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By HAMMAD MOHAMMED
Pre-shipment finance is extended in the following forms : Packing Credit in Indian Rupee Packing Credit in Foreign Currency (PCFC)
CONTD.
L/C or firm order is produced within a reasonable period of time. For commodities under selective credit control, banks should insist on production of L/Cs or firm orders within one month from the date of sanction. Packing credit may also be given under the Red Clause letter of credit.
The credit is given at the instance and responsibility of the foreign bank establishing the L/C. Here, the packing credit advance is made against a simple receipt and is unsecured
CONTD
Whether the exporter is a regular customer, a bona fide exporter and has a good standing in the market. Whether the exporter has the necessary license and quota permit or not. Whether the country with which the exporter wants to deal is under the list of Restricted Cover Countries (RCC) or not. ECGC classifies the countries into seven categories in the ascending order of risks perceived
The Base Rate System is applicable from July 1, 2010 and accordingly interest rates applicable for all tenors of rupee export credit advances sanctioned on or after July 01, 2010 are at or above Base Rate. Different banks have fixed different pre -shipment interest rate on export credit on this basis.
In case of cancellation of export order, the PCFC can be closed by selling equivalent amount of foreign exchange at TT selling rate prevalent on the date of liquidation. The forward covers can be booked in respect of future PCFC drawings.
CONTD
Cross-country drawings are restricted to US dollars. In case, the export order is in a nondesignated currency like Swiss Franc etc. PCFC will be given only in US$. For orders in Euro, Pound Sterling and JPY, PCFC can be availed in the respective currencies or US$ at the choice of exporter.
WHAT IS IT?
A kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds .
THE FEATURES
Post -shipment finance can be secured or unsecured. Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, the finance is normally self liquidating. Can be extended up to 100% of the invoice value of goods. Can be of short term or long term, depending on the payment terms offered by the exporter to the overseas importer. Concessional rate of interest is available for a maximum of 180 days from the date of surrender of documents.
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