can be carved out of the EPC limits available to them subject to the outstandings under both the rupee and foreign currency facilities (converted at the prescribed notional rate) not exceeding the limits sanctioned.

� There is no need for sanction of a separate sub-limit for PCFC.� Export Packing Credit (EPC) in Rupees in part and PCFC in part can be

granted against the same export order.ExplanationAll exporters, having firm export orders/irrevocable letters of credit are normally eligible for PCFC, provided they satisfy other credit norms. Exporters who want to avail PCFC are obligated to discount the export bills under Export Bills Rediscounting Abroad Scheme (EBR).

Screen TitlePre-shipment Credit in Foreign Currency - Running Account FacilityScreen TextRunning Account facility is permitted to exporters with good track record. In cases where running account facility has been extended to exporters:

� LC or firm order need not be insisted.� LC or firm order need not be physically deposited.

LC or firm order need not be insisted.In cases where running account facility has been extended, LC or firm order need not be insisted upon initially for disbursement of PCFC. As and when the exporter receives relative LC or firm order, the particulars thereof should be noted in the registers. LC or firm order need not be physically deposited.The LC or firm order need not be physically deposited with the Bank. However, statement of holding of the LCs / firm orders from the borrower covering the outstandings in PCFC should be obtained at monthly intervals. The branches need to introduce a suitable system to closely monitor the submission and meticulous scrutiny of statement of holding of LCs/ firm orders and also arrange for physical scrutiny of the LCs/firm orders, whenever considered necessary.ExplanationExporters whose overdues do not exceed 5% of the average annual export realisations during the preceding three calendar years may be considered as exporters with good track record. But this facility is not automatically given to their

sister/associate/group concerns. Click on the bulleted text to know more.

Screen TitlePre-shipment Credit in Foreign Currency - Running Account FacilityScreen TextLiquidation of PCFC can be done with:

� First in - first out method� The proceeds of the bill relating to another contract

First in - first out methodIn this method a single PCFC account is opened in the name of the exporter. While allowing repayments into the PCFC account, order-to-order application of repayments may not be necessary. But order-to-order monitoring through drawing power register is essential to ensure proper end use of funds and repayment of a particular PCFC advance within the stipulated period. The proceeds of the bill relating to another contractThe PCFC availed against a particular contract can be liquidated with the proceeds of the bill relating to another contract for which no packing credit has been availed of or by advance remittances in respect of export orders for which no PCFC drawal has been granted. Before allowing this facility, it should be ensured that the exporter has not availed PCFC/EBR with any other bank in respect of the export bill in question.ExplanationIn case PCFC drawn for export purposes is not utilised for the purpose, the running account facilities for the exporter concerned should be withdrawn with immediate effect along with the prescribed penalties. The drawals already made under Rupee Running Account facility earlier should not be converted into PCFC advances.

Screen TitlePre-shipment Credit in Foreign Currency - Type of AccountScreen TextPCFC is made available by way of cash credit account. Before any disbursal is made under PCFC, branches should ensure that:

� The total outstandings under EPC and the rupee equivalent of outstandings under PCFC (arrived at the fixed notional rate) is within the overall EPC limit of the exporter

� The proposed disbursal falls within the limitExplanationThe drawing power register should provide for columns to reflect PCFC and EPC outstandings and the total thereof, to monitor the total outstandings at any point of time.

Screen TitlePCFC - Substitution of Orders and CommoditiesScreen TextRepayment of packing credit may be allowed with export documents relating to any other order covering the same or any other commodity exported by the exporter. The

relaxation is allowed subject to the following conditions.� It is necessary and unavoidable� It is not by its sister/associate/group concerns� Declaration from the exporter� Bank may mark off the order� Liquidation of PCFC under Running Account facility

It is necessary and unavoidableThe facility of substitution of order / commodity is allowed when it is considered that the substitution is commercially necessary and unavoidable. It is not by its sister/associate/group concernsThe documents substituted should also pertain to shipment made by the exporting unit and not by its sister/associate/group concerns. Declaration from the exporterRepayment of PCFC/Running Account facility is allowed from export proceeds of documents or advance remittances in respect of export orders against which such facility has not been availed. A declaration from the exporter may be obtained to the effect that he has not availed /will not avail PCFC from any bank against such orders/ documents. Bank may mark off the orderThe Bank may mark off the order representing the advance against PCFC drawals, if any left unmarked. Liquidation of PCFC under Running Account facilityIn case of liquidation of PCFC under Running Account facility by advance remittances, Branches should restrict such adjustments to PCFC drawals that are not outstanding for more than 360 days from the date of drawal.ExplanationSubstitution of orders and commodities may be allowed during the repayment of packing credit subject to the condition that there is no change in the terms and conditions as applicable for pre-shipment and post-shipment credit with reference to period and rate of interest. Click on the bulleted text to learn more.

Screen TitlePre-shipment Credit in Foreign Currency - Period of CreditScreen TextThe following need to be considered for PCFC:

� Undertaking� Extension� Extension

UndertakingPCFC is available for a maximum period of 180 days from the date of first disbursement. Extension

� Any extension of the credit will be subject to the same terms and conditions as applicable for extension of Rupee Packing Credit.

� It will entail an interest cost of 2% plus the original spread (charged initially) above 6 months LIBOR prevailing at the time of extension for the extended period.

No Export� If no export takes place even within 360 days, PCFC is adjusted at the ruling

T.T. selling rate for the currency concerned.� Interest right from the date of disbursement till the date of payment, should

be recovered at 2% over the interest rate applicable for the cash credit of the exporter and the interest earlier recovered at LIBOR related rates should be adjusted therefrom.

Remittance of foreign exchange for repayment of principal with interest does not require RBI's prior approval in such cases.

Screen TitlePre-shipment Credit in Foreign Currency - CurrencyScreen TextPCFC can be availed in

� US dollar ($)� Pound sterling (�)� EURO� Japanese Yen

ExplanationCurrencies in which PCFC can be availed are as listed on the screen.

Screen TitlePre-shipment Credit in Foreign Currency - Rate of InterestScreen TextThe rate of interest to be charged on the account is 100 basis points (bps), above 6 months LIBOR / EUROLIBOR / EURIBOR rate as on the date of disbursement.Managing Director (MD) of the Network is authorised to quote concessional rate of interest. TIPSSix-month LIBOR/EUROLIBOR/EURIBOR rate for $, EURO, �, and Yen is indicated by SBI, New York in its special page on the Reuter Monitor used for EEFC Deposit rates, on a daily basis. The branches not having Reuter Monitor facility should ascertain the rates from the nearest branches having Reuter Monitor facility.ExplanationBranches should ascertain the applicable rate of interest from their respective LHOs or International Division, IBG, Corporate Centre.

