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• EXIM Bank fills export financing gaps through its loan, guarantee, and
insurance programs when the private sector is unable or unwilling
to do so.
• At the same time, private sector lenders are EXIM Bank's partners.
• In FY 2014, 98 percent of EXIM Bank transactions involved commercial
EXPORT-IMPORT BANK OF INDIA
Exim Bank of India has been both a catalyst and a key player in the promotion of cross border
trade and investment.
FLAG SHIP PROGRAMS
1. Overseas Investment Finance
2. Project Finance
3. Line of Credit
4. Corporate Banking
5. Buyer's Credit Under NEIA
PAYMENT METHOD IN EX-IM TRADE
• Clean Payment
In clean payment method, all shipping documents, including title documents are
handled directly between the trading partners. The role of banks is limited to
clearing amounts as required. Clean payment method offers a relatively cheap
and uncomplicated method of payment for both importers and exporters.
• Collection of Bills
In this method of payment in international trade the exporter entrusts the
handling of commercial and often financial documents to banks and gives the
banks necessary instructions concerning the release of these documents to the
• Letters of Credit L/c
DOCUMENTS IN INTERNATIONAL TRADE
• Air Way bill
• Bill of Lading
• Certificate of Origin
• Combined Transport Document
• Draft (or Bill of Exchange)
• Insurance Policy (or Certificate)
• Packing List/Specification
• Inspection Certificate
• Any advance or loans or any credit extended to exporters by bank for the purpose of
manufacturing, procuring, processing or packaging of goods before shipment can be
called as Pre-Shipment finance.
• Exporter’s Pre-Shipment Financing Requirements:
• Marking, Transactions, Warehousing.
• Purpose: Also known as Packing credit meant to fulfil working capital requirements of
– Short-term finance
– Advance against export incentives.
• The loan is advanced only on receipt of an export order.
• The exporter should deliver either a L/C or a confirmed export order.
• Advances must be repaid from the proceeds of the relative export bill.
• Packing credits are eligible for interest subsidy.
• Available against incentives.
• Concessional rates of interest.
• Sub-supplier must submit documents from Export house or Merchant
FORM OF FINANCE
A. Fund based
– Dependent upon the stage of execution of order.
– Release loan from time to time.
B. Non Fund Based
– In the form of letter of credit
– Issue of various types of guarantee.
REQUIREMENT FOR GETTING PACKING CREDIT
This facility is provided to an exporter who satisfies the following criteria
• A ten digit importer-exporter code number allotted by DGFT.
• Exporter should not be in the caution list of RBI.
• If the goods to be exported are not under OGL (Open General Licence), the
exporter should have the required license /quota permit to export the
• Documentary evidence needed.
DIFFERENT STAGES OF PRE-SHIPMENT FINANCE
• Appraisal and Sanction of Limits.
• Disbursement of Packing Credit Advance.
• Follow up of Packing Credit Advance.
• Liquidation of Packing Credit Advance.
• Overdue packing.
• Issued to that exporter who has the export order in his own name.
• Irrevocable letter of credit.
• Export/Trading/Star Trading/Super Star Trading House or Exporter.
• Exporter of services: services covered under the General Agreement on Trade in services.
• financial institution can also grant credit to a third party manufacturer or supplier of
goods who does not have export orders in their own name.
Quantum of Finance
• Nature of order
• Nature of commodity
• Capability of exporter to bring in the requisite contribution
• Nature of importer
• Importers country profile
No fixed norms.
No intention to finance the profit component in the export contract.
Export credit insurance whole turnover packing credit (ECIB-WTPC).
• Protects banks against losses due to exporter’s default.
• Nominal guarantee fee, borne by the exporters.
Initially for 180 days.
90 days extension in circumstances beyond exporter’s control.
Revalidated export order or L/C.
Concessional rate of interest as per RBI.
Upto 180 days- at the rate of 10%, from 180 to 270 days- at the rate of 13%, From 270 days to 360 days-
subject to the bank.
