Académique Documents
Professionnel Documents
Culture Documents
Mini Project
ON
TRADE FINANCE
BY
A.R.BINEETH
1
ACKNOWLEDGEMENT
Place: Bhubaneswar
Date: Signature
2
CONTENTS
5. BANK GUARANTEES 37
7. EPILOGUE 45
8. BIBLIOGRAPHY 50
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IMPORTANCE OF TRADE FINANCE
Trade Finance is a specific topic within the financial services industry. It‟s
much different, for example, than commercial lending, mortgage lending
or insurance. A product is sold and shipped overseas, therefore, it takes
longer to get paid. Extra time and energy is required to male sure that
buyers are reliable and creditworthy.
In addition, foreign buyers are just like domestic buyers prefer to delay
payment until they receive and resell the goods. Due diligence and careful
financial management can mean the difference between profit and loss on
each transaction.
Trade Finance provide alternative solution that balance risk and payment.
In this overview, we‟ll outline the two broad categories of trade finance:
Pre-shipment Financing to produce or purchase the material
and labor necessary to fulfill the sales order.
Post-shipment Financing in order to generate immediate cash
while offering payment to buyers.
GENERAL CONSIDERATION
The following factors and considerations apply to financing in general:
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exporters, depending on the specifics of the transaction and the
exporter‟s overall financing needs.
Financing Costs
The costs of borrowing, including interest rates, insurance and fees will
vary. The total cost and its effects on the price of the product and profit
from the transaction should be well understood before a pro-forma invoice
is submitted to the buyer.
Financing Terms
Costs increase with the length of terms. Different methods of financing
are available for short, medium, and long terms. Exporters need to be
fully aware of financing limitations so that they secure the right solution
with the most favorable terms for seller and buyer.
Risk Management
The greater the risk associated with the transaction, the grater the cost.
The creditworthiness of the buyer directly affects the probability of
payment to an exporter, but it is not the only factor of concern to
potential lender. The political and economic stability of the buyer‟s
country are also taken into consideration.
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If a lender is uncertain about the exporter‟s ability to perform, or if
additional credit capacity is needed, government guarantee programs are
available that may enable the lender to provide additional financing.
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Term Financing for Foreign Buyers
Frequently, foreign buyers don‟t have the cash on hand to pay for major
purchase. So the buyers ask for extended credit terms and/or financing.
Few exporters can manage the cash flow dilemma or commercial or
political risk caused by these long term contracts.
Exporting country‟s government institutions often back buyer credit
programs. Under this program, the exporting country‟s financial
institution lend credit to the foreign buyer in order allow the foreign
importer to pay the exporter immediately. The payment is usually made
directly to the exporter.
This is an effective solution that benefits the exporter, their buyer and
commercial lender providing the loans. The exporter benefit because
they‟re paid cash on delivery and acceptance of the product or service.
The foreign buyer benefit because they get extended credit terms at
market rate or better.
The lender benefits because guarantees, many backed by the respective
governments, means fully repayment of loan and a reasonable return of
funds lent.
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Import Trade Finance
Importers may use pre and post shipment finance to improve their cash
flow.
Post-shipment trade finance can allow time for goods to be sold prior to
the payment being made. It also enables importers to offer payment at a
sight basis to the supplier, rather than utilizing supplier terms(prices are
often increase to cover supplier terms). This provides a importer with a
negotiating advantage in realizing a potentially lower price.
Pre-shipment trade finance enables an importer to pay for goods prior to
shipment, when the method of payment agreed upon with the exporter is
‘Pre-payment by Clean Remittance’
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PRE-SHIPMENT TRADE FINANCE
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Packing credit facility can be provided to an exporter on production of
following evidences to the bank:
1. Formal application for realizing the packing credit with undertaking
to the effect that the exporter would ship the goods within
stipulated due date and submit the relevant shipping document to
the bank within prescribed time limit.
2. Firm order or irrevocable L/C or original Cable/Fax/Telex message
exchange between the exporter and the buyer.
3. License issued by DGFT if the goods to be exported fall under the
restricted or canalized category. If the item falls under quota
system, proper quota allotment proof needs to be submitted.
The confirmed order received from the overseas buyer should reveals the
information about the full name and address of the overseas buyer,
description, quantity and value of goods (FOB or CIF), destination and last
date of payment.
Eligibility
Pre-shipment credit is granted to an exporter who has the export order or
LC in his own name. the exporter is the person or the company who
actually delivers the goods to the importers/buyers.