Screen TitlePre-shipment Credit in Foreign Currency - Rate of InterestScreen TextOther features of PCFC are:

� Transaction Charges� Funding� Accounting� ECGC Cover� Withholding Tax� Forward Contracts

Transaction ChargesPrescribed transaction charges should be levied for each PCFC disbursal. The International Division (Planning), International Banking Group, Corporate Centre fixes this charge along with other charges from time to time. Branches should ascertain these charges and recover the same. FundingForeign Department acts as the nodal centre to raise/ deploy the offshore and onshore funds to lend under PCFC. It maintains PCFC loan Nostro A/cs to raise funds and route the PCFC repayments at the macro level with the Bank's Nassau (US$), Frankfurt (Euro), London (�), and Tokyo (Yen). AccountingOnly designated Branches have to open a General Ledger Account styled "Cash Credit Foreign Currency Account" to route all transactions under PCFC. The rupee balances in this account is merged with cash credit balances in the Weekly Abstract under the head "Loans and Cash Credits". ECGC CoverECGC cover is available in respect of PCFC Advances on individual basis as in the case of Rupee Packing Credit Withholding TaxIn terms of a clarification given by the Bank's Law Department, no withholding tax is payable, if interest on the foreign currency line is remitted to the Bank's own foreign office. As it is intended to avail lines of credit only from the Bank's foreign offices, and use our own FCNB corpus for funding PCFC the exporters need not pay withholding tax. Forward ContractsForward Contracts can be booked in respect of future PCFC drawals, if they are to be converted to Indian rupees for purchase of domestic raw materials. Cross currency forward contracts can also be availed in any of the permitted currencies against the invoiced currency in which PCFC is availed the minimum amount being USD 250,000. TIPSSix-month LIBOR/EUROLIBOR/EURIBOR rate for $, EURO, �, and Yen is indicated by SBI, New York in its special page on the Reuter Monitor used for EEFC Deposit rates, on a daily basis. The branches not having Reuter Monitor facility should ascertain the rates from the nearest branches having Reuter Monitor facility.

Screen TitlePCFC: Reporting of Transactions to Foreign Department, KolkataScreen TextRBI envisages the application of interest rates linked to LIBOR rates prevailing at the time of PCFC disbursals. Hence, it is crucial to raise the foreign currency funds through the Bank's foreign offices on the same day in respect of the disbursals made at the branches. The success and profitability of the scheme depends on:

� Prompt and accurate reporting of the disbursals and repayments to FD Calcutta by Fax/Telex before 3 P.M. on each day

� Provision of maturity profile of PCFC disbursal and repayment in the relative format

� The approximate date of shipment from the exporter to compile the maturity profile of PCFC

ExplanationIf any branch fails to report the day's disbursements to FD for the purpose of funding, FD will charge the differential between the LIBOR linked rate and average rate for rupee funds for the period involved to the branch concerned.

Screen TitlePCFC - Interest ApplicationScreen TextThe following are the points to be notes for interest application to PCFC account:

� Interest in foreign currency is applied to the individual PCFC Account at monthly intervals.

� The rate of interest to be charged on the account is 100 bps (basis points; 100 bps is 1%), above six-month LIBOR/ EUROLIBOR/ EURIBOR rate as on the date of disbursement applicable for each PCFC drawal.

� The rupee equivalent of the interest amount is debited to the exporter's cash credit account or current account at the ruling TT selling rate and the same is credited to Branch Interest Account.

ExplanationInterest in foreign currency is applied to the individual PCFC Account on the last working day of every month. Listed on the screen are the points to be kept in view to apply interest on PCFC accounts.

Screen TitlePCFC - Cross Currency DrawalsScreen TextPCFC drawals in cross currencies may be permitted subject to the exporter bearing the risk of fluctuation in currency rates. Any shortfall in the foreign currency proceeds of the bill to be applied for liquidation of PCFC can be met by sale of the foreign currency (of PCFC) against Rupees. The minimum amount of drawal for cross currency PCFC should be US $250000 or equivalent.ExplanationTo cover the shortfall and margins as considered necessary, say 10% minimum may be retained on the drawal at the PCFC disbursement stage itself. This is not necessary if the exporter enters into a cross currency forward contract to match PCFC amount while availing cross currency PCFC.

Screen TitlePCFC - Reporting TransactionsScreen TextThe transactions are reported in:

� Weekly Abstract� P-Report� R-Returns:

Weekly Abstract The balances in "Cash Credit (Foreign Currency)" Account in the General Ledger should be merged with the cash credit rupee balances in the weekly abstract.

P-Report

� The disbursals of PCFC for purchase of domestic raw materials that involve conversion into Indian Rupees are purchase transactions and should be included in the total purchases for the purpose of P-Report.

� When the export bill is discounted under EBR to liquidate the underlying PCFC, any surplus portion that is converted into Indian Rupees for credit to the exporter's account should be treated as a purchase transaction and should be included in the total purchases for the purpose of P-Report.

R-Returns:The purchase transactions are same as in P-Reports.

� The disbursals of PCFC for purchase of domestic raw materials that involve conversion into Indian Rupees are purchase transactions and should be included in the total purchases for the purpose of R-Returns.

� When the export bill is discounted under EBR to liquidate the underlying PCFC, any surplus portion that is converted into Indian Rupees for credit to the exporter's account should be treated as a purchase transaction and should be included in the total purchases for the purpose of R-Returns.

Screen TitlePCFC - Other ProvisionsScreen TextOther provisions relating to PCFC are:

� PCFC for Deemed Exports� PCFC sharing between EOH and manufacturer supplier� PCFC sharing between two EOU/EPZ Units� Liquidation of PCFC by Payment in Foreign Exchange� EPC Outstandings� Exporter Availing Suppliers Credit� Compliance with Normal Credit Discipline� ACU Mechanism� Discounting under EBR Scheme� PCFC and EBR Nostro Loan Accounts� EBR Scheme

PCFC for Deemed ExportsPCFC can also be granted for deemed exports covering supplies to projects financed by multilateral /bilateral agencies / funds. The PCFC granted for deemed exports should be liquidated by EBR within a maximum period of 30 days or up to the date of payment by project authorities whichever is earlier, subject to compliance with other conditions relating to deemed exports. PCFC sharing between EOH and manufacturer supplierPCFC granted to:

� A manufacturer supplier against the LC or export order received by the EOH on the basis of the disclaimer from the EOH through his banker.

� The manufacturer can be repaid by transfer of foreign currency from the EOH by availing of PCFC or discounting of bills under EBR.

It should be ensured that there is no double financing involved in the transaction and the total period of packing credit is limited to the actual cycle of production of the exported goods. PCFC sharing between two EOU/EPZ UnitsPCFC can also be made available to both the supplier EOU/EPZ unit and the receiver

EOU/ EPZ unit. PCFC for:� Supplier EOU/ EPZ unit is for supply of raw material / components of goods,

that is further, processed and finally exported by receiver EOU/EPZ unit.� Supplier EOU/EPZ unit has to be liquidated by receipt of foreign exchange

from the receiver EOU/EPZ unit, for which purpose, the receiver EOU/EPZ unit can avail of PCFC.

Liquidation of PCFC by Payment in Foreign ExchangeTransfer of foreign exchange from the banker of the receiver EOU/EPZ unit to the banker of supplier EOU/EPZ unit meets the stipulation regarding liquidation of PCFC by payment in foreign exchange. Thus, there will not normally be any post-shipment credit in the transaction from the supplier EOU/EPZ unit's point of view. In all these cases, it has to be ensured that there is no double financing for the same transaction. The PCFC granted to receiver EOU/EPZ unit will be liquidated by discounting of export bills. EPC OutstandingsExisting EPC outstandings of the exporters in Rupees cannot be converted into PCFC advances. Exporter Availing Suppliers CreditIn case the Exporter avails Suppliers credit in respect of his imports, he will be eligible for PCFC only for purchase of domestic inputs. Compliance with Normal Credit DisciplineThe PCFC amounts are taken into account for the purpose of compliance with normal credit discipline like total assessed limits etc. ACU MechanismPCFC can be granted in respect of exports under ACU mechanism. Discounted under EBR SchemeBefore granting PCFC, it should be made clear to the exporters that:

� The LCs should not be restricted to other banks� The bills should be invariably discounted with the Bank under EBR scheme

Exporters availing PCFC at the Bank's branches should not be allowed to book forward/cross currency forward contracts with any other bank in respect of the relative bills.PCFC and EBR Nostro Loan AccountsDesignated branches should not send any messages relating to debits/credits in the PCFC and EBR Nostro Loan accounts of FD, to the foreign offices concerned directly. The foreign offices act only on the instructions of FD (nodal centre) and ignore the messages relating to PCFC and EBR transactions, received from the domestic offices. EBR SchemeEBR scheme can be availed by exporters who:

� Have not availed PCFC / EPC� Availed EPC

Exporters who availed PCFC have to necessarily avail EBR and cannot avail Rupee post-shipment finance for discounting the relative bills.( EBR will be dealt in more detail in the Post-Shipment Export Credit Module). ExplanationListed on the screen are other provisions pertaining to PCFC. Click on the bulleted text to learn more.