Less than the prime lending rate of the bank.
PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY
• Making the credit available to the exporters at internationally competitive
• credit is provided in foreign currency in order to facilitate the purchase of
raw material after fulfilling the basic export orders.
• The rate of interest on PCFC is linked to London Interbank Offered Rate
• the final cost of exporter must not exceed 0.75% over 6 month LIBOR,
excluding the tax. .
• Banks are also permitted to utilize the foreign currency balances available
under Escrow account and Exporters Foreign Currency accounts.
RUNNING ACCOUNT FACILITY
• Bank has right to grant preshipment advance for export to the
exporter of any origin.
• Banks also extent these facilities depending upon the good
track record of the exporter.
• In return the exporter needs to produce the letter of credit /
firms export order within a given period of time.
PACKING CREDIT FACILITIES TO DEEMED EXPORTS.
• "Deemed Exports" refers to those transactions in which the goods
supplied do not leave the country and the payment for such
supplies is received either in Indian rupees or in free foreign
• Deemed exports made to multilateral funds aided projects and
programmes, under orders secured through global tenders for
which payments will be made in free foreign exchange, are
eligible for concessional rate of interest facility both at pre and
post supply stages.
PACKING CREDIT FACILITIES FOR CONSULTING SERVICES
• In case of consultancy services, exports do not involve physical movement
of goods out of Indian Customs Territory.
• Pre Shipment finance can be provided by the bank to allow the exporter to
mobilize resources like technical personnel and training them.
Advance against cheques/drafts received as advance payment
Where exporters receive direct payments from abroad by means of
cheques/drafts etc. the bank may grant export credit at concessional rate to
the exporters of goods track record, till the time of realization of the
proceeds of the cheques or draft etc. The Banks however, must satisfy
themselves that the proceeds are against an export order.
What is Post-Shipment Finance???
Post Shipment Finance is a kind of loan provided by a financial institution
to an exporter or seller against a shipment that has already been made.
from the date of extending the credit after shipment of the goods
the realization date of the exporter proceeds.
Bridges the financial gap between the time of shipment of goods and the
actual payment received by the importer.
Exporters don’t wait for the importer to deposit the funds.
Basic features of post shipment finance:
• Purpose of Finance:
Meant to finance export sales receivable after the date of shipment of goods
to the date of realization of exports proceeds.
• Basis of Finance:
It is provided against evidence of shipment of goods or supplies made to the
importer or seller or any other designated agency.
• Quantum of Finance:
Post shipment finance can be extended up to 100% of the invoice value of
• Period of Finance:
Post shipment finance can be off short terms or long term, depending on the
payment terms offered by the exporter to the overseas importer.
Financing For Various Types of Export
Post shipment finance can be provided for three types of export
Finance is provided to the actual exporter or to the exporter in whose name
the trade documents are transferred.
Finance is provided to the supplier of the goods which are supplied to the
Capital goods and project exports:
Finance is sometimes extended in the name of overseas buyer. The disbursal of
money is directly made to the domestic exporter.
Types of Post Shipment Finance
The post shipment finance can be classified as :
1. Export Bills purchased/discounted.
2. Export Bills negotiated
3. Advance against export bills sent on collection basis.
4. Advance against export on consignment basis
5. Advance against undrawn balance on exports
6. Advance against claims of Duty Drawback.
1. Export Bills Purchased/ Discounted(DP & DA Bills)
DP - Documents against Payment
DA - Documents against Acceptance
• This is generally used in terms of sale contract/ order may be discounted or
purchased by the banks.
• It is used in indisputable international trade transactions and the proper limit
has to be sanctioned to the exporter for purchase of export bill facility.
