Export Letter of Credit Process
In the world of international trade, understanding the intricacies of the Export Letter of Credit process is crucial. From opening accounts to negotiating banks, examining documents to realising payments, this process involves various key players and steps. Explore this guide to delve deeper into the complexities of Export Letters of Credit.
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Presentation Transcript
SEM IV Module III Dr. Jayashri Kulkarni
Open Account Advance payment Payment against shipment/ consignment Documentary Bill L/C
Most popular Authorisation given by opening bank to negotiating bank that if the exporter presents the relevant set of documents to pay the amount there in.
Exporters Request Importer s request to his bank-opening bank Issue L/C Receipt of L/C by Exporter Shipment of Goods Scrutiny of documents Negotiating Bank Realisation of payment Documents to Importer
Opener--Importer Beneficiary Exporter Opening bank Importer s bank in his Country Negotiating bank Exporter s Bank in his Country nominated by Opening Bank Advising Bank Foreign correspondent of opening bank Confirming bank Bank in Exporter s Country Guarranting credit on request of opening Bank
Revocable Irrevocable Confirmed Unconfirmed With recourse- responsibilty of exporter Without Recourse Revolving Transferable Non transferable
Red Clause Green Clause Back to back domestic L/C Traveller s Clean L/C Stand by Documentary Fixed
Meaning: Packing Credit RBI-, any loan to exporter for financing the purchasing, processing, manufacturing or packing of goods. Finance required before shipment of the goods.
1.Eligibility-Export order/Letter of Credit Or Letter from export house 2. At Pre shipment stage 3.For working capital requirements 4. Depositing Irrevocable L/C with fin. Insti.
5.Amt. of Finance-Equal to amt. of Export order 6.Period-180 days+ extension frm. RBI-90 days 7. Concessional Rate of Int. 8.Phased manner disbursal 9. Proper accounts to be maintained 10. Repayment immediately after receiving export proceeds/ receiving incentives
Meaning: Finance required by an exporter after shipment of goods but before recovery of dues from importer Finance required for working capital requirements after shipment of goods.
1. After actual shipping of the goods/export documents are in the name of exporter 2.Working capital requirements after shipment of goods but before recovery of dues from importer. 3. Shipping documents- evidence 4. Various forms of post shipment finance 5.Amount-As per requirements
6. Period-Commercial Banks-90 days EXIM Bank 90 days to 5 yrs/ upto 12 yrs. 7. Concessional Int. rate 8. Proper accounts to be maintained 9.Disbursement in installments 10.Used for export purpose only , Otherwise penalty is chargable.
Commercial Bank: 1. Fund based assistance: 180 days packing credit at pre shipment stage 90 days finance at post shipment stage 2. Non Fund based assistance: Banks Guarantee Credit rating for exporters
Information about foreign exchange Confirmation of L/C Banks cover the risks of fluctuations in foreign exchange convergence rates. Release foreign currency
Features Export Import Bank Public sector bank Started on 1stmarch 1982 Medium and Long term loan to exporter Promotion of exports in India.-Fund / non fund based assistance
Non Fund based Assistance b. Advisory services Fund based Assistance a. to Indian Companies b. to Foreign Companies/govt. c. to Indian Commercial banks a. Guarantee of loan
Fund Based assistance: 1. Financial assistance to Indian Companies- a. De ffered payment terms b. Pre shipment credit c. Overseas Investment financing
2. Financial assistance to Foreign Companies/govt a. Overseas buyers credit b. Credit to foreign Govt. c. Relending to bank overseas 3. Financial assistance to Indian Commercial banks: a. Rediscounting B/E b. Re finace
Non fund based assistance: 1. Guarantee of loan: 2.Advisory services: market research, pricing, merchant banking
Original French word For fait to surrender The exporter forfeits / surrenders her right to receive payment to the Forfeiting Agency abroad. EXIM Bank is intermediary between-Exporter, Forfeiting Agency
Discounting the Bills Receivable Exporter has B/E or Promissory Notes L/C Without Recourse to the Exporter Long term or medium term maturity of bills Financing up to 100% of the Contract Value.
Small Industries Development bank of India Established in April 1990. Subsidiary of IDBI Promotion, development of small sector Coordinator of institutions engaged in developing/ financing small sector
Direct Assistance Bills Scheme Refinance Seed Capital a. project Fin. a. Direct Discounting Equipment Fin. b. ISO b. Rediscounting Tourism related c. Equipment Fin. a. b. c.
Export Credit Guarantee Corporation Of India Ltd. July 1957 Central Govt. Gives Guarantee to exporters for their loan Risk Coverage for exporter against political & commercial risks Provides information to exporter about credit worthiness of importer
What is Export Finance? What are its types? Write a note on Pre shipment Finance. Write a note on Post shipment Finance. Discuss the role of Commercial bank in Export Finance. Discuss the role of EXIM bank in Export Finance. Discuss the role of SIDBI in Export Finance. Discuss the role of ECGC in Export Finance
What are the types of L/C? What is the procedure for opening and obtaining finance under L/C? Distinguish between Pre shipment Finance and Post shipment Finance. What is counter trade? Explain with example. What are the types of Counter Trade? What are the benefits of Counter Trade?
a. Export Finance means Pre shipment Finance b. Term finance means short term loan c. Pre shipment finance means packing credit d. Extension to packing credit is given for 90 days e. Extension to packing credit does not require permission of RBI f. Post shipment finance is given for 90 days g. Forfeiting scheme is introduced by EXIM bank
