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Pre Shipment Finance

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0% found this document useful (0 votes)
3K views13 pages

Pre Shipment Finance

Uploaded by

madhurmeshram
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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PRE SHIPMENT

FINANCE
EXIM
GROUP A2
MEANING
 Short term funding
 Offered to an exporter
 By way of Packing Credit
 For working capital
 Given in rupees or foreign currency
(PCFC)
 In form of a loan, cash credit or overdraft
facility
ELIGIBILITY
 Holding an Export Order or Letter of
Credit (L/C) taken out by the buyer

 “Running Account Facility”


TENOR
 RBI’s concessional ROIs
 Maximum Period: 180 days + 90 days
Minimum Period: 7 days
 Banks’ own interest rates
 Maximum Period: 270 days
Minimum Period: 360 days
COSTS
 BPLR: 13.25%
 Upto 180 days: 10%, Concessional ROI
 Extension of 90 days: 12% ROI
 Over 270 days: Commercial rates higher
than 270 days
DOCUMENTS
 Export Order/Contract or L/C in original
 Undertaking for advance utilized only for
exporting purposes
 Undertaking from Trading House for not
availing for credit facility for same
transaction, if sub-supplier
 Copies of Income Tax/Wealth Tax
Assessment Order
CONTD…
 Copy of a valid RCMC and/or Trading
House Certificate
 Policy/guarantee of the ECGC
 Credentials of foreign buyer
 Certificate of origin
 Bill of Lading
 Bill of Exchange
SPECIAL SCHEMES
 Exim Bank’s scheme for financing cost of
imported inputs
 Scheme of credit to sub-suppliers
 Credit for deemed exports
 Pre shipment Credit in Foreign Currency
(PCFC)
AMOUNT OF FINANCE AN
EXPORTER CAN GET…
 “Need Based Financing”
 Margin differs from bank to bank (10 – 25%)
 Margins are stipulated:
 Exporter has some stake in transaction
 Cover erosion in goods
 No lending against exporter’s profit margin
 Banking Practice
 90% of FOB
 75% of CIF
CREDIT OBTAINED IN
DIFFERENT CURRENCIES
 Domestic Currency, the Rupee, if exporter
based in India

 Foreign Currency preferred when cost of


borrowing is lower
WAYS TO LIQUIDATE
PRE SHIPMENT FINANCE
 Proceeds of export bills negotiated,
purchased or discounted
 No liquidation by debit to cash credit
account
 Conversion of pre shipment finance to post
shipment
 Bills 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 capital
 Market failure from informational irregularities
on part of banks about exporters’ ability to
execute export orders
 Several countries have established pre shipment
export finance guarantee facility
 Aim to act as catalyst to temporarily share non-
performance risks of exporters
 Encouragement of implementation of pre
shipment finance in some countries without
guarantees
THANK YOU

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