final project exim finance (2)

8/20/2019 Final Project EXIM FINANCE (2)

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EXPORT AND IMPORT FINANCE IN INDIA

CHAPTER 1

INTRODUCTION OF BANK

The statutory basis for control of imports into India is found

in the Foreign Trade (Development and Regulation) Act, 1! "hich

empo"ers the #entral $overnment to prohibit or other"ise control

imports% Deriving po"er under this Act, #entral $overnment has notified

the &'port and Import olicy, 1!*%

&'port and Import financing provides importers "ho have

orders from customers in the +nited tates, or foreign customers bac-ed

by a letter of credit, "ith the necessary financial bac-ing to provide their

overseas supplier "ith a letter of credit to guarantee payment of goods%

The "hole process "or-s because the importer "ill

supply you "ith basic information on the import company and their

customers% .ou then evaluate the credit "orthiness of the customers% For

each of the approved customers, the importer "ill supply us "ith copies

of purchase orders that are to be filled% /e "ill then arrange a letter of

credit to be issued to the suppliers0 ban- "ith the supplier as the

beneficiary%

Financing can be arranged to cover 12 of the

transaction% This provides the importer "ith sufficient financial strength

to sell larger orders than they "ould be able to on their o"n financial

1




strength% Depending on the strength of the buyer, this may be done on

open account "ith the domestic buyer, allo"ing the buyer to increase

their purchasing po"er%

&'port finance is a short term "or-ing capital finance

allo"ed to an e'porter% An e'porter may avail financial assistance from

any ban-, "hich is ta-ing care of the follo"ing factors3

Funds should be available to the e'porter at the re4uired

time to ensure availability of funds to eligible borro"ers% Reserve 5an-

has prescribed time schedule to #ommercial ban-s for speedy sanctioning

of e'port credit limits% Further, ban-s are advised that 1!2 of their total

credit should be for e'port finance%

2




1.1 HISTORY OF BANK:

A ban- is a financial institution and a financial intermediary that

accepts deposits and channels those deposits into lending activities, either

directly or through capital mar-ets% A ban- connects customers that have

capital deficits to customers "ith capital surpluses Due to their critical

status "ithin the financial system and the economy generally6 ban-s

are highly regulated in most countries% 7ost ban-s operate under a

system -no"n as fractional reserve ban-ing "here they hold only a

small reserve of the funds deposited and lend out the rest for profit% They

are generally sub8ect to minimum capital re4uirements "hich are based

on an international set of capital standards, -no"n as the 5asel Accords%

The oldest ban- still in e'istence is 7onte dei aschi di iena,

head4uartered in iena, Italy, "hich has been operating continuously

since 19*! It is follo"ed by 5erenberg 5an- of :amburg

(1;) and veriges Ri-s ban- of "eden (1<<=)%

5an-ing in the modern sense of the "ord can be traced to medieval and

early Renaissance Italy, to the rich cities in the north

3

http://en.wikipedia.org/wiki/Financial_institution

http://en.wikipedia.org/wiki/Financial_intermediary

http://en.wikipedia.org/wiki/Deposit_account

http://en.wikipedia.org/wiki/Loan

http://en.wikipedia.org/wiki/Capital_market

http://en.wikipedia.org/wiki/Financial_system

http://en.wikipedia.org/wiki/Bank_regulation

http://en.wikipedia.org/wiki/Fractional_reserve_banking

http://en.wikipedia.org/wiki/Bank_reserves

http://en.wikipedia.org/wiki/Minimum_capital_requirement

http://en.wikipedia.org/wiki/Basel_Accords

http://en.wikipedia.org/wiki/List_of_oldest_banks

http://en.wikipedia.org/wiki/Monte_dei_Paschi_di_Siena

http://en.wikipedia.org/wiki/Siena

http://en.wikipedia.org/wiki/Italy

http://en.wikipedia.org/wiki/Berenberg_Bank

http://en.wikipedia.org/wiki/Sveriges_Riksbank

http://en.wikipedia.org/wiki/Renaissance


http://en.wikipedia.org/wiki/Financial_intermediary

http://en.wikipedia.org/wiki/Deposit_account

http://en.wikipedia.org/wiki/Loan

http://en.wikipedia.org/wiki/Capital_market

http://en.wikipedia.org/wiki/Financial_system

http://en.wikipedia.org/wiki/Bank_regulation

http://en.wikipedia.org/wiki/Fractional_reserve_banking

http://en.wikipedia.org/wiki/Bank_reserves

http://en.wikipedia.org/wiki/Minimum_capital_requirement

http://en.wikipedia.org/wiki/Basel_Accords

http://en.wikipedia.org/wiki/List_of_oldest_banks

http://en.wikipedia.org/wiki/Monte_dei_Paschi_di_Siena

http://en.wikipedia.org/wiki/Siena


http://en.wikipedia.org/wiki/Berenberg_Bank

http://en.wikipedia.org/wiki/Sveriges_Riksbank

http://en.wikipedia.org/wiki/Renaissance


http://en.wikipedia.org/wiki/Financial_institution




li-e Florence, >enice and $enoa% The 5ardi and eru??i families

dominated ban-ing in 19th century Florence, establishing branches in

many other parts of &urope% @ne of the most famous Italian ban-s "as

the 7edici 5an- , set up by $iovanni di 5icci de 7edici in 1B*%

1.2 DEFINATION OF BANK:

@'ford Dictionary defines a ban- as Can establishment for custody

of money, "hich it pays out on customer0s order%

A financial institution that provides services, such as accepting deposits,

giving business loans and auto loans, mortgage lending, and basic

investment products li-e savings accounts and certificates of deposit% Thetraditional commercial ban- is a bric- and mortar institution "ith tellers,

safe deposit bo'es, vaults and AT7s% :o"ever, some commercial ban-s

do not have any physical branches and re4uire consumers to complete all

transactions by phone or Internet% In e'change, they generally pay higher

interest rates on investments and deposits, and charge lo"er fees%

4

http://en.wikipedia.org/wiki/Florence

http://en.wikipedia.org/wiki/Venice

http://en.wikipedia.org/wiki/Genoa

http://en.wikipedia.org/wiki/Bardi_family

http://en.wikipedia.org/wiki/Peruzzi

http://en.wikipedia.org/wiki/Europe

http://en.wikipedia.org/wiki/Medici_Bank

http://en.wikipedia.org/wiki/Giovanni_di_Bicci_de'_Medici

http://en.wikipedia.org/wiki/Florence

http://en.wikipedia.org/wiki/Venice

http://en.wikipedia.org/wiki/Genoa

http://en.wikipedia.org/wiki/Bardi_family

http://en.wikipedia.org/wiki/Peruzzi

http://en.wikipedia.org/wiki/Europe

http://en.wikipedia.org/wiki/Medici_Bank

http://en.wikipedia.org/wiki/Giovanni_di_Bicci_de'_Medici




1.3 FEATURES OF BANK :

1% Dealing in money 3

5an- is a financial institution "hich deals "ith other

people0s money i%e% money given by depositors%

!% IndividualE firmE #ompany 3

A ban- may be a person, firm or a company% A ban-ing

company means a company "hich is in the business of ban-ing%

B% Acceptance of Deposit 3

A ban- accepts money from the people in the form of

deposits "hich are usually repayable on demand or after the e'piry

of a fi'ed period% It gives safety to the deposits of its customers% It

also acts as a custodian of funds of its customers%

9% $iving Advances 3

A ban- lends out money in the form of loans to those "ho

re4uire to it for different purposes%

5




;% ayment and "ithdra"al 3

A ban- provides easy payment and "ithdra"al facility to its

customers in the form of che4ues and drafts, it also brings ban-

money in circulation% This money is in the form of che4ues, drafts

etc%

<% Agency and +tility ervices 3

A ban- provides various ban-ing facilities to its customers%

They include general +tility services and Agency services%

*% rofit and service @rientation 3

A ban- is a profit see-ing institution having service oriented

approach%

=% &ver Increasing Function 3

5an-ing is a evolutionary concept% There is a continuouse'pansion and diversification as regards the functions, services and

activities of a ban-%

6




1.4 Types of Ba!.

1" S#$e%&'e% Ba!

All ban-s "hich are included in the econd chedule to the Reserve

5an- of India Act, 1B9 are scheduled ban-s% These ban-s comprise

cheduled #ommercial 5an-s and cheduled #ooperative 5an-s% The

type of ban-s comes under these cheduled #ommercial 5an-s and

cheduled #ooperative 5an-s can be seen in the above figure% All most

all ban-s are cheduled ban-s in India%

2" Co((e)#*a' Ba!s

#ommercial ban-s may be defined as, any ban-ing organi?ation that

deals "ith the deposits and loans of business organi?ations #ommercial

ban-s issue ban- chec-s and drafts, as "ell as accept money on term

deposits% #ommercial ban-s also act as moneylenders, by "ay of

installment loans and overdrafts% #ommercial ban-s also allo" for a

variety of deposit accounts, such as chec-ing, savings, and time deposit%

These institutions are run to ma-e a profit and o"ned by a group of

individuals%

3" P&+'*# Se#,o) Ba!s

These are ban-s "here ma8ority sta-e is held by the $overnment of India%

&'amples of public sector ban-s are3 5I, 5an- of India, #anara 5an-,

etc%

7




4" P)*-a,e Se#,o) Ba!s

These are ban-s ma8ority of share capital of the ban- is held by private

individuals% These ban-s are registered as companies "ith limited

liability% &'amples of private sector ban-s are3 I#I#I 5an-, A'is ban-,

:DF#, etc%

" Fo)e*/ Ba!s

These ban-s are registered and have their head4uarters in a foreign

country but operate their branches in our country% &'amples of foreign

ban-s in India are3 :5#, #itiban-, tandard #hartered 5an-, etc%

0" Re/*oa' R&)a' Ba!s

Regional Rural 5an-s "ere established under the provisions of an

@rdinance promulgated on the !<th eptember 1*; and the RR5 Act,

1*< "ith an ob8ective to ensure sufficient institutional credit for

agriculture and other rural sectors% The area of operation of RR5s islimited to the area as notified by $@I covering one or more districts in

the tate% RR5s are 8ointly o"ned by $@I, the concerned tate

$overnment and ponsor 5an-s (!* scheduled commercial ban-s and

one tate #ooperative 5an-)6 the issued capital of a RR5 is shared by the

o"ners in the proportion of ;2, 1;2 and B;2 respectively%rathama

ban- is the first Regional Rural 5an- in India located in the city7oradabad in +ttar radesh%

