Export Finance

Arun.A.R 1005305 I.M.K, Adoor.

Why Export Finance???

Export Finance
Export finance refers to short-term working capital finance allowed to an exporter.

Finance and credit are available not

only to help export production but

also to sell to overseas customers on

credit.

Export Finance
It includes any loan to an exporter for
financing the purchase, processing,

manufacturing or packaging of goods meant for overseas markets.

Types of Export Finance

The export finance is being classified into two types viz. Pre-shipment finance (180 270 days) Post-shipment finance (180 days)

Pre-Shipment Finance
Pre-shipment finance is also referred as
packing credit. The finance required to meet various expenses before shipment of goods is called pre-shipment finance.

Pre-Shipment Finance
Pre-shipment finance is provided to an exporter for

the purpose of procuring raw materials, processing,

packing, transporting, warehousing of goods meant

for exports.
It is working capital finance provided by commercial banks to the exporter prior to shipment of goods.

IMPORTANCE OF FINANCE AT PRE-SHIPMENT STAGE

To purchase raw material, and other inputs to manufacture goods. To pay for packing, marking and labeling of goods. To store the goods in suitable warehouses till the goods are shipped.

To pay for pre-shipment inspection charges.

To import or purchase from the domestic market heavy machinery and other capital goods to produce export goods. To pay for consultancy services. To pay for export documentation expenses

Post-Shipment Finance
The finance provided after shipment of goods is called post-shipment finance. Post shipment finance is provided to meet working capital requirements after the actual shipment of goods. It bridges the financial gap between the date of shipment and actual receipt of payment from overseas

buyer thereof.

 Post shipment finance is provided at concessional rates as per RBI guidelines.

The proof of shipment of goods, serves as the basis of

grant of such facility. The basic purpose of this facility is

to finance export receivables.

Post-shipment finance can be granted upto 100% of the invoice value although the normal practice is to give 90%.

IMPORTANCE OF FINANCE AT POST-SHIPMENT STAGE

To pay to agents/distributors and others for their services. To pay for publicity and advertising in the overseas markets. To pay for port authorities, customs and shipping agents charges. To pay towards export duty or tax, if any.

To pay towards ECGC premium.

To pay for freight and other shipping expenses. To pay towards marine insurance premium. To meet expenses in respect of after sale service.

Major Players in Export Finance

For providing credit and finance and insuring export credit risk, there are 2 primary institutions i.e. EXIM Bank and ECGC. Although there are other commercial banks, nationalized

institutions and private institutions such as IFCI, IDBI,

engaged in providing finance to exporter. The major institutions are EXIM Bank, ECGC, and RBI.

EXIM Bank
Export-Import Bank of India is the premier export finance institution of the country, established in 1982 under the ExportImport Bank of India Act 1981.

Exim Bank is managed by a Board of Directors, which has

representatives from the Government, Reserve Bank of India, Export Credit Guarantee Corporation of India, financial institution, public sector banks, and the business community.

 It has its headquarter in Mumbai and its branches and offices in important cities in India and abroad.

It has taken over the operations of international finance wing

of the industrial development bank of India (IDBI). Government of India launched the institution not just to enhance exports from India, but to integrate the countrys foreign trade and investment with the overall economic

growth.

MAIN OBJECTIVES
To provide financial assistance (medium and long term) to

exporters and importers.

To function as the principal financial institution for coordinating the working of institutions engaged in providing export finance. To promote Foreign Trade of India.

To deal with all matters that may be considered to be incidental

or conducive to the attainment of above objectives.

 ECGC
The Export Credit Guarantee Corporation of India Limited (ECGC) is a company wholly owned by the Government of India based in Mumbai.

Government of India had initially set up Export Risks Insurance

Corporation (ERIC) in July 1957. It was transformed into Export Credit and Guarantee Corporation Limited (ECGC) in 1964 and to Export Credit Guarantee of India in 1983.

 It provides export credit insurance support to Indian exporters

and is controlled by the Ministry of Commerce. It is the only institution providing insurance cover to Indian exporters against the risk of non-realization of export payments due to occurrence of the commercial and political

risks involved in exports on credit terms.

It also offers guarantees to commercial banks against losses that the bank may suffer in granting advances to exports, in connection with their export transactions.

 Functions
Offers insurance protection to exporters against payment risks Provides guidance in export-related activities Makes available information on different countries with its own credit ratings Makes it easy to obtain export finance from banks/financial institutions

Assists exporters in recovering bad debts

Provides information on credit-worthiness of overseas buyers

Reserve Bank Of India (RBI)

It was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. The RBI with its head quarters in Mumbai and several regional

offices is the central banks of our country to authorize extend

and regulate export credit and transaction including foreign exchange affairs.

 RBI does not directly provide export finance to the exporters,

but it adopts policies and initiates measures to encourage commercial banks and other financial institutions to provide

liberal export finance

The Two Departments of RBI are: Industrial and credit department and Exchange control department These Departments administers various policies related to export finance/credit and foreign exchange.

What do India Export the most ???

What do India Import the most ???

Top Exports

Top Imports