Steps involved in the working of DA/DP Bills
Step 1 - The seller and buyer enter into a contract and agree
that payment be made on the basis of a documentary
Step 2 - The seller ships the goods and tenders the
documents to its bank (remitting bank) together with a
corresponding collection order
Step 3 - The remitting bank sends the documents along with
its collection instructions to ICICI Bank (collecting bank)
Step 4 - ICICI Bank notifies the buyer of arrival of documents,
for his payment/acceptance
Step 5 - The buyer pays the amount due or accepts the draft
and in turn receives the documents
Step 6 - ICICI Bank remits the amount to the remitting bank
Step 7 - The remitting bank credits the amount to the seller’s
Documents against Payment Bills(DP) Bills
For Documents against Payment (DP), the collecting bank releases
the import documents to the buyer once he has paid.
• Exporter ships goods to foreign buyer.
• Exporter’s bank sends documents including bill of exchange and
bill of lading to its Correspondent Bank in the buyer’s country.
• Correspondent Bank presents documents to buyer and on
payment of the bill of exchange, delivers the documents to him so
that the can take possession of the goods.
• The correspondent bank sends the money received from the
buyer to the exporter’s bank which is ultimately credited to
Documents against Acceptance(DA) Bills
For Documents Against Acceptance (DA), the collecting Bank releases the
import documents to the buyer on acceptance of the bills of exchange/draft.
• The correspondent bank will submit the bill of exchange to be signed
by the buyer to indicate his acceptance of the payment obligation.
• After the buyer accepts the bill, he will get possession of the
• On the due date of payment, the bank will again present the bill to
the buyer who then makes the payment.
• The money received is remitted through the usual banking channels
to be credited to the exporter’s account.
• DP bills are drawn on “sight” i.e. no credit is involved.
• DA bills involve credit for a fixed period.
2. Export Bills Negotiated (Bill under L/C)
• The risk of payment is less under the LC, as the issuing bank makes sure the
• However, the two major risk factors for the banks are:
1. The risk of nonperformance by the exporter, when he is unable to
meet his terms and conditions. In this case, the issuing banks do
not honor the letter of credit.
2. The bank also faces the documentary risk where the issuing bank
refuses to honour its commitment. So, it is important for the for
the negotiating bank, and the lending bank to properly check all
the necessary documents before submission.
3. Advance Against Export Bills Sent on Collection Basis
• Bills can only be sent on collection basis, if the bills drawn under LC have
• Banks may allow advance against these collection bills to an exporter with
a concessional rates of interest depending upon the transit period in case
of DP Bills and transit period plus usance period in case of usance bill.
• The transit period is from the date of acceptance of the export documents
at the banks branch for collection and not from the date of advance.
4. Advance Against Export on Consignments Basis
• Bank may choose to finance when the goods are exported on
consignment basis at the risk of the exporter for sale and eventual
payment of sale proceeds to him by the consignee.
• However, in this case bank instructs the overseas bank to deliver the
document only against trust receipt /undertaking to deliver the sale
proceeds by specified date, which should be within the prescribed date
even if according to the practice in certain trades a bill for part of the
estimated value is drawn in advance against the exports.
• In case of export through approved Indian owned warehouses abroad
the times limit for realization is 15 months.
5. Advance against Undrawn Balance
• It is a very common practice in export to leave small part undrawn for
payment after adjustment due to difference in rates, weight, quality etc.
• Banks do finance against the undrawn balance, if 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 percent of the export value.
• An undertaking is also obtained from the exporter that he will, within 6
months from due date of payment or the date of shipment of the goods,
whichever is earlier surrender balance proceeds of the shipment.
6. Advance Against Claims of Duty Drawback
• Duty Drawback is a type of discount given to the exporter in his own country.
• This discount is given only, if the inhouse cost of production is higher in relation to
• This type of financial support helps the exporter to fight successfully in the
• In such a situation, banks grants advances to exporters at lower rate of interest for a
maximum period of 90 days.
• After the shipment, the exporters lodge their claims, supported by the relevant
documents to the relevant government authorities. These claims are processed and
eligible amount is disbursed after making sure that the bank is authorized to receive
the claim amount directly from the concerned government authorities.
