MEANINGShort term fundingOffered to an exporterBy way of Packing
CreditFor working capitalGiven in rupees or foreign currency
(PCFC)In form of a loan, cash credit or overdraft facility
ELIGIBILITYHolding an Export Order or Letter of Credit (L/C)
taken out by the buyer
Running Account Facility
TENORRBIs concessional ROIsMaximum Period: 180 days + 90
daysMinimum Period: 7 daysBanks own interest ratesMaximum Period:
270 daysMinimum Period: 360 days
COSTSBPLR: 13.25%Upto 180 days: 10%, Concessional ROIExtension
of 90 days: 12% ROIOver 270 days: Commercial rates higher than 270
days
DOCUMENTSExport Order/Contract or L/C in originalUndertaking for
advance utilized only for exporting purposesUndertaking from
Trading House for not availing for credit facility for same
transaction, if sub-supplierCopies of Income Tax/Wealth Tax
Assessment Order
CONTDCopy of a valid RCMC and/or Trading House
CertificatePolicy/guarantee of the ECGCCredentials of foreign
buyerCertificate of originBill of Lading Bill of Exchange
SPECIAL SCHEMESExim Banks scheme for financing cost of imported
inputsScheme of credit to sub-suppliersCredit for deemed exportsPre
shipment Credit in Foreign Currency (PCFC)
AMOUNT OF FINANCE AN EXPORTER CAN GETNeed Based FinancingMargin
differs from bank to bank (10 25%)Margins are stipulated:Exporter
has some stake in transactionCover erosion in goodsNo lending
against exporters profit marginBanking Practice90% of FOB75% of
CIF
CREDIT OBTAINED IN DIFFERENT CURRENCIESDomestic Currency, the
Rupee, if exporter based in India
Foreign Currency preferred when cost of borrowing is lower
WAYS TO LIQUIDATE PRE SHIPMENT FINANCEProceeds of export bills
negotiated, purchased or discountedNo liquidation by debit to cash
credit accountConversion of pre shipment finance to post
shipmentBills discounted under Rediscounting of Export Bills Abroad
scheme, if PCFC
RECENT UPDATES (AUGUST 07)Many small and medium-sized exporters
have inadequate short-term working capitalMarket failure from
informational irregularities on part of banks about exporters
ability to execute export ordersSeveral countries have established
pre shipment export finance guarantee facilityAim to act as
catalyst to temporarily share non-performance risks of
exportersEncouragement of implementation of pre shipment finance in
some countries without guarantees