Screen TitleExport Credit - Simplification of ProceduresScreen TextThe credit facilities sanctioned to exporters should be renewed annually. In case of delay in renewal, the sanctioned limit may be allowed to continue uninterrupted and urgent requirement of the exporters should be met on ad hoc basis. Therefore, export finance should not be withheld for reasons of delay in renewal or non-renewal of limits. Wherever warranted, ad hoc limits may be considered for sanction ensuring that renewal exercise is completed expeditiously.ExplanationIn case of export of seasonal commodities, agro-based products sanction may be accorded for peak/non-peak credit facilities to exporters as per extant guidelines. A Stand-by Line of Credit to meet genuine contingency needs of exporters may be sanctioned along with regular credit limits as a separate limit.

Screen TitleExport Credit - Simplification of ProceduresScreen TextThe following are the simplification of procedures in export credit: Since the goods have already been valued and cleared by the customs authorities submission of original sales contract, confirmed order, proforma invoice countersigned by overseas buyer and the indent from authorised agent of overseas buyer need not be insistedExplanationThe only exception is in the case of transactions with Letters of Credit where the terms of LC require submission of the sale contract and other alternative documents.

Screen TitleExport Credit - Simplification of ProceduresScreen TextA mechanism for quick initial scrutiny of appraisal and for additional information/clarification are present at:

� At special branches and� Branches having significant export business

RBI Time Norms RBI time norms for disposal of export credit proposals are:Fresh/ enhancement in credit limits 45 daysRenewal of existing credit limits 30 daysSanction of adhoc credit facilities 15 days

ExplanationThe Circle Management Committee may finalise the mechanism by designating a suitable official with adequate skills and experience taking into consideration the special features obtaining at each centre. The export credit proposals should be disposed of within the specified time limit. Click on the 'RBI Time Norms' button to see RBI's time norms for disposal of export credit proposals.


� Packing Credit� Advance against Duty Drawback entitlements� Pre-shipment Credit in Foreign Currency (PCFC)

ExplanationYou have just seen the types of pre-shipment credit. Click on 'Next' button to learn more about other credit facilities extended by the Bank.

Screen TitleExecution of Bid Bond/Tender Guarantees:Screen TextBid bonds/tender guarantees are issued in favour of overseas buyers in lieu of earnest money.ExplanationThe exporters have to submit bid bonds or tender guarantees at the time of participation in tenders for the supply of goods or services abroad.

Screen TitleIssue of Guarantees in Respect of Advance PaymentsScreen TextBank guarantees are issued in favour of overseas buyers in respect of advance payments to be made by them.ExplanationSuch advance payments are a common feature in contracts pertaining to export of capital goods or turnkey jobs.

Screen TitleEstablishment of Letters of CreditScreen TextLetters of credit are issued at the request of exporters in favour of suppliers of:

� Raw materials� Components� Services

ExplanationBack-to-back letters of credit are issued at the request of export houses and merchant-exporters in favour of domestic manufacturing units for the supply of goods contracted for export.

Screen TitleArranging Lines of Credit in Foreign CountriesScreen TextThe facility of arranging lines of credit in foreign countries is usually required where the execution of an export contract involves work to be done in the buyer's country.ExplanationThe local costs may be financed by arranging a line of credit from a foreign branch or a correspondent bank against the Bank's guarantee, wherever necessary.

Screen TitleExecution of Performance GuaranteesScreen TextAt the request of exporters, the Bank issues guarantees for the performance of machinery, equipment, etc. supplied by them.ExplanationPerformance guarantees are generally stipulated in contracts pertaining to the export of capital goods or turnkey jobs. Guarantees are also issued in lieu of retention money.

Screen TitleExport Credit to Exporters of Agricultural ProductsScreen TextTo maintain the desired quality in the commodity to be exported, exporters of Agricultural products / Agri-Export Oriented Units (processing) may procure and supply quality inputs to the farmers. Branches may treat such inputs to farmers as raw material and sanction export credit to cover the cost of such inputs.Branches may extend the facility in case of:

� Tie-up arrangements� Arrangement with the overseas buyer� Contract with the farmers

Tie-up arrangementsTie-up arrangements are considered feasible and the project would take off within a reasonable period of time. Arrangement with the overseas buyerThe exporter has made the required arrangement with the overseas buyer in respect of the product to be exported. Contract with the farmersThe exporter has entered into a contract with the farmers in respect of crops to be purchased. Monitor and ControlIn cases where the facility is granted, it is necessary for the branches to ensure:

� End-use of funds, viz., distribution of the inputs such as quality seeds, permissible pesticides and fertilizer to the farmers for raising the crops as per arrangement made by the exporter/processing units.

� The finished product is subjected to the required inspection and the quality

of the goods certified as good for export.� The final products are exported as per the terms and conditions of sanction

in order to liquidate the pre-shipment credit.

TipsExporters of agricultural products/Agri-Export Oriented Units (processing) located both outside as well as in the Agri-Export Zones may be considered for the facility.ExplanationPerformance guarantees are generally stipulated in contracts pertaining to the export of capital goods or turnkey jobs. Guarantees are also issued in lieu of retention money.

Screen TitleSpecial Financial Package for Large Value ExportsScreen TextThe RBI has introduced a special financial package for Large Value Exports. While extending export credit facilities, branches should be governed by:

� The internal guidelines� Reserve Bank of India (DBOD/IECD/ECD) guidelines� The rules of the Foreign Exchange Dealers' Association of India (FEDAI)� The Trade Control and provisions of FEMA� Codes of the International Chamber of Commerce viz., UCPDC, URC etc.

ExplanationBranches are guided by the detailed guidelines covering concessional interest, the list of eligible products exported under the special package and the validity period of its implementation.

Screen TitleSBI Exporters Gold Card SchemeScreen Text"SBI Exporters Gold Card Scheme"� was started by the bank as a facility after EXIM Policy's proposal and RBI's announcement.Explanation"SBI Exporters Gold Card Scheme" will be covered in detail in Module 7.

Screen TitleSBI Exporters Gold Card SchemeScreen Text"SBI Exporters Gold Card Scheme"� was started by the bank as a facility after EXIM Policy's proposal and RBI's announcement.Explanation"SBI Exporters Gold Card Scheme" will be covered in detail in Module 7.