" Coope)a,*-e Ba!s

8




A cooperative ban- is a financial entity "hich belongs to its members,

"ho are at the same time the o"ners and the customers of their ban-%

#ooperative ban-s are often created by persons belonging to the same

local or professional community or sharing a common interest% #o

operative ban-s generally provide their members "ith a "ide range of

ban-ing and financial services (loans, deposits, ban-ing accounts,

etc)%They provide limited ban-ing products and are specialists in

agriculturerelated products% #ooperative ban-s are the primary

financiers of agricultural activities, some smallscale industries and self

employed "or-ers% #ooperative ban-s function on the basis of no

profit noloss%

1. OBECTIES OF THE STUDY:

9




1% To understand all the dimensions of import G e'port finance%

!% To document the various source of import G e'port finance in

India%

B% To e'amine the documents used in the import G e'port finance%

9% To learn about the strategies G techni4ues used by ban-s to finance

the importer G e'porter%

;% To find various types of import e'port finance%

10




1.0 HAT IS I5PORT AND E6PORT

Import is "hen you buy something from another country and get

it shipped to you% The term import is derived from the conceptual meaning as to

bring in the goods and services into the port of a country% The buyer of such

goods and services is referred to an importer "ho is based in the country of

import "hereas the overseas based seller is referred to as an e'porter% Thus an

import is any good (e%g% a commodity) or service brought in from one country to

another country in a legitimate fashion, typically for use in trade% It is a good

that is brought in from another country for sale Import goods or services are

provided to domestic consumers by foreign producers% An import in the

receiving country is an e'port to the sending country%

&'port is "hen you sell something to another country and it then

ship it% This term e'port is derived from the conceptual meaning as to ship the

goods and services out of the port of a country% The seller of such goods and

services is referred to as an e'porter "ho is based in the country of e'port

"hereas the overseas based buyer is referred to as an importer% In

International Trade, e'ports refers to selling goods and services produced in

the home country to other mar-ets% Any good or commodity, transported from

one country to another country in a legitimate fashion, typically for use in trade%&'port goods or services are provided to foreign consumers by

domestic producers

11

http://en.wikipedia.org/wiki/Good_(economics_and_accounting)

http://en.wikipedia.org/wiki/Commodity

http://en.wikipedia.org/wiki/Service_(economics)

http://en.wikipedia.org/wiki/Trade

http://en.wikipedia.org/wiki/Consumer

http://en.wikipedia.org/wiki/Production,_costs,_and_pricing

http://en.wikipedia.org/wiki/Export



http://en.wikipedia.org/wiki/Transport



http://en.wikipedia.org/wiki/Production_theory_basics



http://en.wikipedia.org/wiki/Service_(economics)



http://en.wikipedia.org/wiki/Production,_costs,_and_pricing

http://en.wikipedia.org/wiki/Export



http://en.wikipedia.org/wiki/Transport



http://en.wikipedia.org/wiki/Production_theory_basics




5ea*/ of E7po),e):

The person "ho sends goods or commodities to a foreign

country, in the "ay of commerce6 opposed to importer% Is -no"n as e'porter%

The seller ships the goods and then hands over the document related to the

goods to their ban-s "ith the instruction on ho" and "hen the buyer "ould pay

E7po),e)8s Ba!:

The e'porters ban- is -no"n as the remitting ban-, and they

remit the bill for collection "ith proper instructions% The role of the remitting

ban- is to3

#hec- that the documents for consistency%

end the documents to a ban- in the buyers country "ith instructions on

collecting payment%

ay the e'porter "hen it receives payments from the collecting ban-%

5ea*/ of I(po),e):

12




The person "ho brings or carries in from an outside source,

especially to bring in (goods or materials) from a foreign country for trade or

sale is -no"n as importer% The buyer E importer are the dra"ee of the 5ill%

The role of the importer is to3

ay the bill as mention in the agreement (or promise to pay later)%

Ta-e the shipping documents (unless it is a clean bill) and clear the

goods%

I(po),e)8s Ba!:

This is a ban- in the importers country3 usually a branch or

correspondent ban- of the remitting ban- but any other ban- can also be used

on the re4uest of e'porter %The collecting ban- act as the remitting ban-s agent

and clearly follo"s the instructions on the remitting ban-s covering schedule%

:o"ever the collecting ban- does not guarantee payment of the bills e'cept in

very unusual circumstance for undoubted customer, "hich is called availing%

Importers ban- is -no"n as the collecting E presenting ban-%

T$e Ro'e of ,$e Co''e#,*/ Ba!:

Act as the remitting ban-s agent%

13




resent the bill to the buyer for payment or acceptance%

Release the documents to the buyer "hen the e'porters instructions have

been follo"ed%

Remit the proceeds of the bill according to the Remitting 5an-s schedule

instructions%

If the bill is unpaid E unaccepted, the collecting ban- 3

7ay arrange storage and insurance for the goods as per remitting ban-

instructions on the schedule%

rotests on behalf of the remitting ban- (if the Remitting 5an-s schedule

states rotest)

Re4uests further instruction from the remitting ban-, if there is a problem

that is not covered by the instructions in the schedule%

@nce payment is received from the importer, the collecting ban- remits

the proceeds promptly to the remitting ban- less its charges%

14




CHAPTER 2

2.1 E6PORT 9 I5PORT FINANCE IN INDIA

The statutory basis for regulation of e'ports from India is the Foreign

Trade (Development and Regulation) Act 1!% The $overnment is empo"ered

to ban the e'port of certain goods from India andE or restrict e'port in 4uantity,

value etc% by sub8ecting them are licensing procedure%

&'port from the country is generally free% The e'port goods may be

classified under any of the follo"ing categories3

a) Free H items e'portable "ithout restrictions%

b) Restricted H e'portable under a license or permission

c) tate Trading H e'port can be done through specified Trading enterprise%

15




d) rohibited H cannot be e'ported%

F*a#e fo) e7po),s *s a-a*'a+'e f)o( #o((e)#*a' +a!s &%e) ,o

#a,e/o)*es;

(1) reshipment finance (or pac-ing credit)

(!) ost shipment finance%

F*a#*/ of E7po), a% I(po),s of <oo%s a% Se)-*#es:

&'ports are a sub8ect of significance to every economy "hether

developing or developed because they represent the biggest source of earning

foreign e'change% The need is all the more acute for a developing economy,

"hich mostly e'periences deficit on its current account as "ell as capitalaccount%

Increasing e'ports enable the economy to earn foreign e'change,

enhance foreign e'change reserves, improve balance of trade, balance of

payments, correct deficits in 5alance @f ayments (5@), and improve

e'change value of its currency%

16




The share of India0s e'ports in "orld trade is belo" 12 and along

"ith the persistent deficits in its 5@D necessitates the need for a ma8or thrust on

e'ports% :o"ever, over the years the e'ports have gro"n "ell and more so the

compositions of e'ports (goods G services e'ported) have undergone a charge%

This has happened mainly after the liberali?ation and globali?ation of our

economy post 11%

T$e <o-e)(e, $as ,)ea,e% o ,$*s o+=e#,*-e +y ao&#*/ ,$e

fo''o*/ *#e,*-es ,o a e7po),e):

1% #heaper rates of interest on 5an- finance (e'port rates today hover

around =2 to =%;2 compared to non e'port rates of 1!1;2)

!% Duty concessions on imports for e'ports%

B% #ash Incentives for e'ports vi?% Ta' brea-s for e'port units, duty

dra"bac- schemes%

9% roviding Infrastructure facilities vi?% Free trade ones &'port ones etc%

17




;% &stablishing of &J@RT I7@RT 5AKL @F IKDIA ban- to promote

e'ports%

<% &stablishing &'port #redit $uarantee #orporation &J@RT #R&DIT

AKD $+RAKT&& #@R@RATI@K to provide a protective shelter to

e'ports against inherent international trade ris-s%

2.2 E6PORT FINANCIN<

&'port financing describes the activity of governments helping

companies by financing their e'port activities% They offer lo" interest

rate loans that the company could other"ise not obtain at a rate lo"er

than mar-et price% &'port financing promotes trade as it provides an

opportunity for those organi?ations that "ould other"ise not have been

able to participate in trade activities because of financial constraints%

TYPES OF E6PORT CREDIT

1. PRE SHIP5ENT FINANCE:

ac-ing #redit%

18




Advance against che4ue EDraft etc% representing Advance ayments%

P)e s$*p(e, f*a#e *s e7,e%e% * ,$e fo''o*/ fo)(s:

ac-ing #redit in Indian Rupee

ac-ing #redit in Foreign #urrency (#F#)

