Off-shore Banking, NOSTRO, VOSTRO,

LIRO, Exim Bank

SESSIONS 23 & 24: 17 SEP 2019
Off-shore Bank Accounts
An offshore bank account is one that is opened and held in another
country.
Offshore accounts usually held in countries with negligible tax rates
or other budgetary advantages.
Accounts are opened for various purposes like investments in assets,
financing foreign education, higher risk adjusted returns etc.
Facilitates receiving payments in a country other than the country of
domicile.
Advantages of offshore accounts
Possibility of receiving higher interests.
Access to foreign ventures.
Access to foreign banking products and various other
services.
Greater security, for instance, a business looking to ensure
its business secrets.
Facilitates payments to foreign creditors without delays in
transfer.
 Offshore Banking Services
It is possible to obtain the full spectrum of financial services from offshore banks, including:
Savings accounts
Corporate administration
Credit
Deposit taking
Foreign exchange
Fund management
Investment management and investment custody
Debit and Credit Cards
Letters of credit and trade finance
Trustee services
Wire- and electronic funds transfers
NOSTRO Accounts
Italian word ‘Nostro’ means ‘Ours’.
Hence Nostro accounts points at ‘Our Account with You’
Held in a foreign country by a domestic bank in the currency of the foreign
country.
◦ Eg: SBI’s account with Barclays, London.
Denominated in a foreign currency.
It is not a typical checking account.
Use of Nostro Account
Company A in India has to receive payment from customer B based in London.
Customer B can pay in Euro to the Nostro account of SBI maintained at Barclays,
London.
Barclays credit SBI’s Nostro account with dollars received from customer B.
On sighting of Euros in the London Nostro account of SBI, it can credit equivalent
Indian rupee as per the prevailing exchange rate in the company A’s account.
In short, the purpose of Nostro account is to facilitate forex transactions.
Vostro Accounts
Italian word ‘Vostro’ means ‘Yours’.
So it is your account with us.
◦ Eg. Barclays, London maintains an Indian rupee account with SBI India.
Rest of the procedures are exactly similar to Nostro accounts.
Use of the words Nostro and Vostro is specific to the context.
◦ For Eg. SBI’s account with Barclays is Nostro for SBI and Vostro for Barclays.
Reverse for Barclays.
LORO accounts
Italian word for ‘Theirs’
Accounts maintained by third party banks other than the account maintaining
bank or with whom the account is maintained.
◦ Eg. BOI can use the Nostro account maintained by SBI with Barclays as a Loro
account for BOI for intermittent fund transfers. If the volumes and number of
transactions increase, it is advisable for BOI to open a Nostro account either
with Barclays or any other bank in London.
Bank for International Settlements

https://www.bis.org/
Bank for International Settlements (BIS)
Established on 17 May 1930
International financial organisation owned by 60 member central banks.
Representing countries from around the world that together make up about
95% of world GDP.
Head office is in Basel, Switzerland.
Two representative offices: Hong Kong Special and Mexico City.
The customers of the BIS are central banks and international organisations.
BIS does not accept deposits from, or provide financial services to, private
individuals or corporate entities.
Mission
The mission of the BIS is to serve central banks in their pursuit of
monetary and financial stability, to foster international cooperation
in those areas and to act as a bank for central banks.
Functions
Fostering discussion and facilitating collaboration among central banks.
Supporting dialogue with other authorities that are responsible for promoting
financial stability.
Carrying out research and policy analysis on issues of relevance for monetary
and financial stability,
Acting as a prime counterparty for central banks in their financial transactions.
Serving as an agent or trustee in connection with international financial
operations.
Social Benefits of BIS
Monetary and financial stability is a precondition for sustained
economic growth and prosperity. Reflecting the public good character
of this goal, the BIS makes part of its work available to the wider
public, including:
its own analyses of monetary and financial stability issues;
international banking and financial statistics that underpin
policymaking, academic research and public debate.
Role & Functions of Exim Bank
Trivandrum, July 17, 2009

Roshanara Sardar
Manager
Exim Bank, Chennai
 15

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 country’s international trade…”

“… shall act on business principles with due regard to public interest”

(Export-Import Bank of India Act, 1981)
 16

Evolving Vision
Product Centric
Approach “To develop commercially viable
Export relationships with a target set of
Credits externally oriented companies by
1982-85 offering them a comprehensive range of
products and services, aimed at
enhancing their internationalisation
Export Capability efforts”
Creation
1986-94