� Classify pre-shipment credit into three categories� Categorise exporters eligible for packing credit� Assess Export Packing Credit (EPC)� Monitor and control packing credit loans to ensure proper end use of the

amounts� Grant pre-shipment credit in foreign currency based on various criteria

ExplanationThis module introduced you to pre-shipment finance and its types. It also introduced you to various criteria for granting such advances to exporters

Export Finance - Post-shipment Credit


List guidelines that branches need to keep in view while extending post shipment finance

Classify post-shipment finance Examine the documents under letters of credit to grant advance Grant advance against shipping documents keeping in view the different

requirements for bills drawn under LC, non-credit bills and credit against duty drawback

ExplanationThis module introduces you to post-shipment finance and its types. It also introduces you to various criteria for granting such advances to exporters.

Screen TitleWhat is Post-shipment Finance?Screen TextExporters who sell goods abroad have to wait for a long time before payment is received from overseas buyers. The period of waiting depends upon the terms of payment. To tide over this period, exporters need post-shipment finance.

ExplanationPost-shipment credit is any loan or advance granted or any other credit provided by

the Bank to an exporter of goods from India from the date of extending the credit after shipment of the goods till the date of realisation of the export proceeds i.e. till the bank's nostro account is credited abroad.

Screen TitleWhat is Post-shipment Finance?Screen TextPost shipment finance can be extended up to 100% of the invoice value of goods. Depending upon the payment terms offered by Indian exporters to overseas buyers, post-shipment finance can be:

Short-term finance or Long-term finance

The maximum period usually allowed for realisation of export proceeds is six months from the date of shipment.

ExplanationExport business may also take place without the support of documentary letters of credit and the Bank normally purchases the bills drawn by exporters on foreign buyers to finance them.

Screen TitleBasic Considerations for Post-shipmentScreen TextWhile purchasing the bill drawn by exporters on foreign buyers, the Bank takes into consideration:

The track record of the exporter Country risk Nature of merchandise Terms of payment Payment record of the drawee

ExplanationListed on the screen are a few considerations that the Bank needs to take into account while purchasing bills. The subsequent screens have a few more guidelines that branches should keep in view while extending post shipment finance.

Screen TitleGuidelines for Post-shipmentScreen TextFew more guidelines that branches should keep in view while extending post shipment finance are:

Eligibility Evidence of shipment Discount / purchase of documentary bills Letter of Credit Documents against acceptance Nature of goods ECGC cover Margin Limits to be sanctioned Interchangeability between pre-shipment and post-shipment finance Compliance� with RBI's exchange control� regulations

ExplanationHi! I am back. This screen lists a few more guidelines that the branches should keep in view while extending post shipment finance. Let us look at each one in detail. Click on 'Next' button to continue.



ExplanationPost shipment finance should always be extended to actual exporter who has exported the goods, an exporter in whose name the exports documents are transferred and suppliers of goods who supply goods to the designated agencies in case of deemed exports.Click on the� 'Next' button to continue.


Eligibility Evidence of shipment Discount / purchase of documentary bills Letter of Credit Documents against acceptance

Nature of goods ECGC cover Margin Limits to be sanctioned Interchangeability between pre-shipment and post-shipment finance Compliance� with RBI's exchange control� regulations

ExplanationPost shipment finance should always be extended against evidence of shipment of exports goods or supplies made. Click on� the 'Next' to continue.



ExplanationIn case of discount / purchase of documentary bills, the credit-worthiness of the drawee of the bills should be ascertained. Status reports (i.e. opinion reports from Dun and Bradstreet) on the overseas drawees should be obtained and carefully studied.

A notice of the Bank’s interest in the goods covered by the bill of lading has to be sent on form COS 329 to the shipping company concerned by the negotiating branch. This serves as a cross check ensuring genuineness of the bill of lading.Click on the 'Next' buttin to continue.


Eligibility Evidence of shipment Discount / purchase of documentary bills Letter of Credit Documents against acceptance

Nature of goods ECGC cover Margin Limits to be sanctioned Interchangeability between pre-shipment and post-shipment finance Compliance� with RBI's exchange control� regulations

ExplanationThe standing of LC opening bank should be verified before negotiating bills under LC. Click on the 'Next' button to continue.



ExplanationIn case of documents against acceptance, the control over goods should be retained until the relevant export bills are accepted by the drawee. On acceptance of the claim by the drawee, the documents are released to the drawee, hence the advance becomes a clean one. It is therefore important to ascertain the credit-worthiness and integrity of the drawer and drawee of the bill. Click on the 'Next' button to continue.


Eligibility Evidence of shipment Discount / purchase of documentary bills Letter of Credit Documents against acceptance Nature of goods ECGC cover Margin Limits to be sanctioned Interchangeability between pre-shipment and post-shipment finance

Compliance� with RBI's exchange control� regulationsExplanationIf the documents cover goods of perishable nature, the bills should preferably be drawn at sight, especially in the case of new exporter client. Click on the 'Next' button to continue.



ExplanationECGC covers political and commercial risks. Where required, ECGC post shipment policy cover duly assigned to the Bank should be stipulated as a condition of sanction, especially If the post-shipment finance is not backed by an LC. It should also be stipulated that the exporter should authorise the branch to debit his account with the amount of premium payable under IPSG(Individual Post Shipment Guarantee) of ECGC. Click on the 'Next' button to continue.



ExplanationIn case of post-shipment finance, other than bill negotiation / purchase / discount, the margin may be stipulated depending upon the merits of each proposal and type of security that is; LC, firm order, or collateral and ECGC cover. Click on the ‘Next’ button to continue.



ExplanationSeparate limits should preferably be sanctioned for bills drawn under letters of credit and bills drawn without letters of credit. Limits for negotiation of bills under letters of credit of foreign offices/correspondents of the Bank can be fixed outside the Assessed Bank Finance and in such cases, branch mangers of the specified branches have unlimited powers to fix limits for negotiation of bills. Click on 'Next' button to continue.



ExplanationNeed-based inter-changeability between pre-shipment and post-shipment facilities may be permitted to take care of bunched export orders or physical exports. Branches should comply with the instruction in respect of

The authority to permit such interchangeability and The extent to which such interchangeability can be permitted

Click on the 'Next' button� to continue.



ExplanationDocuments must be scrutinised from the standpoint of their compliance with RBI's exchange regulations. Branches must be conversant with the relevant provisions of the FEMA. This is an interactive exercise for you to attempt.� Type the correct answer in the blank space provided for all and click the 'Submit' button.

Screen TitleDocuments for Post-shipment FinanceScreen TextAt the post-shipment stage, the Bank basically finances against:

Shipping documents and Duty drawback entitlements

ExplanationAt the post-shipment stage, the Bank basically finances against shipping documents and against duty drawback entitlements. Let us take a look at shipping documents in the next screen.

Screen TitleShipping DocumentsScreen TextAdvances against shipping documents may be grouped as under: -

Bills drawn under LC - Negotiation of bill, whether sight or usance Non-credit bills that include:

o Purchasing of sight bill not under LCo Discounting of usance bill not under LCo Advances against bills sent on collection basiso Advances against consignment exportso Advances against undrawn balances/retention money

ExplanationListed on the screen are two categories of shipping documents against which the Bank grants post-shipment finance. You will learn about sight and usance bills in the subsequent screens.

Screen TitleClassification of Post-shipment FinanceScreen TextPost-shipment finance can be classified as:

Negotiation/Payment/Acceptance of export documents under Letters of Credit (LC)

Purchase/Discount of export documents under confirmed orders/export contracts

Advances against bills sent on collection basis Advances against exports on consignment basis Advances against Duty Drawback entitlements Advances against undrawn balances/retention money

ExplanationListed on the screen are classifications of post-shipment finance.

