MODULE 14:- EXPORT FINANCE - BANK SCHEMES

LEARNING OBJECTIVES

-To understanding why export finance is required by exporter.

-Understand Pre-shipment stage and financial requirements.

-Understand scheme of pre-shipment finance in Foreign Currencies by

banks.

-Learn latest guidelines of interest rates on pre-shipment finance in Rupee.

-Understand pre shipment finance in Foreign Currencies to reduce cost of

borrowings.

- Understand basic nature of post shipment finance given after shipment of

goods

- Help in selecting the right finance scheme to reduce the cost fund
required to complete export transaction.

Financial assistance given by the banks, to exporter during, pre and post
shipment period, to meet the financial requirements at concessional interest
rates and on urgent basis.

1.0.0. MAIN FINANCIAL CHALLENGES OF EXPORT BUSSINESS

1.1.0 Export is a long period involved transaction with very high risk sale
transaction to the foreign buyers. Selling overseas requires, different marketing
and financial strategies as compared, to domestic business. Delivery of goods
takes longer periods with complex payment terms and complicated sale
realization settlement procedures. Presently, foreign buyers are demanding
longer credit periods, best quality at world class prices with strict delivery
schedules. To meet these challenges the exporter needs higher finance
assistance for long periods. Cheap and adequate financial helps are essential
inputs to achieve success in export business.

Exporter needs finance either to manufacture or to procure the goods from other
manufacturers as per, the specific requirements of the foreign buyers.
2.0.0 EXPORT FINANCE UNDER BANK SCHEMES

First and easy source of export finance is form the bank. Exporter should open a
current account under know your customer guidelines with a branch of the
bank, which has been authorized to deal in foreign exchange business.

Please note, export is a disciplined business transaction, which requires strict

adherence to time schedule of shipment of goods to ensure timely delivery of
goods or services to the importer. Strict time management and monitoring are
required to complete the export transaction. It should be appreciated that foreign
buyer has already made commitment to his customers. Delays in shipment of
goods may lead to claims and bad impression of importer in its market. Your
late supply will result in buyer to loose creditability with its local customers by
not meeting delivery schedule.

2.1.0, BASICS NATURE OF BANK FINANCING SCHEME

2.1.1. Bank will provide finance to meet expenses, required to acquire raw
material and manufacturing expenses or in case of trader exporter provide
financial assistances, to procure goods from local manufacturers, so to,
complete the export order. After shipment, bank will preferably adjust this pre
shipment loan by purchasing or discounting of the relative export documents.
Finally, export finance outstanding of bank loan will be adjusted from the
realization of the relative export payments from the foreign buyer by the bank.
Bank structures the transaction, in such manners that payment from the foreign
buyer is always collected by the exporter bank.

2.2.0 COMPLETE EXPORT TRANSACTION

Complete export transaction has following three dates called date of receipt of
export order, shipment of goods and receipt of export payment. In case, any one
of these dates is missing, it will make the export transaction incomplete.

PRESHIPMENT STAGE POSTSHIPMENT S AGE

Date of Receipt of Date of Shipment Date of receipt of

export order export payment
2.2.1 Essential dates to complete the export transaction are as under :

1. Date of receipt of export order from the foreign buyer in the form of
confirmed order or letter of credit.
2. Date of shipment. Date on which goods loaded on the ship, airplane or any
other mean of transportation.
3. Date of realization of the sale proceeds of exported goods or services in the
nostro (foreign currency) account of the bank.

3.0.0 PRE AND POST SHIPMENT STAGES OF THE EXPORT

TRANSACTION

Exporter needs finance at the pre-shipment stage, to meet working capital

requirements and at post-shipment, to meet funds requirements during
credit period which has been given to the foreign buyer. Firstly, we shall
understand and discuss Pre-shipment Stage finance.

3.1.0. PRESHIPMENT STAGE

This stage starts with date of receipt of export order from the foreign buyer and
ends with date of shipment of the goods. This period is designated by the banks
as PRESHIPMENT STAGE. Which simply depends on the manufacturing
activities and time required to complete them or in case of trading, exporter
requires funds to procure the goods from other manufacturers plus time taken,
to transport them to the local port or airport etc.