7. Advances against Retention Money
• In the case of turnkey projects/construction contracts, progressive
payments are made by the overseas employer in respect of services
segment of the contract, retaining a small percentage of the
progressive payments as retention money which is payable after
expiry of the stipulated period from the date of the completion of
the contract, subject to obtention of certificate(s) from the specified
• Retention money may also be sometimes stipulated against the
supplies portion in the case of turn-key projects. It may like-wise arise
in the case of sub-contracts.
• The payment of retention money is contingent in nature as it is a
• Services provided to an exporter or seller in International
• Main Objective to provide smooth cash flow to sellers.
• Originated from an old French word “forfeit”, meaning to
surrender ones right on something to someone else.
• Long term receivable services i.e. over 90 days up to 5 years.
WHAT IS FORFEITING ?
• Purchase of an exporter’s receivables at a discount price by
• There are two parties to it:
• Forfeiter frees the exporter from credit and risk of default on
part of importer
discounts the bill
and presents the
same to importer
Contract Price is
quoted to buyer
• In case of Indian exporters availing forfeiting facility, the forfeiting
transaction is to be reflected in the following documents:
Shipping Bill and GR Form
Forfeiting typically involves the following cost elements:
WHAT IS FACTORING ?
• Defined as the conversion of credit sales into cash
• A financial institution buys the accounts receivable of a
company and pays upto 80% of account immediately.
• The remaining 20 % is paid once the customer pays the
PROCESS INVOLVED IN
• Client concludes a credit sale with a customer.
• Client sells the customer’s account to the Factor and notifies the customer.
• Factor makes part payment (advance) against account purchased, after adjusting for commission and
interest on the advance.
• Factor maintains the customer’s account and follows up for payment.
• Customer remits the amount due to the Factor.
• Factor makes the final payment to the Client when the account is collected or on the guaranteed
CHARACTERISTICS OF FACTORING
• Normal period of factoring is 90 -150 days and rarely exceeds
more than 150 days
• Not possible in case of bad debts
• Credit rating is not mandatory
• Method of offbalance sheet financing
• Cost of factoring is always equal to finance cost plus
DIFFERENT TYPES OF FACTORING
• Client collects money from the customer; incase customer doesn’t pay
the amount , client is responsible to pay the amount to the factor
• Offered at a low rate of interest
• Factor undertakes to collect the debts from customer
• Balance amount is paid at the end of credit period or when the
customer pays the factor, whichever comes first
• It eliminates the need for credit and collection departments in the
SERVICES OFFERED BY A FACTOR
• Follow-up and collection of Receivables from Clients.
• Purchase of Receivables with or without recourse.
• Help in getting information and credit line on customers (credit
• Sorting out disputes, if any, due to his relationship with Buyer &
• To promote exports and assist the exporters.
• Incentive to Export
• Protection against depreciation of rupee
Scheme 1 : April 1 2007 to Sep. 30 2008
Scheme 2 : Dec. 1 2008 to Sep. 30 2009
Scheme 3 : April 1 2010 to Mar 31 2011
Scheme 4 : October 2011
Scheme 5 : June 2012
Scheme 6: January 2013
• 2% interest rate subvention per annum on rupee export credit availed of by exporters in nine
specified categories of exports.
• textiles (including handlooms), readymade garments, leather products, handicrafts,
engineering products, processed agricultural products, marine products, sports goods and
toys and to all exporters from the SME sector defined as micro enterprises, small
enterprises and medium enterprises for a period from April 1, 2007 to September 30, 2008.
• jute and carpets, processed cashew, coffee and tea, solvent extracted de-oiled cake, plastics
and linoleum added later.
• Later 4% subvention provided to leather and leather manufactures, marine products, all
categories of textiles under the existing scheme including Ready Made Garments and
carpets but excluding man-made fibre and handicrafts in preshipment credit for 180 days
while Post shipment credit of 90 days was provided.