Screen TitleDocuments under Letters of CreditScreen TextThe operations under Letters of Credit are governed by Uniform Customs & Practice for Documentary Credits (UCPDC) (1993 Revision - the International Chamber of Commerce Brochure No. 500), and UCP 600 from 1 July, 2007 as well as ISBP.

The cardinal principles of UCPDC are:

The doctrine of strict compliance and In credit operations, banks deal only in documents

ExplanationExporters need to submit documents for negotiation strictly in compliance with the terms and conditions of the LC. It is equally necessary for the negotiating branch to check this compliance with reference to the documents submitted vis-�-vis the LC. It should be ensured that documents are 100% credit compliant.

Screen TitleDocuments under Letters of CreditScreen TextThe examination of documents generally covers whether:

All the documents called for are submitted and in the requisite number. Each document is issued as per the stipulations in the LC and their content

satisfies the provisions of UCPDC and the LC. The description of goods in invoice and documents corresponds to that in the

LC. There are any inter se contradictions among documents. Shipment is made before stipulated date Documents are presented before expiry of LC and within the period from

shipment date as stipulated in LC/UCPDC.ExplanationThe documents under Letters of Credit are generally examined as listed on the screen. Click on the 'Next' button to continue

Screen TitleDocuments under Letters of CreditScreen TextThe examination of documents generally covers whether:

Insurance policy covers the risks as stipulated in the LC and is for adequate amount.

The amount of bill is within the LC value. The conditions about shipment, partial shipments, trans-shipment are

complied with. Full set of clean On Board Bill of Lading is submitted and the Bill of Lading is

issued or endorsed in favour of LC opening bank or, as stipulated in the LC. Stamps and alterations, if any, on any of the documents are duly

authenticated. All export bills are exempted from stamp duty.

Word of CautionSome of the exporters affix on the original of the usance bill a part of the stamp for the stamp duty eligible on the bill and the balance on the duplicate of the bill. Such a practice is fraught with grave risks as it may be contended in the court of law that the bill has not been adequately stamped. Bills of Exchange that are inadequately

stamped, are inadmissible in the court of law as evidence. In the circumstances, it should be noted that stamps for the full duty exigible are affixed on the original bill of exchange itself. No stamps need be affixed on the duplicate of the bill of exchange.

ExplanationListed on the screen are few more points that the Bank should consider when examining the documents under Letters of Credit. Click on the 'Word of Caution' button to learn more.

Screen TitleAgainst Non-credit BillsScreen TextIn case of non-credit bills, points are considered relevant are:

A satisfactory status or opinion report on the importer ECCC has fixed the credit limit on the buyer(Buyer wise limit) and the

exposure is within that limit The exporter should obtain the Contracts / Shipments (Comprehensive) Risks

Policy of the ECGC

For bills are not covered under LC, it should be ensured that the documents are in accordance with firm order/sales contract. The shipping documents are to be drawn/endorsed/consigned to bank and not allow title to the goods to be passed on to the buyer directly.

ExplanationIn case of non-credit bills, various factors that should guide branches are credit worthiness of the exporter, status report on the drawee (importer), past experience and whether ECGC guarantee cover is available.

Screen TitleBills Drawn under LCScreen TextBills drawn under LC are:

Sight Bills Usance Bills

Sight Bills

The following are the conditions for determiing the period for extending� concessionary rate of interest under post-shipment finance:

A concessionary rate of interest is for a maximum period of Normal Transit Period (NTP) stipulated for the concerned bill as per FEDAI rules. NTP is 25 days for all bills denominated in foreign currency. Only in the case of exports to Iraq, the NTP is 120 days.

It has to be charged up to the actual date of realisation of export proceeds or NTP stipulated for the bill, whichever is earlier.

The date of realisation of demand bills for this purpose would be the date on which the proceeds get credited to the Bank's Nostro Account abroad.

Where interest for the entire NTP has been collected at the time of negotiation/purchase/discount of bills, the excess interest collected for the period from the date of realisation to the last date of the NTP should be refunded to the borrowers.

Usance BillsThe following are the conditions of concessionary rate:

Concessional rate of interest up to notional due date comprises - NTP + usance period + plus grace period (if any). (If the due date is known in

advance, then no NTP is allowed). Total period in such cases is not to exceed 6 months from date of shipment

ExplanationDepending on the nature of bills, post shipment finance carries concessionary rates of interest for a period. Click on the tabs to learn more.

Screen TitleBills Drawn under LCScreen TextInterest chargeable for the overdue period will be as applicable to "Export Credit Not Otherwise Specified", if the proceeds of export bills are not realised within:

The normal transit period or date of realisation in the case of demand bills Notional due date (NTP + usance) in any case to be less than 180 days (No

NTP if due date is fixed) in the case of usance billsExplanationInterest should be recovered at the time of giving advance by deducting the same from the amount to be disbursed. In case there is early realisation, proportionate interest should be refunded. However in such cases, early delivery charges, as advised by FD, Kolkata should be recovered.

Screen TitleAdvance Against Bills Sent on Collection BasisScreen TextBranches may also sometimes grant advances against bills sent on collection basis. The need to resort to this arrangement normally arises:

When the accommodation available under the Foreign Bills Purchased Limit is exhausted

When some export bills drawn under LC have discrepancies Where it is the Customary practice in the particular line of trade In the case of exports to countries where there are problems of

externalisation(i.e. countries unwilling or unable to permit remittance in a convertible currency outside the country).

ExplanationListed on the screen are a few conditions when branches may grant advances against bills sent on collection basis. Click on the 'Next' screen to learn more.

Screen TitleAdvance Against Bills Sent on Collection BasisScreen TextIn a situation where advance is granted against bills sent on collection basis, branches may send the export bill on collection basis and finance the exporter after retaining a suitable margin out of the total bill amount and debit such advances to an account styled "Advances against bills sent on collection basis" (rupee advance).

Advances against bills sent on collection basis may be sanctioned as cash credit or overdraft.

ExplanationThe advance should be liquidated out of the realisation of export proceeds. The advances against bills sent on collection basis would attract interest rate as applicable for post-shipment credit i.e., according to the tenure of the bill. The EPC should not be continued till realisation of export proceeds

Screen TitleAdvances Against Goods Sent on Consignment BasisScreen TextWhen goods exported on consignment basis, branches should:

Instruct the Bank's overseas branch/correspondent while forwarding shipping documents to deliver the documents only against Trust Receipt / Undertaking to deliver the sale proceeds by a specified date within the time prescribed for realisation of export proceeds.

Retain appropriate margin while granting advance against such exportsExplanationThe branches may finance goods exported on consignment basis at the risk of the exporter for sale and eventual remittance of sale proceeds to him by the agent / consignee subject to the customer enjoying specific limit for that purpose.

Screen TitleAdvances Against Duty Drawback EntitlementsScreen TextGovernment of India has formulated a Duty Drawback Credit Scheme under which banks are allowed to grant advances to exporters against their entitlements of duty

drawback on export of goods.

ExplanationThe period of such advances is up to a maximum of 90 days beyond which the Bank may not allow the advances or may charge normal interest applicable to export credit. Advance against duty drawback at post-shipment stage should be covered under Export Finance Guarantee of ECGC. Click on the 'Next' button to learn more about other conditions to be fulfilled while granting such advances.

Screen TitleAdvances Against Duty Drawback EntitlementsScreen TextOther conditions to be fulfilled while granting loans against duty drawback entitlements are:

Declaration from the exporter to be obtained on the export promotion copy of the shipping bill containing the EGM number (Export General Manifest Number issued by customs department) mentioning the amount of duty drawback eligible.