E>I<IBI>ITY:

re shipment credit is only issued to that e'porter "ho has the e'port

order in his o"n name% :o"ever, as an e'ception, financial institution can also

grant credit to a third party manufacturer or supplier of goods "ho does not

have e'port orders in their o"n name% In this case some of the responsibilities

of meeting the e'port re4uirements have been out sourced to them by the main

e'porter% In other cases "here the e'port order is divided bet"een t"o more

than t"o e'porters, pre shipment credit can be shared bet"een them%

PACKIN< CREDIT

A#LIK$ #R&DIT is any loan or advance granted or any other credit provided

by a ban- to an e'porter for financing the purchase, processing, manufacturing

19




or pac-ing of goods prior to shipment, on the basis of letter of credit opened in

his favor or in favor of some other person, by an overseas buyer or a confirmed

and irrevocable order for the e'port of goods from the producing country or any

other evidence of an order for e'port from that country having been placed on

the e'porter or some other person, unless lodgment of e'port orders or letter of

credit "ith the ban- has been "aived%

Pa#!*/ C)e%*, Fa#*'*,*es ,o Dee(e% E7po),s:

Deemed e'ports made to multilateral funds aided pro8ects and programme,

under orders secured through global tenders for "hich payments "ill be made in

free foreign e'change, are eligible for concessional rate of interest facility both

at pre and post supply stages%

Pa#!*/ C)e%*, fa#*'*,*es fo) Cos&',*/ Se)-*#es:

In case of consultancy services, e'ports do not involve physical movement

of goods out of Indian #ustoms Territory% In such cases, reshipment finance

can be provided by the ban- to allo" the e'porter to mobili?e resources li-e

technical personnel and training them%

A%-a#e a/a*s, C$e?&e9D)af,s )e#e*-e% as a%-a#e pay(e,:

/here e'porters receive direct payments from abroad by means of

che4uesEdrafts etc% the ban- may grant e'port credit at concessional rate to the

20




e'porters of goods trac- record, till the time of reali?ation of the proceeds of the

che4ues or draft etc% The 5an-s ho"ever, must satisfy themselves that the

proceeds are against an e'port order%

2. POST SHIP5ENT FINANCES:

ost hipment Finance is a -ind of loan provided by a financial institution

to an e'porter or seller against a shipment that has already been made%

This type of e'port finance is granted from the date of e'tending the creditafter shipment of the goods to the reali?ation date of the e'porter proceeds%

&'porters don0t "ait for the importer to deposit the funds%

Types:

&'port bills purchased EnegotiatedEdiscounted%

Advances against bills sent on collection basis%

Advances against e'ports on consignment basis% Advances against +K dra"n balances%

Advances against duty dra"bac-%

1. E7po), +*''s p&)#$ase% 9e/o,*a,e%9%*s#o&,e%:

&'port bills (Kon ME# 5ills) is used in terms of sale contractE order may

be discounted or purchased by the ban-s% It is used in indisputable international

trade transactions and the proper limit has to be sanctioned to the e'porter for

purchase of e'port bill facility%

2. A%-a#es a/a*s, +*''s se, o #o''e#,*o +as*s:

21




5ills can only be sent on collection basis, if the bills dra"n under M# have

some discrepancies% ometimes e'porter re4uests the bill to be sent on the

collection basis anticipating the strengthening of foreign currency% The transit

period is from the date of acceptance of the e'port documents at the ban-s

branch for collection and not from the date of advance%

3. A%-a#e a/a*s, E7po), o Cos*/(e,s Bas*s:

5an- may choose to finance "hen the goods are e'ported on consignment

basis at the ris- of the e'porter for sale and eventual payment of sale proceeds

to him by the consignee% :o"ever, in this case ban- instructs the overseas ban-

to deliver the document only against trust receipt Eunderta-ing to deliver the sale

proceeds by specified date, "hich should be "ithin the prescribed date even if

according to the practice in certain trades a bill for part of the estimated value is

dra"n in advance against the e'ports% In case of e'port through approved Indian

o"ned "arehouses abroad the times limit for reali?ation is 1; months%

4. A%-a#e a/a*s, U%)a Ba'a#e:

It is a very common practice in e'port to leave small part undra"n for

payment after ad8ustment due to difference in rates, "eight, 4uality etc% 5an-s

do finance against the undra"n balance, if undra"n balance is in conformity

"ith the normal level of balance left undra"n in the particular line of e'port,

sub8ect to a ma'imum of 1 percent of the e'port value% An underta-ing is also

22




obtained from the e'porter that he "ill, "ithin < months from due date of

payment or the date of shipment of the goods, "hichever is earlier surrender

balance proceeds of the shipment%

. A%-a#e a/a*s, C'a*(s of D&,y D)a+a#!:

Duty Dra"bac- is a type of discount given to the e'porter in his o"n

country% This discount is given only, if the in house cost of production is higher

in relation to international price% This type of financial support helps the

e'porter to fight successfully in the international mar-ets% In such a situation,

ban-s grants advances to e'porters at lo"er rate of interest for a ma'imum

period of days% These are granted only if other types of e'port finance are

also e'tended to the e'porter by the same ban-%

2.3 I5PORT FINANCIN<

23




All imports permitted by trade policy 4ualify as current account

transactions for "hich the importer can buy currency from an authori?ed dealer%

&arlier, credit on imports "as restricted to a period of <

months, unless other"ise approved by the Reserve 5an-% This since been

e'tended to B years for both suppliers and buyer credits, provided%

The amount does not e'ceed +N 1 per import transaction, and

The interest does not e'ceed MI5@R O %;2 for credit unto 1 year,

and MI5@R O 1%!;2 for periods beyond 1 year%

2.4 CREDIT ON I5PORTS

The economics of importing on credit as compared to

sight payment "ould depend upon the3

1% Rupee and FJ interest rates% Foreign currency interest rates "ill

$enerally be lin-ed to Mondon Inter 5an- @ffer Rate in the currency in

4uestion%

!% &'change rate movement or the cost of handing in the for"ard 7ar-et%B% Difference in commission charged by ban-s on sight and nuisance letters

of credit and the stamp duty on nuisance bills, "here applicable%

Again, the interest paid may attract deduction of ta' at

source, since it is being paid to nonresidents% For calculation the amount, the

24




interest may need to be grossed% The impact of the TD "ould be lo"er, if the

credit is ta-en from a resident of a country "ith "hom India has signed a

Double Ta'ation Avoidance Treaty% ome corporate include the interest element

in the price of the goods to avoid this problem% This "ould be economical only

if the import duty is lo"er than the TD on the gross interest%

2. >ETTER OF CREDIT

Metter of #redit also -no"n as Documentary #redit is a "ritten

underta-ing by the importers ban- -no"n as the issuing ban- on behalf of its

customer, the importer (applicant), promising to effect payment in favor of the

e'porter (beneficiary) up to a stated sum of money, "ithin a prescribed time

limit and against stipulated documents% It is published by the International

#hamber of #ommerce under the provision of +niform #ustom and ractices brochure number ;%

ME# is a binding document that a buyer can re4uest from his ban- in order to

guarantee that the payment for goods "ill be transferred to the seller% 5asically,

a letter of credit gives the seller reassurance that he "ill receive the payment for

the goods% In order for the payment to occur, the seller has to present the ban-

"ith the necessary shipping documents confirming the shipment of goods

"ithin a given time frame% It is often used in international trade to eliminate

ris-s such as unfamiliarity "ith the foreign country, customs, or political

instability%

25




A%-a,a/es of >e,,e) of C)e%*, I(po),e)s:

1. Ce),a* of s$*p(e, of /oo%s:

The e'porter cannot get any benefit under the letter of credit "ithout

shipping the goods and submitting documents to the ban-% Therefore, the

importer is certain to get the supply%

2. De'*-e)y o ,*(e:

As the e'porter submits documents in time for negotiation, it

reaches the opening ban- in time% This enables the importer not only to collect

the documents on time but also to collect the goods from the customs%

3. O-e)%)af, fa#*'*,y:

/hen the importer falls short of payment, he can ta-e possession

of the documents against overdraft facility

4. Be,,e) ,e)(s of ,)a%e:

The opening ban- provides credit facility to the importer% This helps

the importer to obtain better terms of trade from the foreign supplier%

. F&%s a)e o, +'o#!e%:

26




There is no need for the importer to bloc- his funds by ma-ing

advance payment to the e'porter%

0. >o/ +&s*ess asso#*a,*os:

Metter of credit protects the interest of both the e'porter and the

importer% Kothing is left to the imagination of both the parties because the letter

of credit mentions all the terms and conditions of the business% It helps the

e'porter and importer to have prolonged business associations

A%-a,a/es of >e,,e) of C)e%*, ,o ,$e E7po),e)s:

1. P)o-*%es pa#!*/ #)e%*,:

&'porters can easily collect preshipment finance from the ban-s

against letter of credit% Red clause letter of credit is issued to the e'porter to

enable him to collect preshipment finance from the ban-%

2. C'ea)a#e of e7#$a/e #o,)o' )e/&'a,*os:

/hen the opening ban- issues the letter of credit it indicates that the

importer has fulfilled all provisions of e'change control regulations in his

country% Transfer of funds "ill not create a problem from the e'change control

authorities%

27




3. No +'o#!*/ of f&%s:

The e'porter gets immediate payment from the ban- "hen he submits

full set of negotiable documents to the ban-% If the documents are dra"n as per

the terms of the letter of credit the ban- pays the e'porter in full% Therefore, the

e'porter does not have to bloc- his funds

4. No +a% %e+,s:

As the payment is guaranteed by the opening ban-, the e'porter is free

from the problem of bad debt% In case the e'porter holds a confirmed letter of

credit, there is double guarantee by the opening ban- G the confirming ban-%

. No '*a+*'*,y:

