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Understanding Export Finance in India

Export finance is crucial for the Indian economy, particularly as the country faces a growing trade deficit. It encompasses both fund-based and non-fund-based financing options to support exporters, who must navigate various risks associated with international trade. Eligibility for export finance includes having an Import Export Code and a valid export order, with financing categorized into pre-shipment and post-shipment finance.

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141 views14 pages

Understanding Export Finance in India

Export finance is crucial for the Indian economy, particularly as the country faces a growing trade deficit. It encompasses both fund-based and non-fund-based financing options to support exporters, who must navigate various risks associated with international trade. Eligibility for export finance includes having an Import Export Code and a valid export order, with financing categorized into pre-shipment and post-shipment finance.

Uploaded by

skvaze
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

EXPORT FINANCE

PRESENTATION
BY
S.K.VAZE
EXPORT FINANCE
• EXPORTS PLAY VERY IMPORTANT
ROLE IN INDIAN ECONOMY SINCE
• A) INDIA HAS A TRADE DEFICIT OF
US $ 40 BILLION WHICH IS LIKELY TO
INCREASE TO US $ 70 BILLION IN A
FEW YEARS.
• B) THEY ARE EARNER’S OF FOREIGN
EXCHANGE.
EXPORT FINANCE
• 3) EXPORTS GENERATE
EMPLOYMENT.
• 4) HENCE GOVERNMENT IS GIVING A
LOT OF IMPORTANCE TO EXPORTS.
• 5) HENCE VARIOUS INCENTIVES ARE
ANNOUNCED TO EXPORTERS FROM
TIME TO TIME.
Export Finance-
Exporter’s Demands
Export Finance must be
1) Adequate
2) Timely
3) Cheaper
4) On liberal Terms
Export Finance
A) FUND BASED, WHERE MONEY IS
EXTENDED
IMMEDIATELY
I) PACKING CREDIT,II) BILLS
PURCHASE/DISCOUNT
B) NON-FUND BASED, WHERE BANK’S FUNDS
ARE NOT BLOCKED
I) ISSUING GUARANTEES
II)ISSUING L/C
Export Finance
• FINANCE GIVEN FOR EXPORT
ACTIVITY IS RISKIER THAN FINANCE
GIVEN FOR DOMESTIC ACTIVITY
BECAUSE OF VARIOUS RISKS
ASSOCIATED WITH EXPORT ACTIVITY.
Export Finance
– RISKS IN EXPORT ACTIVITY
• COMMERCIAL RISK
• COUNTRY RISK
• MARINE RISK
• EXCHANGE RATE FLUCTUATION RISK
• INTEREST RATE FLUCTUATION RISK
• OPERATIONAL RISK
• LEGAL / DOCUMENTATION RISK
Export Finance
• THREE TYPES OF CONTROLS MUST
BE IN PLACE TO MINIMISE OR
ELIMINATE THE RISKS.
– I) PREVENTIVE CONTROL
– II) DETECTIVE CONTROL
– III) CORRECTIVE CONTROL
Export Finance
• BANKS WERE NOT KEEN ON
FINANCING FOR EXPORT ACTIVITY
SINCE THE EXPORT FINANCE IS
• 1) RISKY
• 2) CONCESSIONAL RATE OF INTEREST
Export Finance-Agencies
• 1 RESERVE BANK OF INDIA
• 2 DIRECTOR GENERAL OF FOREIGN
TRADE
• 3 EXPORT CREDIT GUARANTEE
CORPORATION
• 4 INTERNATIONAL CHAMBER OF
COMMERCE
• 5 FEDAI
• 6 COMMERCIAL BANKS
• 7 EXPORT IMPORT BANK OF INDIA
Export Finance
Eligibility
• 1 IMPORT EXPORT CODE NUMBER
• 2 VALID EXPORT ORDER / LETTER
OF CREDIT
• 3 EXPORTER MUST SATISFY
BANKER THAT HE HAS THE CAPACITY
TO FULFILL THE EXPORT ORDER
WITHIN TIME LIMIT
Export Finance
Eligibility
• 4 EXPORTER SHOULD NOT BE IN
‘SPECIAL APPROVAL LIST’ OF ECGC
OR ‘CAUTION LIST’ OF RBI
• 5 GOODS TO BE EXPORTED MUST
BE PERMISSIBLE FOR EXPORTS AS
PER THE FORIGN TRADE POLICY.
Export Finance
EXPORT FINANCE IS BROADLY CLASSIFIED
INTO TWO CATEGORIES, DEPENDING ON
THE STAGE OF EXPORT ACTIVITY, THE
FINANCE IS EXTENDED NAMELY:
PRE-SHIPMENT FINANCE (PACKING
CREDIT)
ANY LOAN OR ADVANCE GRANTED TO AN
EXPORTER FOR FINANCING OF RAW
MATERIALS ETC., PROCESSING AND
PACKING OF THE GOODS.
Export Finance
POST-SHIPMENT FINANCE
FINANCIAL ASSISTANCE EXTENDED
AFTER THE SHIPMENT TILL RECEIPT
OF PAYMENT FROM IMPORTER.

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