The amount of claim thus declared should be supported by a certificate from a Chartered Accountant authenticating the amount of claim on the basis of Trade Policy/Customs Rules.

A lien for the amount of advance to be noted with the designated bank's branch conducting the account of the custom department under EDI (Electronic Data Interchange) scheme.

The financing branch should also make necessary arrangement with the designated bank's branch for transfer of funds as and when duty drawback claim is credited by the customs through electronic fund transfer system.

Branches may stipulate a margin between the amount of duty drawback provisionally certified and the advance to be granted.

Screen TitleAdvances Against Undrawn Balances/ Retention MoneyScreen TextIn certain lines of exports, it is the practice of exporters not to draw bills for the full invoice value of the goods. In such cases, branches may allow advance against the undrawn portion, provided:

Undrawn balance is in conformity with the normal level of balance left undrawn in the particular line of export subject to a maximum of 10% of the full export value, and

The exporter provides an undertaking that within six months from the date of shipment of goods he will repatriate balance proceeds of the shipment

Retention MoneySimilarly under certain contracts, foreign buyers retain a small portion of the bill amount up to an agreed period to enable themselves to be satisfied about the quality of the items supplied. Advance against such retention money can be allowed to the exporters provided the retention money is repatriated to India within 360 days from

the date of export. Such advance carries interest at concessive rate up to a maximum of 90 days.

ExplanationExporters leave a small part undrawn, for payment after adjustments due to differences in weight, quality, etc. ascertained after arrival and inspection of the goods. Branches are permitted to grant advances against such balances at concessional rate of interest till the receipt of remittances from abroad, subject to a maximum of 90 days.

Screen TitleECGC CoverScreen TextAs regards post-shipment credit not supported by letter of credit, post-shipment guarantee cover of ECGC is generally obtained against commercial and political risks

ExplanationThese guarantees provide credit enhancement to the Bank by insuring that a good portion of the Bank's loss arising from the exporter not discharging his liabilities could be made good by ECGC.

Screen TitleRediscounting of Export Bills Abroad (EBR Scheme)Screen TextRBI formulated the scheme of 'Rediscounting of Export Bills Abroad' by authorised dealers to make available to the exporters post shipment finance at international rates of interest. Under the scheme, exporter's bills are discounted at the post shipment stage and simultaneously rediscounted abroad by the Bank to raise foreign currency funds that are applied to liquidate the underlying PCFC loan. Both sight and usance bills are discounted under EBR scheme.

ExplanationThe other features of the Scheme are advised from time to time by the International Division (Planning), IBG, Corporate Centre. Subsequently you will learn more about the extant instructions on the Scheme. Click on the 'Next'button to continue.

Screen TitleRediscounting of Export Bills Abroad (EBR Scheme)Screen TextThe Scheme of rediscounting export bills abroad is operative at only the designated branches.

ExplanationExporter customers of non-designated branches can avail the EBR facility at the

nearest designated branch.

Screen TitleRediscounting of Export Bills Abroad (EBR Scheme) - EligibilityScreen TextAll exporters are eligible to cover their bills drawn under LCs, non-credit bills under sanctioned limits under the Scheme. Exporters availing PCFC should invariably avail EBR facility to discount the relative export bills. Refinance from RBI Both demand and usance bills are eligible for coverage. EBR facility is normally available for a maximum period of 180 days. If the bills discounted are not paid on the 180th day, extension can be permitted only with prior approval of RBI.

ExplanationExport bills under EBR can be drawn for a maximum period of 180 days. If an exporter does not avail PCFC or rupee EPC, he can avail EBR facility. Also, exporters availing rupee EPC can avail EBR facility.

Screen TitleRediscounting of Export Bills Abroad (EBR Scheme) - CurrencyScreen TextThe Scheme is currently restricted to four major currencies. They are:

US dollar Pound Sterling Euro Japanese Yen

ExampleFor instance, exporters having LC or export order in Swiss Francs or Italian Lira can also avail PCFC and EBR in any of the four designated currencies. For cross currency disbursements, both PCFC and EBR should be availed in the same designated currency. The exchange risk in cross currency disbursements is to be borne by the exporters.

ExplanationThe Scheme is currently restricted to US dollar, Pound Sterling, Euro and Japanese Yen. Cross currency availment is also permitted. Click on the 'Example button to learn more.

Screen TitleRediscounting of Export Bills Abroad (EBR Scheme)Screen TextBranches should ascertain interest rates from their LHOs. The rate of interest on demand bills and usance bills is presently 1% (max) over six months LIBOR.

FD Kolkata advises the six-month LIBOR rate for the designated currencies that is US Dollars, Euro, Pound Sterling and Japanese Yen. MD of Network can quote finer interest rates in Circles on a highly selective basis with a minimum spread charged over six months LIBOR of 1%.

ExplanationThe six-month LIBOR rate advised by SBI New York is displayed on a daily basis on the page showing EEFC and PCFC interest rates on Reuters Monitor Screen. The facility of finer rates can be extended to high value customers from whom the overall income for the Bank is substantial.

Screen TitleRediscounting of Export Bills Abroad (EBR Scheme)Screen TextFew more extant instructions on the Scheme are:

Funding Forward Contracts Accounting Procedure Return of Export Bills Unpaid Withholding Tax

Funding

Foreign Department is designated as the nodal centre to raise offshore funds and use onshore funds to fund the rediscounting portfolio. It maintains rediscounting line Nostro accounts to arrange for necessary funds with the Bank's:

Nassau office for U.S. Dollars Frankfurt office for Euro London office for Pound Sterling Tokyo office for Japanese Yen

Forward ContractsForward contracts can be booked for the surplus portion of EBR bill that is to be converted in to Indian rupees for credit to the exporter's account after adjustment of its foreign currency portion to the PCFC

Accounting ProcedureFor details of accounting procedure, branches should refer to the guidelines issued from time to time by FD, Calcutta.

Return of Export Bills Unpaid

The EBR advance that is a foreign currency loan is closed when the overseas buyer pays the bill and the export proceeds are realised. But if any export bill discounted under EBR Scheme is returned unpaid, a sale entry is to be put through at the prevailing T.T. selling rate.

Withholding Tax

In terms of a clarification received from the Bank's Law Department, no withholding tax is payable, if interest on the foreign currency line is remitted to the Bank's own foreign offices. As lines of credit availed for this purpose is only from the Bank's foreign offices, the exporters may not withholding tax.

Screen TitleRediscounting of Export Bills Abroad - Direct DiscountingScreen TextExporters can arrange for themselves, a line of credit with an overseas bank or any other agency (including a factoring agency) through a bank in India directly to discount their export bills. The following points are to be noted:

This is subject to the condition that discounting of export bills is routed through the designated bank/authorised dealers from whom the packing credit facility has been availed.

Branches should charge a discount of 1% present rate as specified by ID (Planning), IBG, Corporate Centre for themselves apart from recovering the usual transaction charges, commission etc.

ExplanationIf the bills are routed through any other bank/authorised dealer, the latter will first arrange to adjust the amount outstanding under packing credit with the concerned bank out of the proceeds of the rediscounted bills.

Screen TitleRediscounting of Export Bills Abroad - Reporting of balancesScreen TextFollowing are the points to be noted when reporting balances in Export Bills Discounted Account:

The balances in 'Export Bills Discounted Account' in the General Ledger are shown in the same style under 'Bills Discounted and Purchased' column in the Weekly Abstract.