In case of confirmed letter of credit and "ithout recourse clause, the

liability of the e'porter comes to an end as soon as he hands over the relevant

documents to the ban-%

0. Ce),a*,y of pay(e,:

The importer cannot refuse to ta-e possession of the goods and to clear

the payment "hen the terms of payment are the letter of credit% This problem

of no possession of goods and nonpayment may arise in case of DE and DEA%

28




2.0 TYPES OF >ETTER OF CREDIT

A letter of credit may be revocable or irrevocable% If there is no indication

of this reference, the credit "ill be deemed as irrevocable%

A revocable credit may be amended or cancelled at any moment "ithout

prior notice to the beneficiary% :o"ever, the issuing ban- is bound to reimburse

for the negotiation made prior to receipt of such notice%

The irrevocable credit is a definite underta-ing of the issuing ban- and

cannot be amend or cancelled "ithout the agreement of the confirming ban- and

the beneficiary%

29




1. Cof*)(e% C)e%*,:

/hen another ban- adds its confirmation to the irrevocable letter of the

credit it becomes a confirmed credit and it constitutes a definite underta-ing of

the confirming ban- in addition to the issuing ban-%

2. T)asfe)a+'e C)e%*,:

A letter of credit is transferable only if it is e'pressly designated by the

issuing ban-% The beneficiary of such a credit has the right to re4uest the

nominated ban- to transfer the credit to another party or more than one party if partial shipment is permitted% The transferable credit can be transferred once

only%

3. Re% C'a&se #)e%*,:

Red clause credit enables the beneficiary to avail preshipment credit

from the nominated ban-% This credit bears normally a clause in red authori?ing

the nominated ban- to ma-e an advance to the seller prior to shipment% $R&&K

clause credit in addition to permitting pre shipment advance also entails storing

of goods in the name of the ban-%

4. Ba! ,o Ba! C)e%*,:

/hen the e'porter used his e'port letter of credit as a cover for issuing a

credit in favor of his supplier, the second credit is called bac-tobac- credit%

. Re-o'-*/ C)e%*,:

30




In a revolving credit the amount of dra"ing is reinstated and made available

to the beneficiary again after a period of time on notification of payment by the

applicant or merely the fact that shipment has been made%

The ma'imum value up to "hich the credit can be revolved and the e'piry

date of the letter of credit is generally specified in the revolving credit% The re

instatement clause should be al"ays incorporated in revolving letter of credit%

0. Defe))e% Pay(e, C)e%*,s a% A##ep,a#e C)e%*,s:

+nder deferred payment credit the amount is payable in installments for a

stipulated longer period% +sually a part is paid in advance and the balance is

payable in agreed installments as agreed in the te't of the letter of credit%

CHAPTER 3

RO>E OF BANKS IN E6PORT AND I5PORT FINANCE

Along "ith public sector ban-s, the foreign ban-s also provide financial

assistance to Indian e'porters% They offer financial facilities to e'porters and

thereby contribute for e'port promotion% In addition, the e'change ban-s also

provide ban-ing and financial facilities to importers from their respective

countries%

31




It is a fact that foreign e'change ban-s are in a better position to offer

finance to e'porters due to their "orld "ide ban-ing contacts, huge financial

resources and e'pert staff%

Foreign ban-s are ban-s incorporated in foreign countries (+L, +A,

France, Papan, etc) but are functioning in India through their branches or branch

offices opened at important commercial centers such as 7umbai, #hennai,

#alcutta, and Delhi and so on%

Foreign ban-s operate under the supervision of the R&&R>& 5AKL @F

IKDIA and have to function as per the provision made in the 5an-ing

Regulation Act, 19%

These ban-s provide financial support to international trade as per the

policies of the government% In addition, they also conduct other ban-ing

functions and offer ban-ing and financial services to their customers (e'porters)

Foreign ban-s operating in India include Mloyds 5an-, tandard #hartered

5an-, #iti 5an-6 $rind lays 5an-, and so on% These ban-s have their offices at

important commercial centers in India%

Foreign ban-s offer various financial services to e'porters from their home

country% For e'ample, they issue letter of credit to their clients and also provide

financial facilities% They collect payment for goods imported and arrange to

32




ma-e payment to Indian e'porters by completing the necessary formalities and

procedures%

The documentary bills of e'change may be sent to these ban-s and collect

payment for the goods%

Along "ith such services, the foreign ban-s (also called foreign e'change

ban-s) also provide many facilities to Indian &'porters "ho open the account in

such ban-s%

For e'ample, they arrange to ma-e payment for the goods imported% They

also provide discounting facility to Indian e'porters and also offer various types

of guarantees% &'ports proceeds are also collected on behalf of Indian e'porters

as a result6 immediate cash is available to e'ports%

In addition, the foreign ban-s provide preshipment and postshipment

finance to e'porters% imilarly, they help Indian e'porters in the remittance of

money from India to other countries for different purposes sub8ect to rules and

procedures prescribed by the R&&R>& 5AKL @F IKDIA%

The follo"ing are the institutions that are directly or indirectly concerned

"ith import and e'port financing3

1% #ommercial 5an-s!% &'port Import 5an- of India (&JI7 5an-)B% Reserve 5an- of India (R5I)

33




9% &'port #redit $uarantee #orporation of India Mtd (&#$#)

3.1 RESERE BANK OF INDIA @RBI" :

T$e Rese)-e Ba! of I%*a is the ape' financial

institution of the country0s financial system entrusted "ith the tas- of control,

supervision, promotion, development and planning% Reserve 5an- of India is

the 4ueen bee of the Indian financial system "hich influences the commercial

ban-s0 management in more than one "ay% The R&&R>& 5AKL @F IKDIA

influences the management of commercial ban-s through its various policies,

directions and regulations% Its role in ban- management is 4uite uni4ue% In fact,

the R&&R>& 5AKL @F IKDIA performs the four basic functions of

management, vi?%, planning, organi?ing, directing and controlling in laying a

strong foundation for the functioning of commercial ban-s%

O+=e#,*-es of ,$e Rese)-e Ba! of I%*a:

The reamble to the Reserve 5an- of India Act, 1B9 spellsout the ob8ectives of the Reserve 5an- as3 Cto regulate the issue of 5an- notes

34




and the -eeping of reserves "ith a vie" to securing monetary stability in India

and generally to operate the currency and credit system of the country to its

advantage%

rior to the establishment of the Reserve 5an-, the Indian

financial system "as totally inade4uate on account of the inherent "ea-ness of

the dual control of currency by the #entral $overnment and of credit by the

Imperial 5an- of India%

The :ilton.oung #ommission, therefore, recommended

that the dichotomy of functions and division of responsibility for control of

currency and credit and the divergent policies in this respect must be ended by

settingup of a central ban- H called the Reserve 5an- of India H "hich "ould

regulate the financial policy and develop ban-ing facilities throughout the

country% :ence, the 5an- "as established "ith this primary ob8ect in vie"%

F&#,*os of ,$e Rese)-e Ba! of I%*a:

The Reserve 5an- of India performs all the typical functions of a

good #entral 5an-% In addition, it carries out a variety of developmental and

promotional functions attuned to the course of economic planning in the

country3

1% Issuing currency notes, to act as a currency authority%

35




!% erving as ban-er to the $overnment%B% Acting as ban-ers0 ban- and supervisor%9% 7onetary regulation and management%;% &'change management and control%

<% #ollection of data and their publication%*% 7iscellany e'port oriented unit0s developmental and promotional

functions and activities%=% Agricultural Finance%a) Industrial Finance

b) &'port Finance%c) Institutional promotion

3.2. E6PORT I5PORT BANK OF INDIA @E6I5"

Ro'e of E7po), I(po), Ba! of I%*a:

The &'portImport 5an- of India is a public sector financial

insinuation crested by an Act of arliament, the &'portimport 5an- of India

Act% 1=1% The 5an- came in e'istence in Panuary 1=! and commenced

operations from 7arch 1, 1=!% &J@RT I7@RT 5AKL @F IKDIA is the

principal financial institution for cocoordinating the "or-ing of institutions

engaged in financing e'port and Import trade of India% The 5usiness of

&J@RT I7@RT 5AKL @F IKDIA is to finance, facilitate and promote

foreign trade of India%

The process of industrial development in India resulted in

diversification an e'pansion of the e'pert sector in the seventies Development

of capabilities for e'port of capital goods% &ngineering goods, manufactured

36




products, pro8ects and services as also setting up of 8oint industrial ventures

abroad are an important outcome of this process%

Ope)a,*os of E7po), I(po), Ba! of I%*a:

&J@RT I7@RT 5AKL @F IKDIA 5an-s operational

philosophy comprises five ma8or components%

1% To ma-e the Indian e'porter internationally competitive on the count of

financing terms offered by him%

!% To Develop alternate financing solutions for an Indian &'porter in his

effort to be internationally competitive%

B% To provide information on e'port opportunities in ne" traditional e'ports

including currency adviser to Indian manufacturers so that ne" e'port

opportunities are pursued%

9% To provide selective production, mar-eting, finance for ma-ing Indian

manufactured products internationally competitive%

;% To respond to e'port problems of Indian &'porters and pursue policy

resolutions%

The 5an- is continuously building capabilities to anticipate and

respond to development e'port opportunities information technology and

translate national foreign trade policies into action plan%

37




F*a#e Se)-*#es P)o-*%e% By E7po), I(po), Ba! of I%*a:

