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Pre & Post Shipment Credit Scheme

Export Finance

Exporter needs finance for purchasing, processing,manufacturing or packing of goods for export.

After the goods have been shipped there is time gap

between the time of shipment and receipt of exportproceeds from the buyer.

Export finance is the cheapest, easiest and the most liberalfinance available in industry. It is generally found that

they exporter are in need of finance at 2 stages -Pre shipment stage (before the goods are shipped) and

-Post shipment stage(when the goods have been shipped).

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Pre shipment Finance

Pre shipment finance is related to export after procuring the order, to purchase the row material, processing preshipment inspection, packing, insurance, transport charges, export duty, dock charges and custom housecharges.Packing Credit

Extended by the banker for the procurement of raw material, processing, pre shipment finance and packing.

Shipping Loan

To meet the insure, transport, export license fees, export duty, dock charges and custom house charges.

Person eligible for packing credit

Packing credit can be grated to an exporter, who has export order in his own name and who will actually exportthe goods. However, as an exception to this rule, packing credit can be granted to supporting manufacturers orsuppliers of goods, who do not have export ordering his name and are exporting through merchant exporter orexport house.

Basic criteria for granting packing credit

Since export finance is a purpose oriented, it is granted to the eligible exporter or the manufacturers againstevidence/lodgment of irrevocable L/C, established/transferred through the medium of a reputed bank orconfirmed order/contacts placed by buyer.

Purpose of financePacking credit finance, being purpose-oriented finance, is granted for the specific purpose of procuring rawmaterial, purchasing, manufacturing, processing, transporting, warehousing, packing and shipped the goods.

Quantum of finance

There is no fix formula for determines the quantum of finance, to be granted to exporter but banks normallyfinance 60% to 80% of the total value of export in many stage.

Period of finance

Maximum extendibility is only for 180 days or expiry date or processing period which ever is earlier.

Rate of interest- Changer as per bank rules

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Post shipment finance

Post shipment finance is the finance extended by the bank after effectivethe shipment to bridge the financial gap. Post shipment finance isrequired because at the pre shipment stage exporter gets only 60% to80%. So balance amount need to be released to him after shipment.Post shipment finance can be classified as under

Negotiation (settlement) of document under L/CThe exporter tenders the documents to his bank and the bank pass thevalue to the exporter even before receiving it. It is done with resource(right of recovery).

Purchase of document without L/C

In case there is no L/C. the bank purchase the document drawn under theorder. Exporter's bank runs a bigger risk in this case. Bank whilepurchasing the documensinsist of ECGC policy + credit limit on buyer.So that bank cans fallback on ECGC in the case of need.

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Post shipment finance Advance against document sent on collection basis

Sometimes, it is possible that there is a shortfall in sanction bills, purchase or negotiation limit. To cover theentire amount of a bill tendered by the exporter for purchase or negotiation, or the document drawn under L/Chave some discrepancies and the bank is reasonably sure that the same will be accepted to the buyer and that thebill will be paid. Under such situation, considering the immediate need and requirement of the exporter, thebank may send the bill on collection basis and finance him to some extent out of the total bill amount.

Advance against retention money

When the capital goods are being exported the buyer does not pay the full amount to the exporter but retaincertain amount as retention money. It is lieu of performance guarantee according to India law only 10% isretention money only for 6 months.

Advance against undrawn balance

In certain line of export, it is the trade practice that bills are not to be drawn for the full invoice value of thegoods but it leave small parts undrawn for payment after adjustment due to difference in rates, weight, quality.The undrawn amount is pay by the buyer after testing the goods at the discharge port. Bank finance the undrawnbalance subject to a minimum of 10% of the value of export and an undertaking is obtained from the exporterthat he will surrender the balance within 6 months or 12 months from the date of shipment.

Purpose of post shipment finance Post shipment finance, being basically on export sales finance, is meant forfinancial export sales receivables after the date of shipment of goods of the trade of realization of the export

proceeds. Quantum of post shipment finance Post shipment finance can be extendedly to 100% of invoice value of goods.

Period of post shipment finance Post shipment finance can be a both short term and long term financedepending upon the payment terms. Rate of post shipment finance

Upto 90 days --------> PLR - 2.5%91 - 180 days -------> PLR - 0.5%181 days and more --------> depend on the bank.