The outstandings under EBD are not eligible for refinance and need not be reported in the 'Supplementary Information' in the Weekly Abstract.

The designated Branches should report the EBD outstandings to the Assistant General Manager (C & IBP) of the Circle on each reporting Friday in the specified format.

Restoration of Bill Limits should be done only on realisation of Export proceeds.

ExplanationThe rupee equivalent of rediscounted bills will have to be held distinct from the existing post shipment credit accounts. Listed on the screen are the points to be

noted when reporting balances in Export Bills Discounted Account.

Screen TitleImportance of GR FormScreen TextGR (it is an export declaration form) is important as it is proof that export has taken place .i.e. it is evidence of export. It is a declaration made by the exporter (and countersigned by the customers) regarding the value of the export and his undertaking to realise and repatriate the proceeds to India within six months.

Where EDI(Electronic Data Interchange) in vogue, GR has been replaced by SDF(Statutory Declaration Form).

Submission of GR Form is exempted for exports not exceeding US $ 25,000. However, the exporters shall be liable to realise and repatriate export proceeds.

ExplanationGR form is the MOST important export document. Listed on screen are instances where GR Form is exempted from submission.

Screen Title"Write Off" of Unrealised Export Bills & Extension in Time Limit to Realise Export ProceedsScreen TextAn exporter who has not been able to realise the outstanding export dues, may approach an authorised dealer, with a request for write off of the unrealised portion. Authorised dealers may agree to such requests subject to different conditions, out of which mostly applicable conditions are:

The relevant amount has remained outstanding for one year or more. The aggregate amount of write off allowed by the authorised dealer during a

calendar year does not exceed 10% of the total export proceeds due during calendar year.

Satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realise the dues.

If invoice value does not exceed US$100,000, authorised dealer can extend realization of export proceeds beyond six months for 3 months at a time. If extended beyond 1 year, it should be ensured that the outstandings of the exporter is not more than 10% of average export realisation during preceding 3 calendar years.

If invoice value does not exceed US$1,000,000, authorised dealer can extend realization of export proceeds beyond six months for 3 months at a time. If extended beyond 1 year, it should be ensured that the outstandings of the exporter is not more than 10% of average export realisation during preceding 3 calendar years.

ExplanationAn exporter who has not been able to realise the outstanding export dues may approach the authorised dealer, who had handled the relevant shipping documents with appropriate supporting documentary evidence to write off the unrealised

portion. Listed on the screen are applicable conditions for "write off" of unrealised export bills and extension in time limit to realise export proceeds.


List guidelines that branches need to keep in view while extending post shipment finance

Classify post-shipment finance Examine the documents under letters of credit to grant advance Grant advance against shipping documents keeping in view the different

requirements for bills drawn under LC, non-credit bills and credit against duty drawback

ExplanationThis module introduced you to post-shipment finance and its types. It also introduced you to various criteria for granting such advances to exporters.

SBI Exporters Gold Card Scheme


State the features of SBI's Exporters Gold Card Scheme Acquire skills to market the product effectively highlighting the scheme's

competitive termsExplanationThis module gives you a basic knowledge about the various features of SBI's Exporters Gold Card Scheme. It would also help you to acquire skills to market the scheme effectively.

Screen TitleIntroductionScreen Text"SBI EXPORTERS GOLD CARD SCHEME" was launched, to meet working capital needs

of exporters after -

EXIM Policy 2003-2004 proposed to introduce Gold Card Scheme for creditworthy exporters with good track record.

Reserve Bank of India announcement a model Scheme on the same lines, to be implemented by the banks, after due customisation.

TIPSReserve Bank of India announcement the model Scheme, vide letter No.IECD/12/04.02.02/Gold Card/2003-04 dated the 18th May 2004.

ExplanationAfter EXIM Policy's proposal and RBI's announcement the bank decided to launch, "SBI Exporters Gold Card Scheme" with immediate effect

Screen TitleThe SchemeScreen TextSBI Exporters Gold Card Scheme is governed by the following aspects:

Eligibility Criteria ECGC Cover

Assessment of Credit Limit Rate of Interest

Stand-by Limit Security

Sanction of Limits, Tenure and Empowerment of Branch Heads

Time Norms

Application Form

Renewal of Credit Limits Service Charges

Credit facilities in Foreign Currency Additional Facilities

ExplanationThe SBI Exporters Gold Card Scheme is customised by the Bank in detailed under the heads as listed on the screen. Click on the 'Next' button to know more about them

Screen TitleEligibility CriteriaScreen TextCriterion for SBI Exporters Gold Cards scheme are:

Accounts classified as 'Standard Asset' for the last three consecutive years. No irregularities adverse features observed in the conduct of the accounts.

However, occasional over-drawings should not be construed as an adverse feature.

The exporter is not been blacklisted by ECGC and/or included in RBI

defaulters' / caution list. The unit has not incurred losses during the last three consecutive years. Overdue export bills of the unit are not in excess of 10% of the previous year's

turnover.

Greenfield ProjectsGreenfield Projects refer to a new project in an existing industry which an entrepreneur who could be an exporter - endeavours to establish from scratch and run profitably.

TIPSIn case of take-over of the account the extant take over norms should be complied with, together with the other eligibility norms listed above.

ExplanationExisting customers and new connections are eligible for SBI Exporters Gold Cards, who fulfill the criteria as listed on the screen. Greenfield Project may also be considered under this scheme by the appropriate sanctioning authority on a case-to-case basis. Click on the 'Greenfield Project' button to know more.

Screen TitleAssessment of Credit LimitScreen Text��Assessment of Credit Limits are performed by different methods under different circumstances listed as below:Government of India (Ministry of Finance)

Condition Assessment Method

Manufacturing Exporters with projected export turnover, upto Rs.100 crore or below

Simplified Turnover Based Assessment method or Nayak Committee method

Trading Exporters with projected export turnover, upto Rs.100 crore or below

Units with both export and domestic sales components

Turnover Based Assessment method

Software Exporters Cash Budget method, prescribed in respect of software finance, irrespective of quantum of turnover.

Units with projected export turnover above Rs. 100 crore

Projected Balance Sheet (PBS) method, or Cash Budget method

Units with projected export turnover upto Rs. 100 crore or below and

Turnover Based Assessment method

projected domestic turnover upto Rs. 25 crore or below

for the unit as a whole

Units with projected export turnover upto Rs. 100 crore or below and projected domestic turnover above Rs. 25 crore

Projected Balance Sheet/Cash Budget method

�

TIPSNon-fund based limits required by the exporters will be assessed as per existing norms.

Screen TitleStand-by LimitScreen TextStandby limit of 20% may be sanctioned to -

Meet credit demands arising out of receipt of sudden orders etc. All Gold Card holders by the appropriate authority along with sanction of

assessed credit limits.

Exporters will be entitled to avail stand-by limit for a maximum period of 180 days in one instance.�

TIPSThere is no restriction as to the number of times stand-by limit is utilised by the exporter during the tenure of credit limits sanctioned.

ExplanationTo meet credit demands arising out of receipt of sudden orders a Standby limit of 20% may be sanctioned over and above the assessed credit limit i.e. fund based and non-fund based limit.

Screen TitleSanction of Limits, Tenure and Empowerment of Branch HeadsScreen TextCredit limits for the period of three years are sanctioned, on satisfactory fulfilment of the following conditions:

Projected Sales turnover and order book position justifies increase in credit facilities.

The unit has earned net profit from export operations in the preceding financial year.