&J@RT I7@RT 5AKL @F IKDIA plays four

pronged role "ith regard to Indias foreign trade3 those of a cocoordinator, a

source of finance, consultant and promoter% &J@RT I7@RT 5AKL @F

IKDIA is the #oordinator of the /or-ing $roup 7echanism for clearance of

ro8ect and ervices &'ports and Deferred ayment &'ports (for amounts above

a certain value currently +N 1 million)%The /or-ing $roup comprises

&J@RT I7@RT 5AKL @F IKDIA, $overnment of India representatives

(7inistries of Finance, #ommerce, &'ternal Affairs), Reserve 5an- of India,

&'port #redit $uarantee #orporation of India Mtd% and commercial ban-s "ho

are authori?ed foreign e'change dealers% This inters institutional /or-ing

$roup accords clearance to contracts (at the posta"ard stage) sponsored by

commercial ban- or &J@RT I7@RT 5AKL @F IKDIA, and operates as a

one"indo" mechanism for clearance of term e'port proposals% @n its o"n,

&J@RT I7@RT 5AKL @F IKDIA can no" accord clearance to pro8ect

e'port proposals up to +N 1 million in value%

38




3.3. E6PORT CREDIT AND <UARANTEE CORPORATION

@EC<C"

ayments for e'port are open to ris-s even at the best of times% The

ris-s have assumed large proportions due to political and economic charges in

the "orld% A civil "ar in a country may bloc- or delay the payment for e'ports%

&conomic difficulties or 5@ position may also force a country to restrict

payments outflo" to the e'porters%

It is also possible that the buyer may turn insolvent or may refuse to

ma-e the payment% In light of the above, the e'port business though may appear

lucrative is fraught "ith ris-s, /ith a vie" to protect a shelter to the e'porters

against the e'port ris-s, &J@RT #R&DIT AKD $+RAKT&&

#@R@RATI@K "as established in 1;* by the $overnment of India under theadministrative control of ministry of commerce%

It is managed by 5oard of Directors comprising of representatives

of the $overnments, Reserve 5an- of India, 5an-s, and Insurance and

e'porting community% &J@RT #R&DIT AKD $+RAKT&& #@R@RATI@K

is the fifth largest credit insurer of the "orld presently covers 1*%B12 of India0s

total e'ports "ith a paid up capital of Rs 1%; bn%

39




5a=o) F&#,*os of E7po), C)e%*, a% <&a)a,ee Co)po)a,*o:

1% To provide a range of credit ris- insurance covers to e'porters against a

loss in e'port of goods and services%

!% To offer guarantees to ban-s and financial institutions to enable e'porters

obtain better facilities from them%

E7po), C)e%*, a% <&a)a,ee Co)po)a,*o a'so $e'ps E7po),e)s +y:

roviding insurance protection to e'porters against payment ris-s

roviding guidance in e'port related activities

roviding information on credit"orthiness of overseas buyers

roviding information on about 1= countries "ith its o"n credit

ratings

40




7ar-eting it easy to obtain e'port finance from ban-sE financing

institutions

Assisting e'porters in recovering bad debts

Po'*#*es a% S#$e(es of E7po), C)e%*, a% <&a)a,ee Co)po)a,*o:

1% tandard olicy!% pecific olicyB% Financial $uarantees9% @ther

5AIN ACTIITIES OF E6PORT CREDIT AND <UARANTEE CORPORATION:

&J@RT #R&DIT AKD $+RAKT&& #@R@RATI@K

provides a "ide range of credit ris- insurance cover to e'porters against loss in

e'port of goods and services% It also offer guarantees to ban-s and financial

institutions to enable the e'porters to obtain better facilities from the ban-s%

T$e #o-e)s offe)e% +y E7po), C)e%*, a% <&a)a,ee Co)po)a,*o ,o ,$e

E7po),e)s a)e:

i% tandard olicies to e'porters to protect them against payment ris-s

involved in e'ports on short term credit%

41




ii% pecific olicies designed to protect Indian firms against payment ris-s

involved in Ha) &'ports on deferred payment terms

b) ervices rendered to Foreign artiesc) #onstruction "or-s and turn-ey pro8ects underta-en abroad%

T$e <&a)a,ees offe)e% +y E7po), C)e%*, a% <&a)a,ee Co)po)a,*o ,o

,$e Ba!s a)e:

i% ac-ing #redit $uaranteeii% &'port roduction Finance $uarantee

iii% ostshipment &'port #redit $uaranteeiv% &'port Finance $uaranteev% &'port erformance $uarantee

vi% &'port Finance $uarantee%

3.4. CO55ERCIA> BANK:

Ro'e of Co((e)#*a' Ba!s * E7po), F*a#e:

The ma8or part of e'port finance is provided by commercial ban-s%

They also provide other facilities and services to the e'porters% The function of

commercial ban-s can be grouped under t"o heads%

(A)Fund 5ased Assistance

(5)KonFund 5ased Assistance

The assistance provided and commercial ban-s in respect of e'portfinance can be charted as follo"s3

42



COMMERC

IAL

BANKS

FUND

BASED

ASSISTANC

E

NON FUND

BASED

ASSISTANC

E


@A" F&% Base% Fa#*'*,*es:

The commercial ban-s provide fund based activities at

(i) reshipment tage, and

(ii) osthipment tage%

@B" No;F&% Base% Ass*s,a#e:

1. Ba! <&a)a,ees:

a) $uarantee for foreign currency loans sanctioned by a financial

institution abroad to Indian e'porters "ho raise funds to finance

their pro8ects abroad%

b) erformance guarantee "hich is generally re4uired in e'port of

capital goods and also in case of turn-ey and construction pro8ects%

43




c) 5an-s issue a guarantee for payment of retention money by the

overseas party "ho "ould release the retention money to the Indian

party only after receiving guarantee from ban-%

d) The ban-s also issue advance payment guarantee to the overseas

buyer "ho normally ma-es certain advance payment to the Indian

e'porter against a ban- guarantee%

e) 5an-s issue bid bonds so as to enable e'porters to participate in

various global tenders%

O,$e) Se)-*#es:

a) They collect e'port proceeds from the importer and credit the same to

e'porter0s account% b) The ban-s assist the e'porter in the collection of useful information on

the credit "orthiness of the foreign buyer through their foreign agents%

c) The ban-s issue ban- drafts in case of payment of freight charges andsuch other charges%

d) The ban-s send the duplicate copy of $R form to the R&&R>& 5AKL

@F IKDIA after reali?ation of e'port proceeds%e) The ban-s issue ban- certificates in respect of e'port sales value, "hich

are useful for claiming incentives%

44



1.CleanPayment

s

2.Payment

Collection o f Bil ls

inInternati

onalTrae

!.Letterof C reit

L#c


CHAPTER 4

PAY5ENT 5ETHODS IN E6PORT I5PORT TRADE:

There are B standard "ays of payment methods in the e'port import trade

international trade mar-et3

1% #lean ayment

!% #ollection of 5ills

B% Metters of #redit MEc

4.1. C'ea Pay(e,s

In clean payment method, all shipping documents, including title

documents are handled directly bet"een the trading partners% The

role of ban-s is limited to clearing amounts as re4uired% #lean

payment method offers a relatively cheap and uncomplicated

45




method of payment for both importers and e'porters%

There are basically t"o types of clean payments3

A%-a#e Pay(e,

In advance payment method the e'porter is trusted to ship the

goods after receiving payment from the importer%

Ope A##o&,

In open account method the importer is trusted to pay the e'porter

after receipt of goods%

The main dra"bac- of open account method is that e'porter

assumes all the ris-s "hile the importer get the advantage over the

delay use of companys cash resources and is also not responsible

for the ris- associated "ith goods%

4.2. Pay(e, Co''e#,*o of B*''s * I,e)a,*oa' T)a%e

The ayment #ollection of 5ills also called C+niform Rules for

#ollections is published by International #hamber of #ommerce

(I##) under the document number ;!! (+R#;!!) and is follo"ed

by more than 2 of the "orlds ban-s%

In this method of payment in international trade the e'porter

entrusts the handling of commercial and often financial documents

to ban-s and gives the ban-s necessary instructions concerning the

release of these documents to the Importer% It is considered to be

one of the cost effective methods of evidencing a transaction for

buyers, "here documents are manipulated via the ban-ing system%

46




There are t"o methods of collections of bill3

Do#&(e,s a/a*s, Pay(e, D9P

In this case documents are released to the importer only "hen the

payment has been done%

Do#&(e,s a/a*s, A##ep,a#e D9A

In this case documents are released to the importer only against

acceptance of a draft%

4.3. >e,,e) of C)e%*, >9C

Metter of #redit also -no"n as Documentary #redit is a "ritten

underta-ing by the importers ban- -no"n as the issuing ban- on

behalf of its customer, the importer (applicant), promising to effect

payment in favor of the e'porter (beneficiary) up to a stated sum of

money, "ithin a prescribed time limit and against stipulated

documents% It is published by the International #hamber of

#ommerce under the provision of +niform #ustom and ractices

(+#) brochure number ;%

>arious types of ME#s are3

Re-o#a+'e I))e-o#a+'e >e,,e) of C)e%*, @>9C"

A Revocable Metter of #redit can be cancelled "ithout the consent

of the e'porter%

An Irrevocable Metter of #redit cannot be cancelled or amended

"ithout the consent of all parties including the e'porter%

S*/$, T*(e >e,,e) of C)e%*,

47




If payment is to be made at the time of presenting the document

then it is referred as the ight Metter of #redit% In this case ban-s

are allo"ed to ta-e the necessary time re4uired to chec- the

documents%

If payment is to be made after the lapse of a particular time period

as stated in the draft then it is referred as the Term Metter of #redit%

Cof*)(e% >e,,e) of C)e%*, @>9C"

+nder a #onfirmed Metter of #redit, a ban-, called the #onfirming

5an-, adds its commitment to that of the issuing ban-% 5y adding

its commitment, the #onfirming 5an- ta-es the responsibility of

claim under the letter of credit, assuming all terms and conditions

of the letter of credit are met%

CHAPTER

48




DOCU5ENTS USED IN FOREI<N TRADE

Documents are used to record a "ritten evidence of having

carried out a transaction in both local and international trade% This section deals

"ith the documents used in international trade "here there is fairly large

number of documents re4uired to satisfy the t"o basic re4uirements, vi?%

Regulatory and @perational%

Nos,)o A##o&,:

The Demand Draft Deposit account belonging to a domestic

ban- maintained in an overseas ban- denominated in foreign currency is nostro

account%

os,)o A##o&,:

The Demand Draft Deposit account belonging to a domestic

ban- maintained in an domestic ban- denominated in domestic currency is

vostro account%

A '*s, of ,$e -a)*o&s %o#&(e, )e?&*)e% * #)oss +o)%e) ,)a%e *s /*-e

+e'o:

#ommercial Invoice

5ills of MadingEAir"ay 5ill

7arine Insurance olicy and #ertificate

5ills of &'change

#onsular Invoice

#ustoms Invoice #ertificate of @rigin

49




Inspection #ertificate

ac-ing Mist

.1. Co((e)#*a' I-o*#e:

It is the seller0s bill for the merchandise% It contains a description of

the goods, the price per unit at a particular location and total value of the goods,

pac-ing specifications, terms of sale, teams of payment, identification mar-ers

of the pac-ages, bill of lading number, etc% There is no standards form for

commercial invoice%

&ach e'porter designs his o"n format of commercial invoice%

+sually, a commercial invoice is re4uired to be duly signed by the seller and is

submitted in a set of at least three copies% Its main purpose is to chec- "hether

the appropriate goods have been shipped and also the unit price, total value,

mar-ing on the pac-age, etc%

.2. B*'' of >a%*/9A*)ay B*'':

This document is an evidence of shipment the goods% It is a receipt

duly signed and issued by a shipping company ac-no"ledging that the goods

mentioned in the document have been shipped or received for shipment and an

underta-ing to deliver the goods at the agreed destination% 5ill of Mending is

the most important document in foreign trade% A 5ill of Mending serves the

follo"ing proposes%

50




a" I, *s a %o#&(e, of ,*,'e ,o /oo%s3 ; The 5ill of Manding is a

document giving o"nership rights to the goods and the possession

of a 5ill of Manding entitle the holder to the and is transferable by

endorsement% Transfer of the 5ill of Manding after appropriate

endorsement is tantamount to the transfer of goods%

+" I, *s a )e#e*p, f)o( ,$e s$*pp*/ #o(pay: ; It constitutes

evidence that the goods have been received by the shipping

company% As a receipt it is only an evidence of the number and

si?es of pac-ages involved and does not guarantee the contents of

the pac-ages%

#" I, *s a e-*%e#e of #o,)a#, fo) ,$e #a))*a/e o) ,)aspo),a,*o

of /oo%s: The freight contract bet"een the shipping company and

the e'porter is usually mentioned in the 5ill of Manding e'cept in

the case of a charter ship "here the contract of charter incorporates

the freight payable by the shipper .

51




.3.5a)*e Is&)a#e Po'*#y a% Ce),*f*#a,e:

In International trade it is customary to insure the goods against the ris-s

of loss or damage% /hether the insurance "ill be ta-en by the e'porter on his

o"n account or on the account of the overseas buyer depends on the terms of

sale%

A marine insurance policy can ta-e either by an open policy or a specific

policy% @pen policy is ta-en by e'porters "ho have continuous shipments to

ma-e and the insurance policy is issued as an open cover, "hich can be used for

insurance of all consignments to one or more destinations% The insurance

company "ill then issue an insurance certificate to cover Individual shipments

made under the open policy%

For the financing ban-, a marine insurance policy is a very important

document accompanying the shipping documents as it provides additional cover

for the advance it has made to the importer%

.4. B*'' of E7#$a/e:

A bill of e'change is an unconditional order in "riting, addressed by the

dra"er (e'porterEshipper) to the dra"er (importerEbuyer) re4uiring the dra"er to

pay on demand a stated sum of money to the bearerEspecified person or

organi?ation% A bill of e'change is a negotiable instrument and is payable to the bearer or to the person in "hose favor it is endorsed%

52




In International Trade the normal practice is to send documents in t"o sets

as such bill of e'change is also generally dra"n in t"o sets, one each to be sent

along "ith each set of document% /hen dra"n in t"o sets, each one bears an

e'clusion clause ma-ing the other invalid%

The dra"ing of a bill of &'change is not al"ays necessary% In certain

countries bill of e'change is not recogni?ed as a legal document, "hile it is

discouraged in a fe" other countries due to incidence of a heavy stamp duty% In

India also bill of e'change for document dra"n on DA basis for tenure over

days attracts tamp Duty%

.. Cos&'a) I-o*#e:

A consular invoice is a special type of invoice re4uired by some

countries for their imports% uch invoices are re4uired by the +A, #anada,

hilippines and some 7iddle &ast countries, etc% a consular invoice is made out

on a prescribed format certified by the consulate of the importing country

stationed in the e'porter0s country% The main purpose of the consular invoice to

the importing country is to have authenticated particulars of the goods that are

importing into their country%

.0. C&s,o(s I-o*#e:

#ertain countries such as #anada and the +A need customs invoice%

#anada has prescribed a specific from of customs invoice for allo"ing entry of

merchandise at preferential tariff rates%

53




The +A, in addition to the special customs invoice, re4uires a particular

anne' to the invoice, for #otton 7anufacturers% The forms are supplied by the

consular office of the respective importer0s country and are to be duly filled in

and signed by the shipper%

.. Ce),*f*#a,e of O)*/*:

In many countries, permission to import is refused unless a certificateof origin is produced by the buyer% This document may form part of the invoice

itself% The essential feature is certification of the country of origin indicating

"here the goods "ere originally produced andEor manufactured%

.. Ispe#,*o Ce),*f*#a,e:

Inspection certificate by an established inspection Authority is

needed under some contracts or by some countries% This certificate is issued by

one of the authori?ed inspection agencies in the e'porter0s country by the

agency nominated by the importer%

.. Pa#!*/ >*s,:

The e'porter prepares a pac-ing list sho"ing, item by item, the contents

of the containers or cases to enable the receiver of the shipment to chec- the

identify of the shipment% It should give the description of the goods, number and

mar-s on the pac-ages, 4uantity per pac-age, net "eight and gross "eight,

measurement, etc%

54




There is no particular form prescribed for this purpose%

The e'porter concerned may design his o"n pac-ing list%

CHAPTER 0

FOREI<N TRADE PO>ICY

The ne" (F@R&I$K TRAD& @MI#.) ta-es an integrated

vie" of the overall development of Indias foreign trade and% goes beyond the

traditional focus on pure e'ports% This "ould be clear in itself, but a means to

economic gro"th and national development% The primary purpose is not the

mere earning of foreign e'change, but the stimulation of greater economic

activity%

0.1 OBECTIES AND STRATE<Y OF FOREIDN TRADE

PO>ICY 2;14:

In line "ith the above focus, the F@R&IDK TRAD& @MI#. lays do"n t"o

ma8or ob8ectives3

55




I% To double our percentage share of global merchandise trade "ithin the ne't

five years6 and

II% To act as an effective instrument of economic gro"th by giving a thrust to

employment generation%

0.2 5AIN FEATURES OF FOREI<N TRADE PO>ICY 2;

14:

T$e (a* fea,&)es of FOREI<N TRADE PO>ICY 2;14 a)e as

fo''os:

1. Do&+'*/ s$a)e of /'o+a' (e)#$a%*se ,)a%e:

F@R&I$K TRAD& @MI#. (!19) envisaged a

doubling of Indias share in "orld e'ports from %*; per cent to 1%; per cent by

!19%

2. F*-e ,$)&s, se#,o)s:

ectors "ith significant e'port prospects coupled "ith

potential for employment generation in semiurban and rural areas "ere

identified as thrust sectors% F@R&I$K TRAD& @MI#. announced specific

56




strategies (termed pecial Focus Initiatives) for five such sectors3 Agriculture,

:andicrafts, :andlooms, $ems and Pe"eler, and Meather and Foot"ear sector%

7ain strategies announced for the five sectors outlined in the F@R&I$K

TRAD& @MI#. are as follo"s3

(i) In agriculture, a ne" scheme called *s$es$ K)*s$* Upa= Yo=aa "as

introduced to boost e'ports of fruits, vegetables, flo"ers, minor forest produceand their value added products% &'port of these products "ould 4ualify for duty

free credit entitlement e4uivalent to ; per cent of the value of e'ports% In

addition, the policy made capital goods imported for agriculture under the

&'port romotion #apital $oods (&#$) scheme duty free%

(ii) The pac-age for gems and 8e"eler sector includes3

(a) Duty free import of consumables for metals other than gold and platinum up

to ! per cent of the value of e'ports6 (ii) duty free reimport entitlement for

re8ected 8e"eler up to ! per cent of the value of e'ports6

(iii) duty free import of commercial samples of 8e"eler increased to Rs% 1 la-h6

and (iv) allo"ing import of gold of 1= carat and above under the replenishment

scheme%

(iii) As far as the handlooms and handicrafts sector is concerned, the F@R&I$K

TRAD& @MI#. announced that a ne" :andicraft pecial &conomic one

"ould be established% In addition, duty sops for trimmings and embellishments

imported by handlooms and handicraft producers "ere increased to ; per cent of

the value of e'ports%

57




(iv) In the leather and foot"ear sector, the dutyfree entitlements of import

trimmings, embellishments and foot"ear components "ere increased to B

percent% This is e'pected to help the leather and foot"ear sector save up to ; per

cent of its import costs% In addition, duty free import of specified items for

leather sector "as increased to ; per cent of the value of e'ports%

3. 8Se)-e% f)o( I%*a8 ,o +e B&*', as a B)a%:

resently services contribute more than ; per cent of the

countrys $D% To provide a thrust to service e'ports, F@R&IDK TRAD&

@MI#. advocated a number of steps% These include3

(i) erved from India brand "ill be created to catapult India the "orld over as a

ma8or global services hub%

(ii) An e'clusive &'port romotion #ouncil for services "ould be set up in

order to map opportunities in -ey mar-ets, and develop strategic mar-et access

programme%

(iii) Individual service providers "ho earn foreign e'change of at least Rs% ;

la-h, and other service providers "ho earn foreign e'change of at least Rs% 1

la-h "ould be eligible for a duty credit entitlement of 1 per cent of total

foreign e'change earned by them%

58




(iv) tandalone restaurants "ould be entitled to duty credit e4uivalent to ! per

cent of the foreign e'change &arned% In the case of hotels, the entitlement "ould

be ; per cent%

(v) :ealthcare and educational institutions "ould be entitled to duty credit of 1

per cent of the foreign e'change earned%

4. Ne #a,e/o)*es of s,a) $o&ses3

The F@R&IDK TRAD& @MI#. announced a ne"

categori?ation of status holders% +nder the ne" scheme, e'port houses "ere

divided into five categories depending upon their e'port performance in three

years%

The categories "ere

(i) @ne tar (e'port of Rs% 1; crore)