3.2.0 PRESHIPMENT FINANCE BANK SCHEME

3.2.1 Pre-shipment Finance is given by Banks to Exporter, to meet their

working capital requirements relating to export activities. This working capital
finance is provided to exporters, in Rupees as well in Foreign Currencies as per
their choice. Bank provides pre shipment finance under following schemes:
• Packing Credit Advance or Shipping Loan in Indian Rupee.
• Packing Credit Advance in Foreign Currencies (PCFC) i.e US Dollar, Euro,
Pound Sterling ,Yen and any other convertible currency available with the
bank.
• Advances against Export Incentives.
• Opening of letter of Credit and Import Finance required for imported items
to be used in the manufacture of goods for exports.
Clear understanding of these schemes will help the exporter, to select the most
appropriate finance scheme from the Bank.

3.3.0. MAIN FEATURES OF PACKINGCREDIT FOR EXPORTERS

Followings are main feature of pre shipment finance scheme of the bank.

Finance provided at the pre shipment stage which mean before date of
shipment. It is designated as Packing Credit. Some banks provide facilities till
goods are placed in the warehouse, for custom clearance and designate it as
Shipping Loan instead of Packing Credit. Salient features of packing credit or
Shipping Loan given by the Bank to eligible Exporters are as under:

3.3.1. DEFINITION:

Packing credit means any loan or advance granted by bank to an exporter for
financing the purchase,processing, manufacturing, packing, local transporting
and warehousing of the goods prior to shipment. This facility is given by banks
to new exporters, on the basis of production of letter of credit opened in their
favor or in the favor of some other person or against confirmed order or any
other such evidence of export order. In case of established exporters, lodgment
of export order or letter of credit has been waived to avail pre shipment. But
evidence has to be submitted to the bank within stipulated period after availing
of bank finance.

3.3.2. PURPOSE OF THE LOAN

Purpose of this advance depends on the business activity of the Exporter.
Finance is given to purchase raw materials, processing, meet labor expenses,
packing of finished goods, transporting to port or airport and warehousing of the
goods for exports. In case of merchant exporter, finance is given for purchase of
finished goods from some manufacturer and for packing and transporting the
goods to ports or airports.

Exporters involved in export of services are given financial assistance to meet

labor costs, training and visiting expenses, electronic transmission etc. and
expenses of other inputs required, to complete the service package as per
requirement of the foreign buyer.

3.3.3.QUANTUM OF PACKING CREDIT ADVANCE

Normally packing credit advance granted to exporters should not exceed the
FOB (FREE ON BOARD) value of the goods or the cost of the goods,
whichever is lower except in the following cases:
Certain items like engineering goods where cost of production is more than
FOB value of the goods. As these goods are eligible for export incentives under
duty drawback schemes. An advance up to the domestic value is given by the
bank, to the exporter provided ECGC gives Export Production Finance
Guarantee to the bank. Bank adjusts packing credit, in such special cases mainly
from export sale realizations and remaining amount from the receipt of
incentives by the Govt. agency which are always routed through them.

3.3.4. MARGIN REQUIREMENTS FOR PACKING CREDIT ADVANCE

Margin means exporters’ contribution, to meet cost of the goods or services for
the exports. There are no fix stipulation by banks. Bank may determine the
percentage of margin depending on the basic nature of the goods. In case of
perishable goods, banks may keep higher margins. Other factors to decide
percentage of margins are capacity of the exporter past track record and the
credit standing of foreign buyer. If these factors are satisfactory bank may agree
to keep lower margins. The margin varies from 10% to 25%.

3.3.5. PRESCRIBED INTEREST RATES AND PERIODS OFPACKING

CREDIT ADVANCE
Reserve Bank of India has decontrolled the interest rates applicable to export
finance. Now, Banks are free to fix interest rates for export finance. Period of
packing credit is decided based on the actual manufacturing cycle of goods or
period required to arrange them services for export. The maximum period of
packing credit advance is 270 days at prescribed rate of interest.
If exports is completed within 360 days from the date of advance, then
concessional export interest will be charged from day one till date of shipment.
If exports do not take place at all. In such case, interest rate at commercial
lending rate plus penalty decided by the bank will be charged from the date of
original advance.

3.3.6. INTEREST RATE

Exporter should check latest applicable interest from the bank for packing credit
scheme. At present the interest rate structure for Rupee Export Credit applicable
as under:

PERIOD OF CREDIT INTEREST RATE

Up to 270 days Bank Base Rate related

Beyond 271 days up to 360 days Bank Base rate related

To obtain latest Information relating to applicable latest interest rates for export
finance charged by your bank, please visit the website of the concerned Bank.