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Role of exim banks

Exim Bank of India

SET UP BY AN ACT OF PARLIAMENT IN SEPTEMBER 1981

WHOLLY OWNED BY GOVERNMENT OF INDIA

COMMENCED OPERATIONS IN MARCH 1982

APEX FINANCIAL INSTITUTION

OBJECTIVES:

for providing financial assistance to exporters and importers, and for

functioning as the principal financial institution for coordinating the working of

institutions engaged in financing export and import of goods and services with a

view to promoting the countrys international trade

shall act on business principles with due regard to public interest

(Export-Import Bank of India Act, 1981)

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Network of Offices

OFFICES IN INDIA

HEAD MUMBAI

DomesticOffices 9 MumbaiKolkata,

Bangalore

Ahmedabad

Guwahati

DelhiChennai

Hyderabad

Pune

OFFICES OVERSEAS

Overseas Rep.

Offices

5 Washington D.C.

Singapore

Johannesburg

London

Budapest

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Range of Products & Services

Range of Products Services

Pre-

Shipment

Export

Marketing

Export

Production

Export

ProductDevelopment

Import

Finance

Advisory

Services

InvestmentAbroad

Post-

Shipment

IINFORMATION

Advisory

Services

Knowledge

Building

SUPPLEMENTS FINANCING

PROGRAMMES

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Business Strategy

FINANCING PROGRAMME ADVISORY SERVICES RESEARCH & ANALYSIS

Export Finance forProjects/Products/Services/

Finance for ExportOriented Units:

Manufacturing Facilities/Product Development/Export Marketing

Finance for Agri ExportBusiness

Overseas Investment:Equity Loan/ EquityInvestment Overseas

Opportunities inMultilateral FundedProjects

Joint VentureFacilitation Service

Export MarketingService for SMEs

Sector Studies onpotential exportsectors

Country Studies onpotential markets

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Major Programmes

Supplier's & Buyer's Credit

Pre-Shipment Credit

Guarantees & L/Cs

PROJECTS

Lines of Credit

Pre-Shipment Credit

Post-Shipment Credit

PRODUCTS

Supplier's Credit

Buyer's Credit

SERVICES

EXPORT CREDIT

TERM LOANS

WORKING CAPITAL

EXPORT MARKET/EXPORT PRODUCT DEVELOPMENT

EXPORTFACILITATION

OVERSEAS INVESTMENTFINANCE

DIRECT EQUITY PARTICIPATION

IN INDIAN EXPORTING COs

DIRECT EQUITY PARTICIPATION

IN INDIAN OVERSEAS VENTURES

IMPORT FINANCECAPITAL GOODS, RAW MATERIALS

FINANCE FOR EXPORTING COS

EXPORT MARKETING

SERVICES

MULTILATERAL FUNDED

PROJECTS

JOINT VENTUREFACILITATION

CONSULTANCY SUPPORT

WORKSHOPS & SEMINARS

INFORMATION SERVICES

VALUE-ADDED SERVICES

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Support for Execution of Projects

Pioneering Role in Promoting Project Exports

Exim Bank plays a pivotal role in promoting and financing Indian

companies in the execution of projects

Over the past two decades, increasing number of projects have been

executed by Indian companies in North Africa, Sub Saharan Africa,

West Asia, South & South East Asia, CIS and Latin America

Projects currently under execution with Exim Bank support

No. of Contracts : 190

Value of Contracts : US$ 6 bn

No. of Countries : 42

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STATUS HOLDER SCHEME

REVAMPED

Export House (earlier known as One Star ExportHouse), Star Export House (earlier known as TwoStar Export House), Trading House (earlierknown as Three Star Export House), Star Trading

House (earlier known as Four Star Export House),and Premier Trading House (earlier known asFive Star Export House).

They will be granted such status on achieving

aggregate exports of Rs.20 crore, Rs.100 crore,Rs.500 crore, Rs.2500 crore and Rs.10000 crorerespectively over a period of four years.

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STATUS HOLDER SCHEME

REVAMPEDOld category Earlier

performance

criteria (Rs. Crore)

New category New performancecriteria (Rs. Crore)

One Star Export

House

15 Export House 20

Two Star Export

House

100 Star Export House 100

Three Star Export

House

500 Trading House 500

Four Star Export

House

1500 Star Trading House 2500

Five Star Export

House

5000 Premier Trading

House

10,000

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