(ii) T"o tar (e'port of Rs% 1 crore)

(iii) Three tar (e'port of Rs% ; crore)

(iv) Four tar (e'port of Rs% 1,; crore)6 and

(v) Five tar (e'port of Rs% ;, crore)%a star e'port house "as entitled to getlicense, certificate, permissions and customs clearances for both imports and

59




e'ports on selfdeclaration basis% The star e'port house "as also granted the

benefit of 1 per cent retention of foreign e'change in &'port &arners Foreign

#urrency (&&F#) account% It "as also to be eligible for consideration under the

Target plus cheme and en8oy a number of other privileges (li-e e'emption

from furnishing 5an- $uarantee)%

. Ta)/e, P'&s8 S#$e(e:

&'porters "ho e'ceed the annual e'port target "ere to be

re"arded under the Target plus cheme% This re"ard "as in terms of

entitlement to dutyfree credit based on incremental e'port earnings% /ith the

target for !9; being fi'ed at 1< per cent, the lo"er limit for 4ualifying for

these re"ards "as pegged at ! per cent% Target plus scheme "as abandoned in

the second supplement to Foreign Trade olicy announced on April *, !<%

0. Se,,*/ &p of F)ee T)a%e a% a)e$o&s*/ Goes @FTGs":

The F@R&IDK TRAD& @MI#. introduced a ne"

scheme to establish Free Trade and /arehousing ones to create traderelated

infrastructure to facilitate the import and e'port of goods and services "ith

freedom to carry out trade transactions in free currency% This is aimed at ma-ing

India into a global trading hub% &ach ?one "ould have minimum outlay of Rs%

1 crore and ;, , s4uare meters builtup area% Foreign direct investment"ould be permitted up to 1 per cent in the development and establishment of

the ?ones and their infrastructural facilities%

. S#opes fo) E7po), o)*e,e% &*,s:

60




The F@R&I$K TRAD& @MI#. announced a number of

benefits for the e'port oriented units% These include3 (i) &'port @riented +nits

to be e'empted from service ta' in proportion to their e'ported goods and

services6 (ii) &'port @riented +nits to be permitted to retain 1 per cent of

e'port earnings in &&F# accounts6 (iii) Income ta' benefits on plant and

machinery to be e'tended to Domestic Tariff Areas that converting &'port

@riented +nits6 and (iv) Import of capital goods to be on self certification basis

for &'port @riented +nits%

.Re%&#*/ ,)asa#,*oa' #os,s a% s*(p'*fy*/ p)o#e%&)es:

The F@R&I$K TRAD& @MI#. announced a number of

rationali?ation measures to reduce transactional costs and simplify procedures%

These include3 (i) All e'porters "ith minimum turnover of Rs% ; crore e'empted

from furnishing ban- guarantee (this "ill help small e'porters "ho incur high

transactional costs)6 (ii) Import of secondhand capital goods permitted "ithout

any age restrictions6 (iii) 7inimum depreciated value for plant and machinery to

be located into India reduced from Rs% ; crore to Rs% !; be filed reduced6 (vii)

Time bound introduction of &lectronic Data Interface for e'port transactions,

etc

. Fo#&s o *f)as,)&#,&)e %e-e'op(e, So(e:

special measures announced for infrastructure development

in the F@R&I$K TRAD& @MI#. are3 (i) The threshold limit of designate

To"ns of &'port &'cellence has been reduced from Rs%1 crores to Rs% !;

crore in the five thrustsectors announced (ii) Funds from Assistance to tates

61




for infrastructure Development of &'ports used for development of Agri &'port

ones also, (iii) establishment of common facility centre "ill be encouraged for

use by housebased service providers6 and (,v) ragati 7aidan at Delhi "ill be

transformed into a "orldclass comple'%

1. O,$e) (eas&)es:

@f the various other measure announced in the F@R&I$K TRAD&

@MI#.% the follo"ing deserve specific mention

(i) 5iotechnology ar-s to be set up in the country having all the facilities of

1 per cent &J@RT @RI&KT&D +KITs%

(ii) The 5oard of Trade to be revamped and given a clear and dynamic role%

(iii) Financial assistance to be provided to e'port for meeting their costs and

legal e'penses related to trade matters li-e antidumping action and

countervailing duties in other countries%

(iv) Although the D&5 (Duty &ntitlement and ass boo- cheme) is as it

covers ;! per cent of Indias e'ports and is easy to administer%

CHAPTER

INFOR5ATION OF BANK OF INDIA

62




.1 INTRODUCTION:;

5an- of India (5@I) is an Indian stateo"ned commercial ban- "ith

head4uarters in 7umbai, 7aharashtra, India% $overnmento"ned since

nationali?ation in 1<, 5an- of India has 9;9; branches as on B1

December !1B, including ;9 branches outside India, and about AT7s%

5@I is a founder member of /IFT (ociety for /orld"ide Inter 5an-

Financial Telecommunications), "hich facilitates provision of cost

effective financial processing and communication services% The 5an-

completed its first one hundred years of operations on * eptember !<%

.2 H*s,o)y:;

P)e-*o&s +a!s ,$a, &se% ,$e a(e Ba! of I%*a

63




At least three ban-s having the name 5an- of India had preceded the

setting up of the present 5an- of India%

1% A person named agar Ra8ani set up the first 5an- of India in Delhi(Lol-ata) in 1=!=, but nothing more is -no"n about this ban-%

!% The second 5an- of India "as incorporated in Mondon in the year

1=B< as an AngloIndian ban-6 it is not clear that it ever actually

functioned%

The third ban- named 5an- of India "as registered in 5ombay (7umbai)in the year 1<%

T$e #&))e, +a!

5an- of India, 7umbai 7ain 5ranch

The earlier holders of the 5an- of India name had failed and "ere no

longer in e'istence by the time a diverse group of :indus, 7uslims,

arsees, and Pe"s helped establish the present 5an- of India in 1<% It

"as the first in India promoted by Indian interests to serve all the

communities of India% At the time, ban-s in India "ere either o"ned by

&uropeans and served mainly the interests of the &uropean merchant

houses or by different communities and served the ban-ing needs of their

o"n community%

64

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Mumbai




The promoters incorporated the 5an- of India on * eptember 1<

under Act >I of 1==!, "ith an authori?ed capital of Rs% 1 million

divided into 1, shares each of Rs% 1% The promoters placed

;;, shares privately, and issued 9;, to the public by "ay of I@ on

B @ctober 1<6 the ban- commenced operations on 1 Kovember 1<%

The lead promoter of the 5an- of India "as ir assoon P% David (1=9H

1!<)% :e "as a member of the assoons, "ho in turn "ere part of a

5ombay community of 5aghdadi Pe"s, "hich "as notable for its history

of social service% ir David "as a prudent ban-er and remained the chief

e'ecutive of the ban- from its founding in 1< until his death in 1!<%

The first board of directors of the ban- consisted of ir assoon David,

ir #o"as8ee Pehangir, P% #o"as8ee Pahangir, ir Frederic- Meigh #roft,

Ratan8ee Dadabhoy Tata, $ordhandas Lhattau, Malubhai amaldas,

Lhetsety Lhiasey, Ramnarain :urnundrai, Penarrayen :indoomull Dani,

Koordin &brahim Koordin%

• 1<3 5@I founded "ith :ead @ffice in 5ombay%

• 1!13 5@I entered into an agreement "ith the 5ombay toc-

&'change to manage its clearing house%

•19<3 5@I opened a branch in Mondon, the first Indian ban- to do

so% This "as also the first post//II overseas branch of any

Indian ban-%

• 1;3 5@I opened branches in To-yo and @sa-a%

• 1;13 5@I opened a branch in ingapore%

65

http://en.wikipedia.org/wiki/Sassoon_J._David

http://en.wikipedia.org/wiki/Sassoon_(surname)

http://en.wikipedia.org/wiki/Ratanjee_Dadabhoy_Tata

http://en.wikipedia.org/wiki/Osaka

http://en.wikipedia.org/wiki/Sassoon_J._David

http://en.wikipedia.org/wiki/Sassoon_(surname)

http://en.wikipedia.org/wiki/Ratanjee_Dadabhoy_Tata

http://en.wikipedia.org/wiki/Osaka




• 1;B3 5@I opened a branch in Lenya and another in +ganda%

• 1;;3 5@I opened a branch in Tanganyi-a%

• 1<3 5@I opened a branch in :ong Long%

• 1<!3 5@I opened a branch in Kigeria%

• 1<*3 The $overnment of Tan?ania nationali?ed 5oIs operations

in Tan?ania and folded them into the governmento"ned Kational

#ommercial 5an- , together "ith those of 5an- of 5aroda and

several other foreign ban-s%

• 1<3 The $overnment of India nationali?ed the 19 top ban-s,

including 5an- of India% In the same year, the eoples Democratic

Republic of .emen nationali?ed 5oIs branch in Aden, and the

Kigerian and +gandan governments forced 5oI to incorporate its

branches in those countries%

• 1*3 Kational 5an- of outhern .emen incorporated 5oIs branch

in .emen, together "ith those of all the other ban-s in the country6

this is no" Kational 5an- of .emen% 5@I "as the only Indian ban-

in the country%

• 1*!3 5@I sold its +ganda operation to 5an- of 5aroda%

• 1*93 5@I opened a branch in aris% This "as the first branch of an

Indian ban- in &urope%

• 1*<3 The Kigerian government ac4uired <2 of the shares in

5an- of India (Kigeria)%

66

http://en.wikipedia.org/wiki/Tanganyika

http://en.wikipedia.org/wiki/National_Commercial_Bank


http://en.wikipedia.org/wiki/Bank_of_Baroda

http://en.wikipedia.org/w/index.php?title=National_Bank_of_Yemen&action=edit&redlink=1

http://en.wikipedia.org/wiki/Tanganyika



http://en.wikipedia.org/wiki/Bank_of_Baroda

http://en.wikipedia.org/w/index.php?title=National_Bank_of_Yemen&action=edit&redlink=1