However, as an exception, financial institution also grant credit to the
third-party manufacturer or supplier of goods who does not have export
orders or LCs in their name, but some of the responsibilities of meeting
the export requirement have been out sourced to them, by the main
exporter.
In cases where the export order is divided between more than one
exporter, pre-shipment credit can be shared between them.
Quantum of Finance
There is no fixed formula to determine the quantum of finance that is
granted to an exporter against a specific order/LC or an expected order.
The only guiding principle is the concept of Need-Based-Finance.
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Banks determine the percentage of margin, depending on factor such as:
The nature of order.
The nature of the commodity.
The capability of exporter to bring in the requisite contribution.
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There are special types of export activities that may be seasonal in
nature, in which the exporter may not be able to produce the export order
at time of availing Packing Credit. In these cases, the bank may provide a
special packing credit facility, known as Running Account Packing Credit.
Before disbursing, the bank specifically checks for the following particulars
in the submitted documents:
a) Name of the Buyer.
b) Commodity to be exported.
c) Quantity.
d) Value (either CIF or FOB).
e) Last date of shipment/negotiation.
f) Any other terms to be compiled with.
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The authorized dealer (Banks) also physically inspect the stock at regular
intervals.
Overdue Packing
5. If the borrower fails to liquidate the packing credit on the due
date/extended due date, the bank considered it an overdue.
In case of overdue position persists, the bank takes steps to realize its
dues as per usual recovery procedures. Nursing programme may be
initiated, if found feasible.
SPECIAL CASES
Packing Credit to sub-supplier
1. Packing Credit may be shared between an Export Order Holder (EOH)
and the manufacturer of goods on the basis of a disclaimer issued by EOH
to the effect that he has not availed/is not availing credit facility against
the portion of the order transferred in the name of the manufacturer.
This disclaimer may preferably be countersigned by the banker of EOH.
The banker of EOH may open an inland L/C specifying the goods to be
supplied by the sub-supplier to the EOH as part of the export transaction.
On the basis of such an L/C, the sub-supplier‟s bank may grant a packing
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credit to the sub-supplier to manufacture the components required for
exports. On supply of goods, the L/C opening bank will pay to the sub-
supplier‟s bank against the inland documents received on the basis of
inland L/C opened by them.
The EOH is finally responsible for exporting the goods as per export order
and any delay in the process will subject him to penal provisions issued
from time to time. The scheme is intended to cover only the first stage of
production cycle, and is not to be extended to cover supplies of raw
material etc. Running account facility is not granted to the sub-suppliers.
In case the EOH is a trading house, the facility is available commencing
from the manufacturer to whom the order has been passed by the trading
house. Banks however, ensure that there is no double financing and the
total period of packing credit does not exceed the actual cycle of
production of the commodity.
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This is an additional window available to Indian exporters, along with the
existing INR packing credit. Under this scheme credit is provided in
foreign currency in order to facilitate the purchase of raw material,
components etc. required to fulfill the export order. The procurement of
raw material, components etc. may be made from the international
market or from the domestic market.
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POST-SHIPMENT TRADE FINANCE
FEATURES
The features of post-shipment finance are:
Purpose of Finance
Post-shipment Finance is meant to finance export sales receivables
after the date of shipment of goods to the date of realization of
exports proceeds. In case of deemed exports, it is extended to
finance the receivables against supplies made to designated
agencies.
Basis of Finance
Post-shipment finance is provided against evidence of shipment of
goods or supplies made to the importer or any other designated
agency.
Form of Finance
Post-shipment finance can be secured or unsecured, Since the
finance is extended against evidence of export shipment and banks
obtain the document of title of goods, the finance is normally self
liquidating. In case that involve advances against undrawn balance,
it is unsecured in nature.
Further, the finance is mostly a funded advance. In few cases, such
as financing of project exports, the issue of guarantees (retention
money guarantees) is involved, the financing is non funded in
nature.
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Quantum of Finance
Post-shipment finance can be extended upto 100% of the value of
goods. However, where the domestic value of goods exceeds the
value of the export order or the invoice value, finance for the price
difference can also be extended if such a price difference is covered
by receivables from the government. This form of finance is not
extended at the pre-shipment stage.
Banks can also finance undrawn balance. In such cases banks are
free to stipulate margin requirements as per their usual lending
norms.
Period of Finance
Post-shipment finance can be short term or long term, depending
on the payment term offered by the exporter to the overseas
buyer. In case of cash export, the maximum period allowed for
realization of exports proceeds is six months from the date of
shipment. Banks can extend post-shipment finance at lower rate
up to normal transit period/notional due date, subject to maximum
of 180 days.
