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The rate of interest depends on the nature
of the Bills, i.e., whether it is a demand bill or usance bill. Like
pre-shipment, post-shipment finance is also available at concessional
rate of interest. Present Rates of interest are as under:
Demand Bills for
transit period Not exceeding ( as specified by FEDAI) 10% p.a.
Usance Bills (for total period
comprising usance period of ex-port bills, transit period as
specified by FEDAI and grace period, wherever applicable:
(a) Upto 90 days 10% p.a.
(b) Beyond 90 days and upto six 12% p.a.months from the date of
shipment.
(c) Beyond six months from the 20% date of Shipment (Minimum)
Against duty drawback etc., receive- Not
exce-vable from Government covered by adding 10%ECGC guarantees (upto 90
days) p.a. 4. Against undrawn balance (upto 90 days) -- do -- 5.Against
retention money (for suppl- -- do -- ies portion only) payable within
one year from the date of shipment (upto90 days)
Normal Transit
Period:Foreign Exchange
Dealers Association of India (FEDAI) has fixed transit period for export
bills drawn on different countries in the world. The concept of this
transit period is that an export bill should normally be realised within
that period. The transit period so fixed by FEDAI is known as 'Normal
Transit Period' and mainly depends on geographical location of a
particular country.
Direct and
Indirect Bill:If the
currency of the bill is the same as the currency of the country on which
it is drawn, it is termed as direct bill, e.g. an export bill in US $
drawn on a place in U.S.A. However, if the currency of the bill in which
it is drawn is different than the currency of the country on which it is
drawn, it is termed as indirect bill, e.g. an export bill in US $ drawn
on a place in Japan. The normal transit period fixed for indirect bill
is on higher side as compared to transit period fixed for direct bills.
Notional Due
Date:To determine the due
date of an export bill we have to consider the following 3 components:
(1) Normal transit period as fixed by FEDAI (2) Usance period of
the bill (3) Grace period if applicable in the country on which the bill
is drawn. Grace period is applicable only in the case of usance bills.
The notional due date of an export bill may thus be calculated after
adding all the above 3 components The concessional rate of interest is
chargeable upto the notional due date subject to a maximum of 90 days.
- FORFAITING
FINANCE BY AUTHORISED DEALERS:Reserve
Bank has now permitted the authorised dealers (Banks) to arrange
forfeiting of medium term export receivables ð 7 3 on the same
lines as per the scheme of EXIM Bank and many International
forfeiting agencies have now become active in Indian market.
Forfeiting may be usefully employed as an additional window of
export finance particularly for exports to those countries for which
normal exports credit is not intended by the commercial banks.It
must be noted that charges of forfaiting are eventually to be passed
on to the ultimate buyer and should, therefore, be so declared on
relative export declaration forms.
- EXTERNAL
COMMERCIAL BORROWINGS:Proposals
for raising foreign currency loans/credits viz., Buyer's Credits,
Supplier's Credits or Lines of Credits by firms/companies/lending
institutions, banks, etc. for financing cost of import of goods,
technology or for any other purposes, other than short-term
loans/credits maturing within one year should first be submitted to
government of India, Ministry of Finance (Department Economic
Affairs), ECB Division, New Delhi for necessary clearance. The
proposals are considered by the government on merits of each case
and in the light of prevailing Government policy. For details refer
to (1) NABHI'S FOREIGN EXCHANGE MANUAL & (2) NABHI'S MANUAL OF
SEBI GUIDELINES ON CAPITAL ISSUES, EURO ISSUES, MERCHANT BANKNG
& MUTUAL FUNDS
- EXIM
BANK FINANCE:Besides
commercial banks,export finance is also made available by the EXIM
bank. The EXIM bank provides financial assistance to promote Indian
exports through direct financial assistance , overseas investment
finance, term finance for export production and export development,
pre-shipment credit, lines of credit, re-lending facility, export
bills re-discounting, refinance to commercial banks, finance for
computer software exports, finance for export marketing and bulk
import finance to commercial banks. The EXIM Bank also extends
non-funded facility to Indian exports in the form of guarantees. The
diversified lending programme of the EXIM Bank now covers various
stages of exports, i.e. from the development export markets to
expansion of production capacity for exports, production for export
and post shipment financing. The EXIM Bank's focus is on export of
manufactured goods, project exports, exports of technology, services
and export of computer software.
- Forfaiting Finance from EXIM Bank:A
new financing option for the Indian exporters is available under the
forfaiting finance Scheme recently introduced by the EXIM Bank.
Forfaiting is a form of trade finance involving discounting of
medium-term export receivables with or without recourse to the
exporter. The arrangement envisages discounting by Indian exporters
of bill of exchange/promissory notes relating to export transactions
which are "avalised" or guaranteed by the buyer's bankers
with overseas forfaiting agencies on "without recourse"
basis.Briefly, the procedure involved in the scheme of for ð 7 3 Šfaiting
finance by the Exim Bank is as follows:
- Exporter initiates negotiations with
the prospective overseas buyer with regard to the basic contract
price, period of credit, rate of interest, etc.,
-
After successful
negotiations, he furnishes the relevant particulars such as name and
country of overseas buyer, contract value, nature of goods, tenure
of credit, name and country of guaranteeing bankers to the Exim Bank
and requests for an indicative discounting quote. Exim Bank obtains
the indicative quote of forfaiting discount together with commitment
fee and other charges, if any, to be paid by the exporter, from an
overseas forfaiting agency.
-
On receipt of the
indicative quote from the Exim Bank, the exporter finalises the
terms of the contract, loading the discount and other charges in the
value and approaches Exim Bank for obtaining a firm quote. Exim Bank
arranges to get the same from an appropriate overseas forfaiting
agency and furnishes the same to the exporter. At this stage,
exporter would be required to confirm acceptance of the arrangement
to Exim Bank within a specific period as stipulated by that Bank.
-
The export contract
clearly indicates that the overseas buyer shall prepare a series of
avalised Promissory Notes in favour of the exporter and hand them
over against the shipping documents to his banker. The Prommissory
Notes will be endorsed with the words without recourse by the
exporter and handed over to his banker in India for onward
transmission to the Exim Bank.
-
Alternatively, the
export contract may provide for exporter to draw a series of Bills
of exchange on the overseas buyer which will be sent with the
shipping documents through latter's banker for acceptance by the
overseas buyer. Overseas buyer's banker will handover the documents
against acceptance of Bills of Exchange by the buyer and signature
of 'aval' or the guaranteeing bank. Avalised and accepted bills of
exchange will be returned to the exporter through his banker.
Exporter will endorse avalised Bills of Exchange with the words
'without recourse' and return them to his banker for onward
transmission to the Exim Bank.
-
Exim Bank will
forward the Bills of Exchange/Promissory Notes after verification to
the forfaiting agency for discounting by the latter.
-
Exim Bank will
arrange to collect the discounted proceeds of Promissory Notes/Bills
of Exchange from the overseas forfaiting agency and effect payment
to the nostro account of the exporter's bank as per the latter's
instruction.
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