Customer Centric Comprehensive Range of

Approach Products And Services
– All Stages of the Export Business Cycle –
Exim Bank TODAY

Leadership and Expertise in India’s Export Finance

 17

Organisation
BOARD OF DIRECTORS (16)* OFFICES

 Chairman and Managing Director Domestic Offices: 9 Overseas Offices:6

 5 Directors: Government of India  Ahmedabad  London

 Bangalore  Dakar
 3 Directors: Scheduled Banks
 Chennai  Durban
 4 Directors : Professionals/Experts
 Guwahati  Dubai
 1 Director nominated by RBI
 Hyderabad  Singapore
 1 Director nominated by IDBI
 Kolkata  Washington D.C.
 1 Director nominated by ECGC
 New Delhi
 Mumbai
Appointed
by  Pune
Govt. of India
* As per Exim Bank Act
 18

Operational Philosophy
International Trade

Financing Promoting Facilitating

Through

Variety of Financing Value Added Business Research &

Programmes Advisory Services Analysis

Catalyst for Financing

Projects Products Services

 19

Range of Products & Services

Presence Across All Stages of Business Cycle Value Based Services

Export Pre- Advisory

Marketing Shipment Services

Export Post-
Production Shipment Knowledge
Building
Export
Product Investment
Development Abroad
INFORMATION
Import Advisory
Finance Services
SUPPLEMENTS FINANCING PROGRAMMES
 20

Financing Programmes
Financing Programmes (Various Currencies)

Export Credit Import Credit Loans for Exporting Units

Medium / Long Term - Import Loan for - Term Loans for expansion/
diversification/ new projects/
- Lines of Credit capital goods
export product development/
- Buyer’s Credit - Bulk Import Loan for export marketing/ research &
development
- Supplier’s Credit Raw Materials
- Term Loans for overseas equity
investment
Short Term
- Direct equity stake in Indian/
- Pre/Post Shipment
Overseas ventures of exporting
Credit
companies
 21

Export Marketing Finance

 Administered as an Export Marketing Fund from World Bank

 SMEs are extended export marketing finance to implement strategic export marketing plans
aimed at entry into developed country markets and term loans for supply side upgradation
 Exim Bank’s assistance resulted in generation of significant exports to developed country
markets
 Many of these companies have become large companies with high export orientation
 Based on the successes achieved in the programme implemented by Exim Bank in India,
the Bank has shared its experience with other developing countries, with World Bank
funding
 Over 300 companies supported in variety sectors:

 Knitting  Pharmaceuticals  Herbal Products

 Needles  Jute Products  Textiles
 Polyester Ropes  Printing Machinery  Software
 Home Appliances  Auto Components  Castings
 22

Lines of Credit

 Exim Bank extends export Lines of Credit (LOC) to overseas financial

institutions, regional development banks and foreign governments and their
agencies and Buyers’ Credits (BC) to foreign corporates

 LOCs also extended at the behest of Government of India

 LOCs serve as a market entry mechanism to Indian exporters and provide a

safe mode of non-recourse financing option to Indian exporters

 LOCs/BCs are particularly relevant for Indian SME exporters as the payment
risk is borne by Exim Bank

 Bank has in place 117 operative LOCs covering more than 94 countries of
value of over US$ 3.85 billion
 23

Enterprise Management Development Services

 Competency as Collateral :
 Development of Loan.Com an IT tool kit which will enable SMEs to develop
bankable business plans thereby enhancing their access to finance
 Tool kit will also enable lending institutions to screen viable projects
 Pioneering initiative for supporting SMEs and for providing term loans and
export finance facilities to identified units to help them in their globalisation
efforts.
 Learning from the programme to be transferred to other developing
countries; capacity creation and institution building in the global arena.
 Exim Bank has already financed select firms by way of term loans and export
finance facilities, using the tool kit

THIS INITIATIVE HAS BEEN LAUNCHED BY ITC FOR THE FIRST TIME WITH
EXIM BANK AS A PARTNER.
 24

Global Trade Finance under IFC

 Agreement between Exim Bank and International Finance Corporation

(IFC)
 Envisages confirmation of Letters of Credit (L/Cs), Standby letters of
Credit, demand guarantees, promissory notes or bills of exchange
received by Indian exporters
 From 105 pre-approved banks in more than fifty countries of IFC’s
operation
 Covers the risk of non-payment by Issuing Bank to Negotiating / Paying
banks
 25