• 1*=3 5@I opened a branch in Ke" .or-%

• 1*s3 5@I opened an agency in an Francisco%

• 1=*3 5@I too- over the three +L branches of #entral 5an- of

India (#5I)% #5I had been caught up in the ethia fraud and

default and the Reserve 5an- of India re4uired it to transfer its

branches%

• !B3 5@I opened a representative office in hen?hen%

• !;3 5@I opened a representative office in >ietnam%

• !<3 5@I plans to upgrade the hen?en and >ietnam

representative offices to branches, and to open representative

offices in 5ei8ing, Doha, and Pohannesburg% In addition, 5@I plans

to establish a branch in Ant"erp and a subsidiary in Dares

alaam, mar-ing its return to Tan?ania after B* years%

• !*3 5@I ac4uired *< percent of Indonesiabased T 5an-

"adesi%

• !113 5@I opened a fully o"ned ubsidiary in Auc-land, Ke"

ealand on < @ctober !11 (5an- of India (Ke" ealand) Mtd%)

• !1!3 5@I opened a fully o"ned subsidiary in +ganda on 1= Pune

!1! (5an- of India (+ganda) Mtd%)%

• !1B3 5oI opened a fully o"ned subsidiary in 5ots"ana on

August !1B (5an- of India (5ots"ana) Mtd%

67

http://en.wikipedia.org/wiki/Central_Bank_of_India


http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/Shenzhen

http://en.wikipedia.org/wiki/Doha

http://en.wikipedia.org/wiki/Johannesburg

http://en.wikipedia.org/wiki/Antwerp

http://en.wikipedia.org/wiki/Dar-es-Salaam


http://en.wikipedia.org/w/index.php?title=PT_Bank_Swadesi&action=edit&redlink=1




http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/Shenzhen

http://en.wikipedia.org/wiki/Doha

http://en.wikipedia.org/wiki/Johannesburg

http://en.wikipedia.org/wiki/Antwerp








Q

FINDIN<S

/hile selling abroad, importers may undergo #redit ris-, #urrency

ris-, #arriage ris- and #ountry ris-% These ris-s can be insured to a great

e'tent by ta-ing appropriate steps% #redit ris- against the buyer can be

covered by insisting upon an irrevocable letter of credit from the overseas

buyer% An appropriate policy from &'port #redit and $uarantee

#orporation of India Mtd% can also be obtained for this purpose% #ountry

ris-s are also covered by the &#$#% As regards currency ris-, i%e%

possible loss due to adverse fluctuation in e'change rate, importer should

obtain for"ard cover from his ban- authori?ed to deal in foreign

e'change% Alternatively, he should obtain e'port order in Indian rupees%

#arriage ris-, i%e% possible loss of cargo in transit can be covered by

ta-ing a marine insurance policy from the general insurance companies%

Indian e'porters "hile selling abroad may face various commercial

and political ris-s% The commercial ris-s may arise due to insolvency of

the buyer6 failure of the buyer to ma-e the payment due "ithin the

specified period6 or buyers failure to accept the goods, sub8ect to the

given conditions% /hile, the political ris-s may be due to imposition of

restrictions by the $overnment of the buyers country or any $overnment

action "hich may bloc- or delay the transfer of payment made by the

68




buyer6 "ar, civil "ar, revolution or civil disturbances in the buyers

country%

:ence, in order to ensure safe and successful overseas e'pansion

plans it is necessary to provide a comprehensive insurance cover against

all such ris-s faced by an entrepreneur% uch an insurance facility see-s to

create a favorable climate in "hich investors including e'porters can get

timely and liberal credit facilities from ban-s at home% &#$# provides a

range of credit ris- insurance covers to e'porters against loss in e'port of

goods and services as "ell as offers guarantees to ban-s and financial

institutions to enable e'porters to obtain better facilities from them%

69




T$e I,e)p)e,a,*o /a,$e)e% f)o( ,$e p)*(a)y %a,a e)e:

As other leading ban-s in india, 5an- of India is also actively involved

in &JI7 finance% Follo"ing are the Interpretation after doing survey

through 4uestionnaire 3

1% 5@I collect import bills on behalf of their client from third party%!% 5@I provide K@TR@ AE# services to importer and e'porter%B% 5@I discount bills in form of Metter @f #redit9% Kegligible scopeE small scope for default in &JI7 finance

repayment is speculated by the ban-, after due ris- assessment

before providing &JI7 loanE advancesE finance%;% To recover the loanE advanced for"arded to &JI7 client E loanee,

ban- hold charge over assets G holdings, mortgage G also pledge

over assets%<% &'port bills rediscounting G refinance facility of e'port credit is

available in 5@I%*% 5an- do not provide &JI7 finance facility to nonban- clients%=% 5@I is ta-ing due care of their &JI7 finance by the "ay of ris-

assessment of their clients G also or pledge over their assets%

LIMITATIONS O$ T%E PRO&ECT

The Stu! "#$e%& #'(! 1 B)'* +' et)+(&,

70




The &tu! +& &u-.e"t t# (+/+t)t+#' # t+/e +,e, 2

/#'th&

The t#+" -e+' $)&t the &tu! h)& -ee'

(+/+te t# #'e -)'*+' +'&t+tut+#' ')/e(! SIDBI,

The /).#% (+/+t)t+#' e'"#u'te%e u%+' the

&tu! )& the t+/e %)/e +th+' h+"h the

%#.e"t h) t# -e "#/(ete,

CONC>USION

#redit and finance is the life and blood of any business "hether

domestic or international% The payment terms ho"ever depend upon the

71




availability of finance to e'porters in relation to its 4uantum, cost and the

period at preshipment and postshipment stage%

The providers of e'port and import finance also e'tend advisory

and planning assistance to the importers and e'porters% The $overnment

of India and R&&R>& 5AKL @F IKDIA has conceived various

schemes to stimulate and support e'ports and imports% Thus this

speciali?ed form of financing of foreign trade is a crucial contributor to

"orld industrial development of the country%

T$e +*//es, +eef*, of *(po), a% e7po), f*a#*/ *s ,$a, ,$e

#o(pay *'' /e, ,$e o)!*/ #ap*,a' ee%e% fo) /)o,$

The financing solutions "ill enhance a company0s cash flo" by

ensuring that the company and its suppliers are paid in a timely fashion%

The funding "ill help in ta-ing on ne" opportunities, both locally and

internationally% 5enefits include3

1% #ommercial trade credit verification services and help to establish

credit limits for national and international customers%

!% redictable cash flo"3 Advancing funds against invoices, providing

"or-ing capital to pay employees and suppliers%

B% Financing to pay suppliers allo"ing the company to deliver its

large purchase orders%

9% For Importers3 Import financing E purchase order financing handles

supplier payments for large purchase orders enabling to ta-e on

orders and deliver orders that in the past "ould have e'ceeded its

"or-ing capital capabilities%

72




ANNE6URE

1% Do you collect import bills on behalf of your customer

73




Ans3 .es Ko

!% hould importer G e'porter maintain Kostro account "ith you to

enable international trade

Ans3 .es Ko

B% Do you discount bill dra"n under letter of credit as "ell as outside it

Ans3 .es Ko

9% Is their scope for default in loan repayment by e'porter G importer

Ans3 .es Ko

;% Do you hold any charge Emortgage Epledge over their assets through

"hich you can recover your outstanding loan

Ans3 .es Ko

<% Do you avail e'port bills rediscounting G refinance facility of e'port

credit from Reserve 5an- of India and &'port Import ban- of India

74




Ans3 .es Ko

Ko*% Are you giving bill discounting facility to non ban- customers as

"ell

Ans3 .es Ko

=% If yes, "hat are the general guidelines for the same

Ans3 .es Ko

75




APPENDI6

76




BIB>IO<RAPHY

77




Boo!s )efe)e#e:

International Financial 7anagement Peff 7adura%

Finance of Foreign Trade and

F@R&I$K &J#:AK$& #%Peevanandam% International 5usiness #harles /M :ill%

International 5an-ing cott 5% 7acdonald%

Foreign Trade%

Import H &'port rocedure G Document%

EB>IO<RAPHY

///%yahoo%co%in

///%google%co%in

///%rediff%com

///%e'imban-%org

http://www.yahoo.co.in/

http://www.google.co.in/

http://www.rediff.com/

http://www.eximbank.org/

http://www.yahoo.co.in/

http://www.google.co.in/

http://www.rediff.com/

http://www.eximbank.org/