Transcript Export Credit - ICAI

Export Credit
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Pre-Shipment/Packing Credit
• Any loan granted to an exporter for purchase,
processing, manufacturing or packing prior to
shipment.
• In case of service exports the loan could be for
working capital expenses.
• Normally, such advances are given against an LC or
Confirmed orders.
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Period of Advance
- Depends on the time required to procure, process and
export the goods.
- Sanctioned period of 360 days whichever is earlier.
- If the advance is not liquidated within 360 days by
submission of export documents, the advance will cease
to be eligible for concessional ROI ab-initio.
- Where period of PC is not extended beyond the
sanctioned period, concessional ROI is available only up to
sanctioned period.
Rate of Interest
Concessional ROI is charged. Normally, ROI is linked to base
rate and is dependent on internal credit rating.
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Liquidation Of PC.
Should be done by submission of Export Documents or
from EEFC balance.
Running Account Facility
The Banks may extend this facility to exporters with
good track record. Prior lodgement of LC/ Orders is not
insisted in this case.
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Post Shipment credit
May be in the form of,
• Export Bills Purchased/discounted/negotiated.
• Advances against bills for collection.
• Advances against duty drawback receivable from Govt.
Liquidation
• Normally from proceeds of the Export Bill.
• For all over due export bills over due interest will be
charged. For bills where recovery is effected from rupee
resources, commercial rate may be charged ab-initio.
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Period
For Demand Bills 
For Usance Bills 
Normal Transit Period (NTP)
365 Days
It should be noted that 365 days is allowed from FEMA
angle and not from credit appraisal angle.
ECGC Cover
Premium for cover under WTPSG should be borne by
the bank and not passed on to the borrower.
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Note:
Where partial domestic sale is involved
In case of agro based products like tobacco, pepper,
cardamom, cashew nuts etc, a larger quantity is purchased
and graded into exportable and non-exportable variety.
For advance covering the non-exportable portion, banks
have to charge commercial rate of interest.
In case of export of HPS groundnut and deoiled/defatted
cakes, value of raw materials required will be higher than
the export order. The advance in excess of export order
should be repaid within 30 days to be eligible for
concessional ROI.
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Rupee Export Credit Subvention Scheme
The present scheme is operative from Jan 1, 2013 to 31st
Mar 2014.
a. A subvention of 3% (w.e.f. Aug 1, 2013) on the interest
rates is available for export credit (both pre and post
shipment) to specified sectors.
b. The benefit has to be passed on to the exporter upfront.
The Bank has to claim the amount from RBI on quarterly
basis against certification by concurrent auditors/
statutory auditors.
c. The sectors benefitted are Handicrafts, Handlooms,
SMEs, readymade garments, engineering products etc.
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Export Credit in Foreign Currency
i. Preshipment Credit is disbursed in Foreign Currency
(FCY)
ii. FCY so disbursed can be converted into INR and
credited to Export C/A.
iii. The FCY amt can also be used to retire import bills
without conversion.
iv. Either way the exporter’s liability will be in FCY.
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v. The Export bill is purchased or discounted (under EBR
scheme) and the PCFC a/c is credited.
vi. On realization of the export bill, the FCY received is
applied towards the bill purchased and the bill
liability is closed.
vii. Any shortfall on account of foreign banks charges
etc. is debited to exporters’ a/c.
Thus the entire cycle is completed in FCY only.
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Interest Rates
• The interest rates charged to the customer are linked to
LIBOR (i.e. LIBOR plus spread).
• Banks are free to determine the rates.
Crystallisation of Overdue Export Bill
• When a bill becomes overdue and remains overdue for
say, 15 days it is crystallized and converted into INR.
Thereafter, rupee interest rates will become applicable till
the date of payment by the exporter.
• By this process the bank crystallizes the exporters’ liability
in INR. The exchange risk thereafter is borne by the
exporter.
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• The export bill will be held in collection portfolio. As and when
the bill is paid, the FCY amount will be paid to the exporter.
Sources of FCY funds for banks
a. EEFC, RFC balances
b. FCNR (B) funds
c. Borrowings from Banks abroad
Note:
In case of decreased availability of FCY limit due to depreciation
of rupee, banks are advised to reassess the limits.
OR
Banks may denominate foreign currency (FC) component of the
limit in FC only so that exporters are insulated from rupee
fluctuations.
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Export Credit Refinance (ECR)
RBI provides refinance to banks who have extended
export credit at Repo rate. The eligible amount is 50%
of outstanding export credit.
The amount (each drawal) is repayable on expiry of 180
days.
Export credit in foreign currency is not eligible for
refinance.
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