Export Marketing Services

 Exim Bank has launched an ‘Export Marketing Services’ programme
 Seeks to help Indian SME sector to establish their products overseas and enter new markets through
Exim’s overseas offices and institutional partner network
 Helps Indian SMEs in their export efforts by proactively assisting in locating overseas buyers/partners for
their products/services
 No upfront fees, but operates on success-fee basis
 Some of the sectors assisted include :

 Agricultural Equipments to Senegal  Processed foods to Singapore & Italy

 Ayurvedic Products to Hungary
 Agarbathis to S. Africa and Singapore
 Tiger Prawns to a leading restaurant chain in
S.Africa  Natural Sandstone and Tiles to Hungary
 Cotton fabrics to S. Africa
 Lucknow Chikan Kurtas to Singapore
 Incense sticks to Singapore, S. Africa, USA
 Setting up of oil mill on turnkey basis in
 Grapes and Pomegranates to Singapore
Senegal (pipeline)
 Seting up of Solar City in Senegal(pipeline)
 26

Seminars / Workshops

 Eximius Centres of Learning for knowledge building & capacity creation for SMEs
– Bangalore/Pune/ Ahmedabad

 Set up to organise seminars and workshops for the benefit of exporting

companies, particularly SMEs

 Subjects include:
 International trade & investment  Quality
 Export marketing  Packaging
 Sector and country specific  Business opportunities in multilateral
programmes agencies funded projects
 27

Research Publications
 Exim Bank has brought out Research Papers pertaining to SMEs on policies,
institutional support and infrastructure
 Institutional Support to SMEs: A Study of Select Sectors
 Institutional Support Systems for SMEs in India and International Experiences
 Export Performance of Small and Medium Enterprises in India

 Others research papers on sectors that are predominated by SMEs include:

 Sports Goods  Chemicals

 Indian Handicrafts  Leather
 The Bank has also brought out a publication on ‘Business Practices of Successful
Indian Exporters’, outlining the internationalisation strategies adopted by successful
Indian firms including SMEs
 ‘Agri Export Advantage’, a bimonthly publication in English, Hindi and 10 regional
languages
 28

Agri Business Group

 The Bank has put in place an ‘Agri Business Group’
 The Group looks for viable projects and export transactions in agriculture sector.
 The Bank has set up an agro-portal, in-house, which is an IT initiative to promote
knowledge-based agriculture enterprise. www.eximbankagro.in
 The Bank brings out a bi-monthly newsletter ‘Agri Export Advantage’ to facilitate
information dissemination in 10 regional languages.
 Brought out following study reports;
 Organic Farming
 Plantation Sector
 Agro & Processed foods –Export Opportunities
 Assisted a number of Small and Medium exporters in the Agro Sector covering
following products;
 Honey, Mango pulp, mushrooms, gherkins,fresh & processed fruits & Vegetables
 29

Promoting Investment
Supporting two-way investment

 Comprehensive assistance:
 Pre investment advisory services

 Finance through debt and equity

 Finance available for:

 Greenfield projects;

 Brownfield expansion;

 Overseas acquisitions directly or through special purpose vehicles

 Direct equity participation in Indian ventures abroad

 Joint investments by Indian and overseas company in third country markets in addition
to facilitating investments into India.
 30

Institutional Linkages
Multilateral Agencies Trade & Invt. Promotion Agencies Export Credit Agencies
 Board of Investment of  Afrexim Bank
 World Bank
Mauritius
 National Bank of Egypt
 EBRD
 Netherlands Council for
 Czech Export
 ADB
Trade Promotion
Bank(CEB)
 African Development
 Board of Investment of
 Belvnesheconombank,
Bank Sri Lanka
Belarus
 MIGA  Sharjah Chamber of
 Czech Export Bank
 IFC Commerce & Industry
 Hungarian Exim Bank
 UNCTAD  Caribbean Association
of Industry & Commerce  Exim Bank of China
 31

Exim Bank: Partner in Globalisation

 Technology  Final Products
 Capital  Capital Goods
(Foreign Investment)
 Capital
 Raw Materials
(Overseas Ventures)
 Capital Goods

 Product
Development
 Production
 Marketing
 Pre shipment
 Post shipment
THANK YOU
Website

www.eximbankindia.in