1. EXPORT FINANCE

2. EXPORT ACTIVITY LC or ORDER COMMERCIAL BANKS / EXIM BANK EXIM BANK
SALES TOUR
PARTICIPATION IN FAIRS/EXHIBITIONS
ADVERTISING IN FOREIGN MEDIA
OPENING OF FOREIGN OFFICES
PROCUREMENT OF RAW MATERIALS
PRODUCTION
INSURANCE
FREIGHT
SHIPMENT
SHIPPING DOCUMENTS
LC or
ORDER
REALIZATION OF PROCEEDS
RECEIVABLES
EXIM BANK
FIEO / MoC
COMMERCIAL BANKS / EXIM BANK
FINANCIAL INSTITUTIONS

3. Export Finance a. What is financed ? Cost of input, ci&f (not profit)
Receivables from the Government - DDB
b. Two stages
Pre- shipment
Post- shipment
c. Two types
Indian Rs
Foreign currency
d. Registration requirement

4. Pre Shipment Finance 2. Post Shipment Finance
DIFFERENT STAGES OF EXPORT FINANCE
Pre Shipment Finance
2. Post Shipment Finance

5. Pre- shipment finance PRE-SHIPMENT FINANCE a. working capital
b. in anticipation of exports
PERSONS ELIGIBLE
Merchant exporter
Manufacturer exporter
Export and Trading Houses
Manufacturer s supplying goods to EH , TH or merchant exporters
Conditions Attached
Not on the caution list of RBI
Should have a licence if the goods are on restricted list
Quota allotment proof if the goods are under quota system

6. 2. Advance against receivables from Govt
TYPES OF PRE SHIPMENT FINANCE
Packing Credit
2. Advance against receivables from Govt
3. Advance against cheques /drafts representing
advance payments

7. Pre- shipment finance BASIS FOR GRANTING
A confirmed export order /contract or
Letter of credit or
Original fax /telex message exchanged between the buyer and the seller
In case of sub suppliers
A letter from the main exporter
a undertaking from the main exporter that he has not availed packing credit from any other bank
PURPOSE
a. purchasing raw materials
b. manufacturing
c. processing
d. transporting
e. warehousing
f. packing, and
g. shipment

8. Pre- shipment Finance QUANTUM OF FINANCE Concept of need based finance
Margin requirement
Credit rating of the exporter
Receivables on account of DDB
PERIOD OF ADVANCE
a. Product cycle
b. 180 days plus extension of 90 days
c. In case of DDB 90 days

9. Pre- shipment Finance Rate of Interest
Not exceeding Base Rate minus 2.5% for 270 days
Above 270 days ………….no cap from RBI
DDB………….upto 90 DAYS Base Rate minus 2.5%
Above 90 days …………no cap from RBI
END USE
Payment to be released only for designated purposes
LIQUIDATION OF FINANCE
a. Export Bill
b. Fresh credit
c. DDB
d. substitution of contract/ buyer/ commodity etc allowed

10. 3. Export of deoiled/defatted cakes Where DDB is the part cost quoted
PACKING CREDIT IN EXCESS OF EXPORT VALUE
Where by- product can be exported eg agro product – raw cashew nut( cashew shell oil)
2. Where partial domestic sale is involved eg tobacco, pepper ( for gradation into exportable /non exportable)
3. Export of deoiled/defatted cakes
Where DDB is the part cost quoted

11. Post- shipment Finance
WHO IS ELIGIBLE
Merchant/Manufacturer exporters
Export /Trading Houses
Manufacturer supplying goods to EH/TH or Merchant Exporter
BASIS
PURPOSE
QUANTUM

12. Export bills purchased/negotiated /discounted
TYPES OF POST SHIPMENT FINANCE
Export bills purchased/negotiated /discounted
2. Advances against bills sent on collection basis
3. Advance against exports on consignment basis
Advance against undrawn balances
5. Advance against Duty Draw Back receivables from Government

13. Post- shipment Finance
PERIOD OF FINANCE
at concessional rate
at overdue rate
NTF
NDD
END USE
CHANGE OF TENOR

14. Export credit in foreign currency
AVAILABLE FOR EXPORTS MADE ON ‘CASH’ BASIS ONLY
Pre-shipment IRS
Post-shipment IRS
Pre-shipment FC
Post-shipment FC
CHOICE OF CURRENCY - $, £, ¥, €
change of currency is allowed
RATE OF INTEREST is LIBOR + 350% max , overdue rate is +2%
GOOD FOR IMPORT BASED INDUSTRY
NO PREMIUM BENEFIT

15. Merchanting trade
Transactions where goods are either DIRECTLY SHIPPED to the country
of the buyer or TRANSHIPPED at an Indian port under customs
supervision, but not the cases where goods are imported into India for
re-export after processing, re-labeling etc.
TRADER
BUYER
SELLER
INDIA
goods 2
goods 1
LC Order Or
Adv. Payment
LC Order Or
Adv. Payment

16. Contd..
1.For genuine traders, not for financial intermediaries. Obtain approval
from AD.
2. Import should be possible in importing country and payment should be
forthcoming
3. No foreign exchange involved except for NTP or maximum 1 month.
Drafts should be of same tenor
4. Total transaction should be within 6 months of LC date or date of
approval from AD (advance payment)
5. Funds received abroad can be retained in Nostro A/c
6. Transaction should leave reasonable profit

17. FORFEITING- An Export financing option
Forfeiting is a mechanism of financing exports
By discounting export receivables
Evidenced by BOE /DPN
Without recourse to the seller
Carrying medium to long term maturities
On a fixed rate basis ( discount)
Upto 100% of contract value

18. FORFEITING- An Export financing option
Type of exports eligible for F
Capital goods and other goods made on medium to long term credit
How does F works
co-accepted BOE
endorsed by exporter in favour of Factor ,
without recourse in exchange of discounted cash proceeds

19. FORFEITING- An Export financing option
What does forfeiting cost ?
Commitment fee
0.5 to 1.5% pa of the unutilised amount
no refund if not used
Discount fee
interest rate plus premium for the risk assumed by the forfaiter
Documentation fee – no
AS PER RBI DISCOUNT FEE ,DISCOUNT FEE AND ANY
OTHER COST MUST BE TRANSFERRED TO THE OVERSEAS BUYER

20. FORFEITING- An Export financing option
Benefits………………
Converts Deferred Payment exports into a cash transaction
Exporter is free from credit administration and collection problems
No cross border political or commercial risk
Forfeiting represents an additional source of funding as it is not on the balance sheet of the exporter
On a fixed rate basis..hedges against interest and exchange risks
Upto 100% of contract value as compared to 80 to 85% under conventional export credit programmes

21. Forfeiting- An Export financing option
Benefits………………
Forfeiting is transaction specific and hence long term relationship with the forfaiter is not pre requisite.
Saves on insurance cost(ECGC)
Simple documentation