In case of deferred payment exports, requiring prior approval of
the Authorized dealer, RBI or EXIM Bank, post-shipment finance
can be extended at non-concessional rates up to the approved
period.
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Capital Goods and Project Exports
In case of export of capital goods and project exports, finance is
sometimes extended in the name of overseas buyer. The disbursal
of money is directly made to the domestic (Indian) exporter.
BUYER’S CREDIT
As seen in the case of capital goods and project exports, credit is
sometime extended directly to the foreign buyer.
Buyer‟s Credit is a financial arrangement whereby a financial institution in
the exporting country, or another country, extends a loan directly or
indirectly to a foreign buyer to finance the purchase of goods and services
from the exporting country. This arrangement enables the buyer to make
payment due to the supplier under the contract.
SUPPLIER’S CREDIT
Finance extended by supplier to buyers in their own name is referred to
as Supplier‟s Credit. Hence, Supplier‟s Credit is a financing agreement
under which an exporter extends credit to the buyer in the importing
country to finance the buyer‟s purchases.
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contract/order may be discounted or purchased by the banks. Proper limit
has to be sanctioned to the exporter for the purchase of export bill
facility. If the export is not covered under L/C, risk of non-payment may
arise. The risk is more pronounced in case of documents under
acceptance.
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transit period in case of DP Bills and transit period plus usance period in
case of Usance Bills, depending upon the type of drawing. For computing
the Eligible Transit Period, the period commences from the date of
acceptance of the export documents at the bank‟s branch for collection
and not from the date of advance.
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Advance Against Receivables from Government of India
6. where the domestic cost of production of goods is higher in relation to
international price, the exporter may get support from the government so
that he may compete effectively in the overseas market. Just as in the
case of various foreign governments. The Government of India and other
agencies provide support to exporter under the Export Promotion
Scheme. This can be in the form of refund of Excise and Custom duty,
known as Duty Drawback.
Banks can grant advances to exporters against their entitlement under
this category at lower rate of interest at maximum period of 90 days.
These advances being in the nature of unsecured advances cannot be
granted in isolation. These are granted only if other types of export
finance are also extended to the exporter by the same bank.
After the shipment, the exporter lodge their claims, supported by relevant
documents to the relevant government authorities. These claims are
processed and eligible amount is disbursed. These advance are liquidated
out of the settlement of claims lodged by the exporters. It has to be
ensured that the bank is authorized to receive the claim amount directly
from the concerned government authorities.
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on the day of the payment. In this case, the exchange profit/loss is borne
by the exporter.
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3. Pre-shipment in Foreign Currency (PCFC) and post-shipment under
export bill re-discounting in foreign currency, under EBRD.
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FORFAITING AND FACTORING
BRIEF HISTORY
Factoring has a long and rich tradition, dating back 4,000 years to the
days of Hammurabi. Hammurabi was the king of Mesopotamia, which gets
credit as the “cradle of civilization”. In addition to many other things, the
Mesopotamians first developed writing, put structure into business codes
and government regulation and came up with the concept of factoring.
The first widespread, documented use of factoring occurred in the
American colonies before the revolution. During this time, cottons, furs
and timber were shipped from the colonies. Merchant bankers in London
and other parts of Europe advanced fund to the colonist for these raw
materials, before they reached the continent. This enabled the colonist to
continue to harvest their new land, free from the burden of waiting to be
paid by their European customer.
These were not banking relationships, as they exist today. If the colonist
had been forced to use modern banking services in eighteenth century
England, the process would have been much slower. The bank would have
waited to collect from the European buyers of the raw material before
paying the seller of these goods. This was not practical for anyone
involved. So, just as today, the “factors” of colonial times made advances
against the accounts receivable of clients.
With the advent of Industrial Revolution, factoring become more focused
on the issue of credit, although the basic premise remained the same. By
assisting clients in determining the creditworthiness of their customers
and setting credit limits, factors could actually guarantee payment for
approved customer. This is known as factoring without recourse (or non-
recourse factoring) and is quite common in business today. Today, factors
exist in all shapes and sizes as division of large financial institution or, in
large numbers, as individually owned and operated entrepreneurial
endeavors.