The unit has submitted its balance sheet (audited balance sheet where it is mandatory) within four months of close of financial year and no adverse

movement has taken place both in Total Outside Liabilities (TOL) to Tangible Net Worth (TNW) and Current Ratio.

ExplanationSanction of credit limits together with Standby limit are granted by the sanctioning authority empowered to sanction the various types of credit facilities. Credit limits that are sanctioned are valid for a period of three years. Click on the 'Empowerment of Branch Heads' button to know more.

Screen TitleEmpowerment of Branch HeadsScreen TextBranch Heads are empowered to review the credit facilities at the end of 1st and 2nd year and accordingly step up the credit upto 10% for -

Fund based Non-fund based Stand-by credit facilities

Branch Heads may exercise discretion without reference to the sanctioning authority provided the various types and the combined credit facilities after step up, fall within the financial powers of the exisiting sanctioning authority which has sanctioned the credit limits for the period of three years.

Review StatementThe Branch Heads have to submit the review statement of accounts to the sanctioning authority against, which credit step up was granted. The sanctioning authority records the step ups granted by Branch Heads as per the Review Statement. A uniform format for this purpose will be provided to branches separately.

TIPSRequests from exporters that are beyond the financial powers of the sanctioning authority are:

Enhancements above 10% of the credit limit Combined credit facilities after step up, by upto 10% or less

Enhanced credit facility can only be granted by the appropriate sanctioning authority, which will be valid for a fresh period of three years from the date of sanction.

ExplanationAll Branch Heads are empowered to review the credit facilities at the end of 1st and 2nd year, and accordingly step up the credit upto 10%, without prior reference to the sanctioning authority, provided the combined credit facilities after step up, falls within the financial powers of the existing sanctioning authority. Click on the 'Review Statement' button to know more.

Screen TitleRenewal of Credit LimitsScreen TextThe credit facility is renewed automatically for another three years when the previous sanctioned credit including standby limit steps up, subject to -

The fulfillment of terms and conditions of sanction The unit continuing to satisfy the eligibility criterion for the scheme

Renewal Memorandum / Note is also required to be submitted to the existing sanctioning authority.

ExplanationThe credit facilities sanctioned for the period of three years including standby limit and step ups, if any, granted by Branch Heads under the Scheme will get automatically renewed for another� three years.

Screen TitleCredit facilities in Foreign CurrencyScreen TextExporters Gold Card holders will be given priority in sanction of PCFC advances. For foreign currency credit to Indian exporters the �

Rates of Interest <= LIBOR + 1 %

If PCFC is made available to Exporters Gold Card holders, by making market borrowings, an additional service charge at flat rate of 10 basis points i.e. 0.10 % will be charged. Foreign Department, Kolkata will separately advise the same.

ExplanationAs a credit facility in foreign currency the Exporters Gold Card holders will be given priority in sanction of PCFC advances. The branches should clearly specify that the borrowing unit is a Gold Card holder, while seeking Funds Angle Clearance (FAC) from Foreign Deportment, Kolkata.

Screen TitleECGC CoverScreen TextExemption from ECGC cover / guarantee may be considered by the sanctioning authority.

ExplanationExporters Gold Card holders might be exempted from ECGC cover or guarantee on a case to case basis

Screen TitleRate of InterestScreen TextThe interest rates for Pre & Post shipment credit under Gold Card Scheme are as below:

Interest Rate Present Effective Rate

Pre-shipment credit, up to 180

days

6.50%

3.75% below SBAR

Post-shipment credit upto 365

days

6.50%

3.75% below SBAR

ExplanationThe interest rates for Pre-shipment & Post-shipment credit are as displayed on the screen.

Screen TitleSecurityScreen TextThe security norms for Exporters Gold Card holders will be same as those for existing advances.

ExplanationThere is no separate security norms for SBI's Exporters Gold Card scheme, it is same as that of the credit advances given under Export Finance .

Screen TitleTime NormsScreen TextUnder the SBI Exporters Gold Card Scheme the time frame for disposal of applications received for sanction of credit are as below:

Disposal of fresh applications

25 days

Renewal of limits

15 days

Sanction of adhoc limits

7 days

TIPSThe details of pending proposals should be furnished to the Domestic Offices (Planning) Section of International Banking Group at the Corporate Centre, every quarter in Statement A of the "Nation Building" return, in a separate column.

ExplanationThe time frame for disposal of applications received for sanction of credit under the Scheme are as displayed on the screen. The appraisal memoranda should be accompanied by a date chart to enable the sanctioning authority to monitor adherence to the time norms.

Screen TitleApplication FormScreen TextApplication Form for Exporters Gold Card Scheme for Exporters is comprised of -

Bio-data Form Application Form for Working Capital Credit Facilities Details of Existing Fixed Assets & Particulars of Machinery Projected Balance Sheet Technical Feasibility

ExplanationThe Application Forms will be used irrespective of the size of the credit limit. Application Forms for SBI Exporters Gold Card Scheme is simplified for easy usage. Click on the bullet points to see their respective forms.

Screen TitleService ChargesScreen TextThe applicable service charges for accounts under the SBI's Exporters Gold Card Scheme are as that of the existing -

Bank's schedule charges Discretion structure

ExplanationBank's existing schedule of charges, together with the discretion structure, will be

applicable for accounts under the Exporters Gold Card Scheme.

Screen TitleAdditional FacilitiesScreen TextUnder the SBI Exporters Gold Card Scheme, International Credit/Debit cards and Internet Banking facilities may be extended to -

Promoters Directors Senior Executives

ExplanationInternational Credit/Debit cards and Internet Banking facilities may be extended to the promoters, directors and senior executives of the borrower units under the scheme on priority basis.

Screen TitleMarketing StrategiesScreen TextThe marketing strategies for SBI's Exporters Gold Card Scheme are:

Meetings and Seminars with exporters should be organized at forex intensive centres to explain the salient features of the Scheme

Publicity campaigns should be organised to increase the visibility of� the product

Top non-borrower exporters of the area should be identified from public domain�information (directories, trade journals, export promotion councils etc.) and suitable letters/mailers should be sent to them

Personal visits should be given to prospective non-borrower exporters of the area

Highlight the scheme's competitive terms, amongst prospective borrowersExplanationA suitable marketing strategies for marketing the product effectively should be adopted with a view to cover maximum number of eligible export clients under the Scheme. The marketing strategies for SBI's Exporters Gold Card Scheme are as listed on the screen.

Screen TitleReportingScreen TextThe data related to export credit under SBI's Exporters Gold Card scheme is furnished to the Business Control Section of the Domestic Wing of International Banking Group.

In the quarterly statement on Form - 'C' as on the last reporting Friday of each quarter additional information is provided regarding -

Export credit disbursement Balances outstanding

ExplanationThe data related to export credit granted under this scheme may be furnished to the Business Control Section of the Domestic Wing of International Banking Group. Click on the 'Export Credit Data' button to see the format in which the data is furnished.

Screen TitleSummaryScreen TextHaving completed this module, you should now be able to:

State the features of the SBI's Exporters Gold Card Scheme Acquire skills to market the product effectively highlighting the scheme's

competitive terms

As per the Bank's latest circular instructions dated 7/9/2004, it has now been decided to extend the benefit of the scheme to all accounts which fall due for renewal up to 31/3/2005. The scheme will be extended to such accounts by the sanctioning authority on the basis of a brief note.

ExplanationThis module has given you a basic knowledge about the various features of the SBI's Exporters Gold Card Scheme and helped you to market the same more effectively.