3.3.7. REPAYMENT OF PACKING ADVANCE

Packing credit is a trade credit scheme and is self-liquidated in nature.

Normally, packing credit at pre-shipment stage is adjusted by banks from the
proceeds of relative export documents or bills. This system converts, Pre-
shipment credit into Post shipment credit of the bank. It should be noted that
this is not final repayment of export credit. It is just conversion of pre-shipment,
to next stage of post shipment stage, so that banks may have better control on
finance transaction.

3.4.0 PACKING CREDIT DISBURSEMENT TO EXPORTER

Packing Credit advances are given to exporter, to meet specific requirement of

the export transaction. Bank will ensure the end use of the funds given to the
exporters. Exporter will submit the request letter containing details of expenses
with purpose and payment schedule to the bank. Banks will insist to make
payment to the supplier of raw material and other accessories by electronic
payment method or by draft in their names. In this way major payments are
made in the name of suppliers in their bank accounts, to ensure end use of the
export credit.

Where payments are small like labor charges and patty expenses, in such cases,
bank will credit such funds, to the current account of the exporter. Thereafter,
exporter can make small payments through this account.

4.0.0 EXPORT CREDIT IN FOREIGN CURRENCY FOR EXPORTERS.

With a view to make the credit available to exporters at internationally

competitive low interest rates, banks may extend pre-shipment Credit in
Foreign Currency (PCFC) to exporters for arranging domestic and as well
as imported inputs required for export of goods.

.1.0 PACKING CREDIT FINANCE SCHEME IN FOREIGN

CURRENCIES (PCFC)

4.1.1. Packing Credit in Foreign Currency Scheme (PCFC SCHEME)

PCFC scheme has been introduced, with a view to make export credit available
to exporters, at internationally competitive low interest rate. PCFC is granted to
exporters for acquiring imported and domestic inputs at
LIBOR/EUROLIBOR/EURIBOR linked interest rates. It is pre shipment loan
facility to meet working capital requirements of the exporter at low interest rate.

4.2.1. SALIENT FEATURES OF PCFC BANK SCHEME

Following are main salient features of pre shipment finance in foreign currency,
to eligible exporters:

The scheme is an additional window for providing pre-shipment credit in major

foreign currencies for short periods to Indian exporters at internationally
competitive low interest rates. The exporter will have the following options to
avail of export finance under this:

1. To avail of pre-shipment credit in Rupees and then the post-shipment credit

either in Rupees or in Foreign Currency.
2. To avail of pre-shipment credit in foreign currency and postshipment credit
also in foreign currency.
3. To avail of pre-shipment credit in rupees and then convert drawals into
packing credit in foreign currency(PCFC) at the discretion of the bank subject to
availability of foreign currency resources.
4. The facility may be extended in one of the convertible currencies viz. US
Dollars, Pound Sterling, Japanese Yen, Euro, etc.
5. Bank may extend credit in a currency other than export invoice currency
depending on requirement of exporter with currency risk to be for exporter.

4.2.1.GUIDELINES FOR INTEREST RATE FOR PCFC

Banks are now free to decide to charge interest on export credit in foreign
currency to exporters. Please check up with your dealing bank by referring their
website for interest rates for export advances.

4.2.2. PERIODS AND INTEREST RATES APPLICABLE TO PCFC

SCHEMES

Banks normally charge interest rates on packing credit in foreign currency

based on LIBOR rate for the concerned currency plus spread. Spread is the extra
margin charged by the banks over and above the basic interest reference rate
(LIBOR London interbank offered rate ) of the concerned currency. Normally
the lending rate by the bank to the eligible exporter should not exceed over
LIBOR/EURIBOR of the concerned currency plus prescribed spread excluding
withholding tax. Present guidelines are 6LIBOR + 3.5% up to the period of 180
days.
Banks will charge additional interest of 2% over and above the prescribed
interest rate for extended period after 180 days to 360 days. For example:
interest rate on PCFC in USD is 6LIBOR + 3.5%(0.5% + 3.5% =4% p.a ) for
180 days. For period taken more than 180 days to 360 days, interest will be
6LIBOR + 5.5% (0.50% +5.50% = 6.0% p.a.

If no exports take place within 360 days then PCFC amount in foreign currency
will be converted into Rupees equivalent by applying T.T selling rate of the
concerned currency. Penal interest rate will be changed as per the specific
policy of the concerned bank.