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Forfaiting and Factoring
Forfaiting and factoring are similar services that serve to provide better
cash flows and risk mitigation to the seller. It may be mentioned that
factoring is for short term receivables (under 90 days) and is more
related to receivables against commodity sales. Forfaiting can be for
receivables against which payments are due over a longer term, over 90
days and even up to 5 years. The difference in the risk profiles of
receivables is the fundamental difference between factoring and forfaiting,
which has implications for the cost of services.
Both factoring and forfaiting are like bill discounting, but the bill
discounting is more domestic-related and usually falls within the working
capital limit set by the bank for the customer.
FORFAITING
Forfaiting is a mechanism of financing exports:
By discounting export receivables.
Evidence by bills of exchange or promissory notes.
Without recourse to the seller (such as exporter).
Carrying medium to long term maturities.
On a fixed rate basis (discount).
Up to 100% of the contract value.
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3. The exporter draws a series of bills of exchange and send them
along with the shipping documents, to his banker for presentation
to importer for acceptance through latter‟s bank. Bank returns
avalised and accepted bills of exchange to his client (the exporter).
4. Exporter informs the Importers bank about assignment of proceeds
of transaction to the forfaiting bank.
5. Exporter endorses avalised Bill of Exchange (BOE) with a word
“without re-course” and forwards them to the Forfaiting Agency
(FA) through his bank.
6. The FA effects payments of discounted value after verifying the
Aval‟s signature and other particulars.
7. Exporter‟s bank credits Exporter‟s A/C.
8. On maturity of BOE/Promissory notes, the Forfaiting Agency
presents the instruments to the Aval (Importer‟s Bank) for
payment.
DOCUMENTARY REQUIREMENT
In case of Indian exporters availing Forfaiting facility, the forfaiting
transaction is to be reflected in the following three documents associated
with an export transaction, in the manner suggested below:
Invoice: Forfaiting discount, commitment fees, etc. need to be
shown separately, instead, these could be built into the FOB price,
stated on the invoice.
Shipping Bill and GR form: Details of the forfaiting costs are to be
included along with the other details, such as FOB price,
commission insurance, normally included in the “Analysis of Export
Value” on the Shipping Bill. The claim for duty drawback if any is to
be certified only with reference to the FOB value of the export
stated on the shipping bill.
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BENEFIT TO EXPORTER
100% Financing – Without recourse and not occupying exporter‟s
credit line. That is to say once the exporter obtains the financed
fund, he will be except from the responsibility to repay the debt.
Improved Cash Flow – Receivables become current cash inflow
and it is beneficial to the exporter to improve financial status and
liquidation ability so as to heighten further the fund raising
capabilities.
Reduced Administration Cost – By using forfaiting, the exporter
will spare from the management of the receivables. The relative
costs, as a results are reduced greatly.
Advanced Tax Refund – Through Forfaiting, the exporter can
make the verification of export and get tax refund in advance just
after financing .
Risk Reduction – Forfaiting business enables the exporters to
transfer various risks resulted from deferred payment, such as
interest-rate risk, currency risk, credit risk and political risk to the
forfaiting bank.
Increased Trade Opportunity – With forfaiting, the export is able
to grant credit to his buyer freely, and thus, be more competitive in
the market.
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DISCOUNT FEE
This is the interest cost payable by the exporter for the entire period of
credit involved and is deducted by the forfaiter from the amount paid to
the exporter against the availed promissory notes or bills of exchange.
BENEFIT TO BANK
Forfaiting services provide the bank with the following benefits:
Banks can provide an innovative product range to clients, enabling
the client to avail 100% finance, as against 80-85% in case of other
discounting products.
Banks gain fee-based income.
Lower credit administration and credit follow up.
FACTORING
Factoring is a continuing arrangement between a financial institution (the
Factor) and a business concern (the Client), selling goods or services to
trade customers. The Factor purchases the client‟s book debt (account
receivables) either with or without recourse to the client.
The purchase of book debts or receivables is central to the functioning of
factoring. The supplier submits invoices arising from contracts of sale of
goods to the factor.
The Factor performs at least two of the following services:
Financing for the seller, by way of advance payments.
Maintenance of accounts relating to the account receivables.
Collection of account receivables.
Credit protection against default in payment by the buyer.
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DIFFERENT MODELS OF FACTORING
Export Factoring can be done based on two distinct models:
1. Two-Factor System.
2. Direct Factoring.
1. A TWO-FACTOR SYSTEM
It essentially involves an export factor in the country of the seller
(exporter) and its correspondent factor (import factor) in the country of
the debtor (importer). The correspondent factor typically performs a
mutually agreed set of services for the export factor. It could be any one
or both the below mentioned services:
A. Credit Guarantee Protection: The import factor undertakes to
pay the export factor in the event the importer fails to pay by a
specified period after due date. The import factor sets up limits on
buyers present in that country and the export factor discounts
invoices for its customers based on these limits. The credit
guarantee protection cover insolvency/protracted default of buyer,
However it does not cover trade disputes.