• The Interest rate post subvention is not <7% (provided to priority sector)
• Services Covered 231
• Benefit Provided (3% w.e.f from Aug 1, 2013)
• The Subvention provided would be reimbursed by RBI to
concerned banks on a quarterly basis subject to
submission of claims.
than hotel , hospital
and software up to
USD 750 million
Corporate in service
sector viz. Hotel,
software up to
USD 200 million
Units in Special
NGOs engaged in
(Relationship of at
least 3 years with
scheduled bank and
granted ‘fit and
proper’ status AD
Financial Intermediaries such as Banks, Financial Institutions, Housing Finance
Companies, NBFCs, Trusts, Individuals and Non Profit making organizations are not
eligible to raise ECB
Corporate in service sector other than
hotel , hospital and service up to USD 750
Corporate in service sector like Hotel,
Hospital, and software up to USD 200
NGO engaged in micro finance activity
and Micro Finance Institutions can raise
ECB up to USD 10 million or its
ECB up to USD 20 million can have call/
• Import of capital goods
• Executing new projects
• Modernization/ expansion
• Infrastructure sector
• Payment of spectrum Allocation
• First and second stage acquisition of shares from divestitutre of
• Overseas JV / Wholly owned Subsidiary
• Interest payment during Construction of projects
• lending by EXIM Bank for specific purposes
• ECB with minimum average maturity of 5 years by NBFC
• Corporate which have violated the extant ECB policy and are under investigation by the RBI and/or ED
• Banks and financial institutions which had participated in the textile or steel sector restructuring
• SEZ developers for providing infrastructure facilities within SEZ
• Infrastructure Finance Companies availing ECB for on-lending to the infrastructure sector
• Corporate in service sector other than hotel , hospital and service above USD 750 million
• Corporate in service sector like Hotel, Hospital, and software up to above 200 million
• Foreign Currency Convertible Bonds (FCCBs) by Housing Finance Companies
• Multi state Cooperative societies engaged in manufacturing activities
• ECB from indirect equity holder provided the indirect equity holding by the lender in the Indian Company is at least 51%.
• ECB from a group company provided both the borrower and the foreign lender are subsidiaries of the same parent
• Case falling outside the purview of the automatic route limits and maturity period
CONVERSION OF ECB INTO EQUITY
ECB into equity
The activity of the
company is covered under
the Automatic Route for
approval for foreign
equity participation has
been obtained by the
The foreign equity
holding after such
conversion of debt into
equity is within the
Pricing of shares is as per
the pricing guidelines
issued under FEMA,
1999 in the case of listed/
The conversion of ECB has to be reported in 7 days from the close of month to RBI and
DSIM by filling Form FC GPR and Form ECB2 respectively.
Two types of conversation:
Full Conversation of
Outstanding ECB into equity
Clear indication on the top of
the form ECB 2 of words “ECB
wholly converted to equity”
Partial Conversation of
Outstanding ECB into equity
Clear indication on the top of
the form ECB 2 of words “ECB
partially converted to equity”
Limits Minimum Maturity
Up to USD 50 million or its
equivalent 3 years
Above USD 50 million or
COST OF BORROWING
All-in-cost Ceiling over
6 month LIBOR
3 years and up to 5
350 basis points
More than five years 500 basis points
WHAT IS DEEMED EXPORT?
Transaction in which goods supplied do not leave the country.
Sells petroleum Gas
Supply of goods to Export Oriented Units (EOUs) or Software
Technology Parks (STPs) or Electronic Hardware Technology Parks
(EHTPs) or Bio Technology Parks (BTP);
Supply of capital goods to holders of licences under the Export
Promotion Capital Goods (EPCG) scheme;
Supply of goods to nuclear power projects through competitive
bidding as opposed to International Competitive Bidding.
Supply to projects funded by UN agencies.