Exporter has choice to avail pre shipment finance in Rupee or in Foreign

Currency for export transaction. PCFC facility helps the exporter to reduce cost
of financing the export transaction.

In case exporter avails the export finance in USD and gets the export payment
also in USD. Such an arrangement has natural hedging against change in
exchange rates of foreign currency against INR.

4.2.3 HOW PCFC IS GIVEN TO THE EXPORTER

In case full amount of PCFC or part thereof is utilised to finance domestic input,
banks may apply appropriate spot rate and calculate the Rupee requirement of
the exporter. Bank will give Rupee equivalent to exporter for arranging the local
inputs. In the books of the bank loan amount will be in Foreign Currency and
attract low interest rate. Exporter can also utilize foreign currency loan for
import of inputs required for export transaction.

5.0.0 POST SHIPMENT FINANCE SCHEME OF BANKS

5.1.0. POSTSHIPMENT EXPORT FINANCE IN RUPEES

Exporter needs financial assistance at post shipment stage which starts after the
date of shipment of the goods. We have Pre shipment finance enables the
exporter to arrange the goods and ship them. After shipment exporter has to
wait for the receipt of export payment. Duration of this waiting period depends
upon the credit period given to the foreign buyer. To meet shortage of cash
during this waiting period, bank provides post shipment finance. It is an
extension of already existing pre shipment finance. Thus, Exporter will avail
export finance in steps, first as pre shipment and then finally as post shipment
finance.
5.2.0 EXPORT BILLS PURCAHSE,DICOUNT AND NEGOTIATION BY
THE BANK

This type of finance converts credit sales of exporter into cash sales. Bank will
purchase, discount or negotiate export documents after shipment in post
shipment stage.

Where exporter gives credit period to buyer for payment, in such case time or
tenor bill of exchange will be drawn by the exporter. Tenor of the bill will
depend on the credit period given to the foreign buyer. Bank in such cases will
discount the time or usance bill of exchange by deduction of interest cost for
total period comprising of usance period, normal transit period and grace
period, if applicable. Balance amount after adjusting pre shipment fiancé
liability will be given to exporter.

5.2.1.TYPES OF POST SHIPMENT FINANCE VAILABLE TO

EXPORTERS

Banks have classified post shipment finance facilities as follows:

• Negotiation of export bills under Letter of Credit - FOBL/C (foreign outward

bills under letter of credit).
• Purchase/Discount of export bills under confirmed order - FOBP (foreign
outward bills purchased).
• Advance against export bills sent on collection basis but subsequently,
advance is granted to exporter - FABC (advance against foreign bill sent on
collection).
• Advance against bills sent on consignment basis.
• Advance against Export Incentives.
• Advance against retention money by foreign buyer for verifying quality and
quantity etc.
• Advance against approved deemed export.

5.2.2. MAIN FEATURE OF POST SHIPMENT FINANCE ARE AS

UNDER:

5.2.3. DEFINITION

Post-shipment credit means any loan or advance granted by the bank, to an

eligible exporter of goods or services from the date of shipment of the goods up
to the date of realization of export sales proceeds. It also includes loan or
advance granted to exporters in anticipation of getting duty drawback under
Govt. of India schemes. The purpose of finance is to provide liquidity to
exporter during the credit period given to the foreign buyer or waiting for
incentives.

5.2.4. ELIGIBILITY FOR POSTSHIPMENT FINANCE

Bank provides this finance automatically to exporters, who are availing pre-
shipment advance from them. But exporter not availing pre-shipment advance
may avail post-shipment advance from the bank. Post-shipment advance is
always extended against evidence of shipment of goods. Complete set of
documents required by the bank, must be submitted within 21 days from the
date of shipment.

5.2.5. PURPOSE AND QUANTUM OF POSTSHIPMENT FINANCE

Post-shipment finance is basically an export sale finance given by banks in the

form of bill purchased or discounted. The main purpose is to finance export
sales claims of the exporter, after the date of shipment of the goods up to date of
realization of sales proceeds. Exporter gets immediate cash flow relating to
export sales.

5.2.6.INTERESTRATE FOR POST-SHIPMENT ADVANCE

Period of post shipment finance

(a) In case of demand export bills, the period of advance will be NORMAL
Transit Period as prescribed by Foreign Exchange Dealers Association.

NTP means period involved from date purchase/discount or negotiate till the
receipt of export bill payment in the concerned foreign currency ( nostro)
account of the bank at the foreign center. Please note, it should not be confused
with the time taken for the arrival of goods at the overseas destination of
buyer’s country.