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2. DIRECT FACTORING
Factoring can also be offered by availing credit insurance for the entire
factoring portfolio. Credit insurance will cover insolvency/protracted
default by the buyer as well as country risk but it would not cover trade
disputes. The credit insurer will set up limits on overseas buyers and
based on these limits export bills would be discounted.
Thereafter, detail of the invoice would be passed on to the collection
agency that will follow up for payment with the overseas buyer. In case
the overseas buyer does not respond, the collection agent can monitor
potential default cases, so that credit insurer can be informed in advance.
Using services of a collection agency could reduce significantly the delays
and to some extent the uncertainty in payments from overseas buyers.
BENEFITS OF FACTORING
Turnover Linked Finance – So as an exporter, you can finance a
higher level of sales than before and plan growth more effectively.
Flexible Cash Flow – To finance working capital requirements and
improve profitability.
No Collateral/Security – So availing the financing is comparatively
easier.
More Time for Core Business – Since sales ledger management and
collections are handled by the factor.
Credit Protection – Reduces the incidence of bad-debts.
Pre-assessments – So buyers‟ creditworthiness is checked
beforehand.
Regular MIS Report – MIS reports from Factors reduce the time
spend on reconciliation of outstanding.
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client indicating the extent to which, and the period for which the Factor
is prepared to accept the client‟s receivables for such customers.
1. The client (seller) sells the goods to the customer (buyer) and
invoices him in the usual way inscribing a notification to the effect
that the debt due on the invoice is assigned to and must be paid to
the Factor.
2. The client offers the assigned invoices to the Factor under cover of a
schedule of offer accompanied by copies of invoices and receipted
delivery challans.
3. The Factor provides immediate prepayment up to 80% of the value
of the assigned invoices and notifies the customer sending a
statement of account.
4. Factor follows up with the customer and sends him the statement.
5. The customer makes the payment to the Factor.
6. When the customer makes the payment for the invoice, the Factor
will pay the balance 20% of the invoice value.
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SERVICE FEE
Service charge is a nominal charge levied at monthly intervals to cover
the cost of services, For example collection, sales ledger management and
periodical MIS reports. It ranges from 0.1% to 0.3% on the total value of
invoices factored/collected by the bank.
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BANK GUARANTEES
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In this case, the initiating bank will cover the guaranteeing (foreign)
bank against the risk of any losses that it may incur in the event
that a claim is made under the guarantee. It formally pledges to
pay the amount claimed under the guarantee upon first demand by
the guaranteeing bank.
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delivered and/or services have been provided in accordance with
the contract, a written declaration to this effect is generally
sufficient to redeem payment from the guaranteeing bank.
This instrument can be used instead of a Letter of Credit if, for
example, the buyer does not require or demand proof of delivery by
means of the usual original delivery documents.
5. Confirmed Payment Order
This is an irrevocable obligation on the part of the bank to pay a
specified sum at a specified time to the beneficiary (creditor) on
behalf of the customer.
6. Advance Payment Guarantee
The advance payment guarantee is intended to bind the supplier to
use the advance payment for the purpose stated in the contract
between the buyer and the supplier. An advance payment provides
the supplier with funds to purchase equipment or components.
In general, the advance payment guarantee should contain a
reduction clause that automatically reduces the amount in
proportion to the value of the (partial) delivery(ies). The advance
payment guarantee should only become effective once the advance
payment has been received.
7. B/L Letter of Indemnity
This is also called a Letter of Indemnity. Individual bill of lading or
the full set can go missing or be held up in the mail. Carriers may
be liable for damages if they deliver the consignment before
receiving the original bill of lading. A bank guarantee in the carrier‟s
favor for 100-200% of the value of the goods enables them to
delivers the goods to the consignee without presentation of the
original documents.
8. Rental Guarantee
This a guarantee of payment under a rental contract. The guarantee
is either limited to rental payments only, or includes all payments
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due under the rental contract. (e.g. including cost of repairs on
termination of the rental contract).
9. Credit Card Guarantee
In a certain circumstances, credit card companies will not issue a
high value credit card without a bank guarantee. Such kind of
guarantee extended by a bank is known as a Credit Card
Guarantee.
