EXPORT FINANCEEXPORT FINANCE

By

K. RAJASEKARAN

Former AGM: Global Trust Bank

Ex-Trainer in SBT (Subsidiary of State Bank of India)

SOURCES OF INTERNATIONAL SOURCES OF INTERNATIONAL FINANCEFINANCE

OVERSEAS SOURCES: EXTERNAL COMML. BORROWING (ECB) SUPPLIER’S CREDIT BUYER’S CREDIT DOMESTIC SOURCES: EXPORT PACKING CREDIT P.C.F.C. FOREIGN BILL DISCOUNTING FACTORING

Preliminary StepsPreliminary Steps

Get IEC No. from DGFTObtain RCMC No. from Export Promotion

CouncilRegister with Sales Tax OfficeCanvass for OrderEnter into Sales ContractObtain LC from buyerApply for export finance from bank

EXPORT PACKING EXPORT PACKING CREDITCREDIT

• IT IS A WORKING CAPITAL LIMIT TO EXPORTERS• * IT IS GRANTED (AGAINST L/C) FOR 180 –270 DAYS

(L/C or Firm Order or Contract to be produced)

IT CARRIES CONCESSIONARY INTEREST RATE (Max: 2.5% BELOW Bank’s P.L.R.)

* Currently banks will charge interest at or above BASE RATE* Exempted categories will be charged less by further 2%

90% of FOB VALUE WILL BE GRANTED BY BANK

DUES TO BE REPAID OUT OF EXPORT REALISATION

EXPORT PACKING CREDITEXPORT PACKING CREDIT

1. RUNNING A/C FACILITY GIVEN TO ESTD. EXPORTERS

2. SUBSTITUTION OF CONTRACT ALLOWED BY BANK

3. E.C.G.C. POLICY / GUARANTEE STIPULATED BY BANK

4. E.P.C. IS GRANTED TO SUB-SUPPLIER BASED ON L/C FROM EXPORT ORDER HOLDER (EOH)

5. DEEMED EXPORTERS ARE ALSO ELIGIBLE FOR E.P.C. IN RESPECT OF SUPPLIES TO WORLD BANK / ADB /OPEC SUPPORTED PROJECTS

6. EXPORTERS GETTING ADVANCE CHEQUES / DRAFTS CAN GET E.P.C. TILL RECEIPT OF ADVANCE PAYMENT

7. IF EXPORT DOES NOT TAKE PLACE BANK WILL CHARGE NORMAL COMMERCIAL INTEREST RATE

P.C.F.C. P.C.F.C. (PRESHIPMENT CREDIT IN FOREIGN CURRENCY)(PRESHIPMENT CREDIT IN FOREIGN CURRENCY)

ADVANCE IS DENOMINATED IN FOREIGN CURRENCY LIKE US $ or EURO

INTEREST IS CHARGED AT A MAXIMUM OF 3.5%

ABOVE L.I.B.O.R. (This ceiling is now removed) THE ADVANCE WILL BE LIQUIDATED AFTER

REALISATION OF EXPORT BILL ADVANCE IS USUALLY GIVEN FOR 180 DAYS OTHER TERMS AND CONDITIONS ARE AS PER

EXPORT PACKING CREDIT

POST SHIPMENT LIMITPOST SHIPMENT LIMIT

1. EXPORT BILLS PURCHASED

2. EXPORT BILLS DISCOUNTED

3. EXPORT BILLS NEGOTIATED

4. ADVANCE AGAINST BILLS SENT ON COLLECTION

TERMS AND CONDITIONS:

1. INTEREST CHARGED AT PACKING CREDIT RATE

2. INTEREST COLLECTED FOR NORMAL TRANSIT PERIOD / USANCE PERIOD

3. IF BILL REMAINS UNPAID EVEN AFTER 30 DAYS FROM DUE DATE BANK WILL DO CRYSTALLISATION.

EXPORT FACTORINGEXPORT FACTORING

Factoring is a receivables management and financing service designed to improve the seller's cash flow and to cover risk. This is best suited for financing trade and unlike other financing services, it normally requires no collateral

In recourse factoring, in the event of the buyer failing to pay on maturity, the seller has to pay back the advance obtained from the factor. In non-recourse factoring, the factor provides finance with a credit guarantee for buyers and will bear the bad debt risk in case of financial inability of the buyer to pay.