Following are the guidelines for charging interest rates on post shipment
finance.

On demand bills for Transit period Bank Base plus 3.5% p.a.

Usance Bills For total period comprising

ofusance period, transit period 1 – 180
days Bank base rate plus
Against incentives receivable from Bank Base Rate plus 3.5% by GOVT
covered by ECGC guarantee
Up to 90 days
Against undrawn balances up to 90 days. Do
Against retention money payable within Do
one year from date of shipment up to
90 days
Deferred Credit for the period more than As per Bank policy
180 days

Post shipment finance can be availed up to 360 days from date of shipment.
Exporters are advised to contact the branch of the bank to find out the latest
interest rates for post shipment finance.

5.2.7. METHOD OF ADJUSTING OF POST SHIPMENT FINANCE

Normally, post shipment credit of the bank should be adjusted from the
proceeds of export bills from abroad duly paid by the foreign buyer of goods or
services. It can also be repaid/prepaid out of the balances held in Exchange
Earner Foreign Currency Account (EEFC A/C) or from collection proceeds of
any unfinanced export bill of the exporter. This facility has been granted to
exporters in order to reduce the interest cost to exporters. Exporters with
overdue export bills may also adjust their post shipment credit form their rupee
funds.

5.2.8. NEGOTIATION OF BILLS UNDER LETTER OF CREDIT

Letter of credit is internationally recognized and accepted method of payment in

international trade transactions. Letter of credit protects, the business interest of
the exporter and importer. It ensures payment to exporter on time and supply of
goods as per requirement to importer. In case of new foreign buyer with low
creditworthiness and with high country risk, letter of credit provides safety of
payment to exporter.

Under Letter of Credit payment is made to exporter based on documents only.

All the care should be taken to prepare the documents strictly in terms of letter
of credit. Exporter gets payment if terms and conditions of L/C are complied
with documents. L/C ensures payment from the bank based on documents not
on goods. L/C opening bank makes payment to exporter and replaces the risk of
non-payment by buyer.
5.3.0 RUPEE EXPORT CREDIT INTEREST RATE SUBVENTION (
INTEREST EQUILISER SCHEME)

Subvention is the facility given as rebate in the Rupee interest rate to exporters
availing finance in INR and belong to employment oriented including small
scale sectors. Rupee export credit interest rate subvention scheme was
introduced by Govt. of India in 2007, to certain specified sectors. during Rupee
appreciation period. Since then, this scheme is being extended on yearly basis.
Subvention in interest rate is applicable at pre shipment stage for the period of
180 days and for post shipment stage for a period of 90 days. Presently, interest
equalizer of 3.50 p.a. is applicable. It is advisable to contact the bank about the
applicable rate.

6.0.0 POST SHIPMENT FINANCE IN FOREIGN CURRENCY

6.0.1 INTRODUCTION

Like pre shipment credit (refer to lesson covering pre shipment finance
schemes) exporters are also eligible for post shipment credit in foreign
currencies under discounting/rediscounting of export bills scheme of the banks.
This facility will be an additional window available to exporters along with
existing post shipment finance in Rupees. Exporter may avail either finance in
Rupee or Foreign Currency. This scheme provides an opportunity to exporters
to avail post shipment finance at international competitive interest rates which
reduces the cost of financing the export transactions.

6.0.2. EXPORTER’S CHOICE

Exporters have the option to avail of pre shipment credit, post shipment credit
either in Rupee or in foreign currency. However, if the pre shipment credit has
been availed in foreign currency, the post shipment credit has to be in foreign
currency to adjust pre shipment credit. For example exporter may avail pre
shipment finance in foreign currency and post shipment finance in same foreign
currency. However, if exporter avails pre shipment credit in Rupee, bank may
grant post shipment credit in foreign currency. Even if pre shipment credit is
not availed. Exporter is eligible for foreign currency credit in post shipment.
Banks are allowed to interchange Rupees export finance limits into foreign
currency limits. For example if bank has fixed Rupees Ten million as export
credit limit, exporter can avail it in Rupee as well as in equivalent foreign
currency say in USD.