CLAIM (GUARANTEE UTILIZATION)
If the beneficiary under the guarantee considers that the supplier has
violated the supplier‟s contractual obligation, the former may utilize the
guarantee. Claims must be made during the period of validity and strictly
in accordance with the guarantee conditions.
GENERAL GUIDELINES
The RBI has issued some general guidelines for bankers to follow while
doing the guarantee business. The Authorized Dealer/EXIM Bank have
been authorize to furnish (without prior permission of Reserve Bank), bid
bonds/tender guarantees and advance payment/performance guarantees
in cases where the RBI has been authorized to approve proposals of
exporters.
As per the recent guidelines, the Authorized Dealers/EXIM Bank/Working
Group may consider and approve project export proposal/service
contracts abroad. These may involve all types of guarantees to be
furnished in connection with execution of projects/contract abroad. In
order to get the latest updates on these guidelines, one should refer to
relevant circulars of RBI, available at RBI‟s website:
While issuing guarantees on behalf of customers, the following safeguards
are observed:
In the case of Financial Guarantees, banks should ensure that the
customer would be in a position to reimburse the amount in case
the bank is required to make the payment under the guarantee.
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In the case of Performance Guarantees, banks should exercise due
caution and should know the customer sufficiently well, to satisfy
themselves that he has the necessary experience, capacity and
means to perform the obligations under the contract and is not
likely to commit any default.
Banks should normally refrain from issuing guarantees on behalf of
customers who do not enjoy credit facilities with them.
Banks should ideally guarantee shorter maturities, and leave longer
maturities to be guaranteed by other institutions. A Bank Guarantee
should ideally not have tenure for more than 10 years.
A Bank should ensure that 20% of its outstanding unsecured
guarantees plus the total of its unsecured outstanding unsecured
advances should not exceed 15% of its total outstanding advances.
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DOMESTIC TRADE FINANCE
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CHANNEL FINANCING
Through channel financing, Dealers are able to leverage their relationship
with reputed companies in sourcing low cost funds with support from their
counterparts. Channel Financing is a product that extends working capital
finance to dealer having business relationships with large companies in
India. This may be in the form of either cash credit facilities or as a bill
discounting line of credit.
Under this, the bank can extend:
Discounting of trade bills drawn by the reputed supplier and
accepted by the dealer/distributor.
Limited overdraft facility to the dealer/distributor for his business
dealing with large corporate.
VENDOR FINANCING
Vendors can leverage their relationship with reputed companies by
sourcing low cost bill discounting line of credit. Vendor Financing is a
product to extend working capital finance to vendors having business
relationships with large corporate in India. Herein the bank undertakes to
discount bills drawn by the supplier/vendor and accepted by the
corporate.
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CHALLENGES BEFORE TRADE FINANCE SERVICE
PROVIDERS
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careful information processing and Supply Chain Management by sharing
critical data on a continuous basis.
Domestic and International trade has experienced dramatic changes due
to the introduction of supply chain management techniques that have
reduced the dollar size of individual shipments. In 2001, the average
value of an international shipment was 42% of what it was in the 1970s.
Managing the supply chain carefully reduces inventory and brings
companies close to just-in-time production.
This change has had a tremendous impact on the trade finance business,
because traditional trade finance solutions such as letters of credit are far
less relevant to this new reality of international trade business.
Most banks operating in the trade finance business have moved their
trade features online, for reason of efficiency and cost reduction, either
via proprietary solutions or by outsourcing the operation to another
institution. Even if this move has created efficiencies, reduced costs, and
fulfilled clients‟ needs, it has failed to address the issue of today‟s trade
finance business. This step is very similar to integrating third-party
solutions, which cannot alone completely address customer needs.
The real added value to customer in the trade business today stems from
the merger of trade finance with supply chain and cash management, and
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packaging and providing the information on real-time basis to the
customer in an easily accessible manner. As Businesses move towards
operating in a more integrated manner across political boundaries, so
would their supporting financial structures. This would require banks to
provide for internationally integrated financial solutions, like Global cash
management solutions and integrated multinational treasury solutions.
The underlying principal towards all future growth would be integration –
integration of markets leading to integration of services, further leading to
integration of processes and databases.
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BIBLIOGRAPHY
www.eximbankindia.com
www.eximin.net
www.investopedia.com
www.fieo.org
www.iibf.org.in
www.rbi.org.in
www.cio.com/enterprise/scm
BOOKS
PRACTITIONERS‟ BOOK ON TRADE FINANCE
By IIBF
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