6.1.0 SCHEME FOR FOREIGN CURRENCY LOANS

The salient feature of the scheme is as under:

• Post shipment will be in foreign currency and interest will also be charged in
that foreign currency. This loan will be adjusted from the foreign currency
sale proceeds of the export bill.
• This scheme mainly covers bill with usance period up to 180 days from date
of shipment. In case exporter is eligible to extend credit period more than
180 days, credit can be provided at applicable interest rates which is 2% p.a.
higher than for prescribed period.
• Loan can be availed in any convertible currency like USD, Pound Sterling,
Yen, and Euro or in any convertible currency. It is always better to take loan
in the same currency in which invoice will made to avoid currency risk.
• The proceeds of the foreign currency may be utilized by exporter to adjust
PCFC in foreign currency at pre shipment stage or Rupee equivalent value
can be used to adjust packing credit advance in Rupees.
• ECGC will provide policy to exporter for claims in Rupees not in foreign
currency.

6.1.1. INTEREST RATE

RBI has removed control on Interest rate ,Banks are now free to determine
the interest rates for export finance in foreign currencies. Present
guidelines are as under:

On Demand bills Not exceeding 3.5 LIBOR

LIBOR/EURIBOR for NTP as prescribed by FEDAI (NTP =
Normal Transit period) period)

1. Usance bills up to 6 months from Not exceeding 3.5% of

date of shipment including Usance LIBOR/EURIBOR
Period, NTP and Grace Period

• As per FEDAI guidelines, overdue export bill will be crystallized after 30

days from due date or as per the requirement of the exporter. Rate of interest
will be charged 2%p.a. over and above LIBOR plus 3.5% from due date to
date of crystallization. Crystallization mean foreign currency amount will be
converted into Rupees at bank’s TT selling rate to protect against adverse
movement in exchange rates of the foreign currency loan amount.

LEARNING OUTCOMES: APPLICATION OF KNOWLEDGE

CASE STUDY WITH SOLUTION

JAZVIN & Company has received an export order of USD 25000

(approximately INR 1750000) for export of children garments from the buyer in
Tanzania. Foreign buyer wants the credit period of 60 days from the date of
shipment. Importer is not supplying letter of credit.

Exporter has machines installed in rented space, to manufacture garments with

the arrangement of skilled labor. Company needs finance at low cost, to meet
the working capital requirements, to execute the order. Exporter is dealing first
time with buyer and also wants the solution for nonpayment risk by the importer
in Africa.

Exporter needs following financial requirements:

Purchase of stock of fabric : ₹ 1050000

Purchase of buttons, thread and inputs : ₹ 25000
Labor charges : ₹ 150000
Charges for Packing in special cartoons : ₹ 40000
Local transportation charges up to Port : ₹ 60000

Exporter has given credit period of 60 days from date of shipment to importer.

Suggest the cheapest source of finance and solution for nonpayment risk of
Tanzanian buyer.

SOLUTION

Cheapest source of finance to the exporter is the Bank Export Trade Finance
scheme for financing pre-shipment and post-shipment activities for export of
goods.

Calculation of pre-shipment fiancé is as under:

Total pre-shipment requirements : ₹ 1325000

Margin from exporter 10% : ₹ 135000

Pre-shipment Advance or Packing credit advance:

Total working capital requirement of exporter : ₹1325000

Less Margin money 10% contribution of the exporter :₹ 132500

Packing credit loan given by bank : ₹ 1192500

To reduce the cost of interest exporter should request the bank to give
Packing credit advance in USD at the rate of USD = INR70 will be USD
17035.71. USD packing credit will attract interest rate of say 4% p.a. for the
period of manufacturing till date of shipment. As compared to Rupee packing
credit with interest of 8% p.a. after adjustment of subvention interest concession
facility.
Similarly, bank will provide post shipment facility starting from date of
purchase of export bill till receipt of export payment. It can be availed in INR or
USD. It will be advisable to avail post shipment facility of discounting the
export bill of USD25000. Bank will deduct interest for 60days at rare of 4% p.a.
and also adjust the pre-shipment finance liability with interest and release the
balance amount to the exporter. Post shipment facility is the extension of loan
facility given at pre-shipment stage. Bank will adjust the post shipment liability
on receipt of payment from the foreign buyer through bank channels.

REVIEW OF LEARNING OUTCOME

1, Understanding of various bank scheme for financing export transaction.

2. Understand pre and post-shipment stages activities and financing schemes.
3. How to use foreign currency finance schemes to reduce the cost of export
finance.
4. Selecting low cost export finance scheme of banks and ECGC policy of
management of non-payment risk by foreign buyer.