In cases where such overdue credits are liquidated within a period of days from the notional due date i. If the bills are not paid within the aforesaid period of days, banks should charge from the date of advance, the rate prescribed for 'ECNOS'-post-shipment.
The Base Rate System is applicable with effect from July 1, Accordingly, interest rates applicable for all tenors of rupee export credit advances are at or above Base Rate. Accordingly, interest rates applicable for all tenors of rupee export credit advances sanctioned on or after July 01, are at or above Base Rate. The Base Rate System is applicable from July 1, and accordingly interest rates applicable for all tenors of rupee export credit advances sanctioned on or after July 01, are at or above Base Rate.
If pre-shipment advances are not liquidated from proceeds of bills on purchase, discount, etc. If exports do not materialise at all, banks should charge on relative packing credit domestic lending rate plus penal rate of interest, if any, to be decided by the banks on the basis of a transparent policy approved by their Board.
In the case of advances against demand bills, if the bills are realised before the expiry of the normal transit period NTP , interest at the prescribed rate shall be charged from the date of advance till the date of realisation of such bills.
The date of realisation of demand bills for this purpose would be the date on which the proceeds get credited to the banks' Nostro accounts. Banks should adopt the following guidelines to ensure uniformity in charging interest on post-shipment advances which are not adjusted in an approved manner due to non-accrual of foreign exchange and advances have to be adjusted out of the funds received from the ECGC Ltd in settlement of claims preferred on them on account of the relevant export consignment:.
Where ECGC Ltd have admitted the claims and paid the amount for transfer delay, banks may charge interest as applicable to 'ECNOS'-post-shipment even if the post-shipment advance may be outstanding beyond six months from the date of shipment. In a case where interest has been charged at commercial rate or 'ECNOS', if export proceeds are realised in an approved manner subsequently, the bank may refund to the borrower the excess amount representing difference between the quantum of interest already charged and interest that is chargeable taking into account the said realisation after ensuring the fact of such realisation with satisfactory evidence.
While making adjustments of accounts it would be better if the possibility of refund of excess interest is brought to the notice of the borrower. The scheme is an additional window for providing pre-shipment credit to Indian exporters at internationally competitive rates of interest. It will be applicable to only cash exports. The instructions with regard to Rupee Export Credit apply to export credit in Foreign Currency also mutatis mutandis, unless otherwise specified.
The facility may be extended in one of the convertible currencies viz. To enable the exporters to have operational flexibility, it will be in order for banks to extend PCFC in one convertible currency in respect of an export order invoiced in another convertible currency. The risk and cost of cross currency transaction will be that of the exporter. Banks are also permitted to utilise the foreign currency balances available under Escrow Accounts and Exporters Foreign Currency Accounts for the purpose, subject to ensuring that the requirements of funds by the account holders for permissible transactions are met and the limit prescribed for maintaining maximum balance in the account under broad based facility is not exceeded.
In addition, banks may arrange for borrowings from abroad. Banks may negotiate lines of credit with overseas banks for the purpose of grant of PCFC to exporters without the prior approval of the RBI. Banks may avail of lines of credit from other banks in India if they are not in a position to raise loans from abroad on their own, provided the bank does not have a branch abroad.
The spread between the borrowing and lending bank is left to the discretion of the banks concerned. Banks should draw on the line of credit arranged only to the extent of loans granted by them to the exporters under the PCFC. However, where the overseas bank making available the line of credit stipulates a minimum amount for drawals which should not be very large, the small unutilised portion may be managed by the bank within its foreign exchange position and Aggregate Gap Limit AGL.
Similarly, any pre-payment by the exporter may also be taken within the foreign exchange position and AGL limits. Banks are also permitted to use foreign currency funds borrowed in terms of para 4. Banks are free to determine the interest rates on export credit in foreign currency with effect from May 5, Banks may quote rates on the basis of standard period if PCFC is required for periods less than 6 months.
However, while quoting rates for non-standard period, banks should ensure that the rate quoted is below the next upper standard period rate. The PCFC will be available for a maximum period of days.
Any extension of the credit will be subject to the same terms and conditions as applicable for extension of rupee packing credit. Further extension will be subject to the terms and conditions fixed by the bank concerned and if no export takes place within days, the PCFC will be adjusted at T.
In such cases, banks can arrange to remit foreign exchange to repay the loan or line of credit raised abroad and interest without prior permission of RBI. For extension of PCFC within days, banks are free to determine the interest rates on export credit in foreign currency with effect from May 5, While the overall export credit limits are fixed in Indian Rupees, the foreign currency component of export credit fluctuates based on the prevailing exchange rates.
In above connection, a reference is invited to para 2. Padmanabhan that the export finance limit is sanctioned by Indian banks, who revalue the foreign currency borrowings like PCFC and PSCFC on periodic ranging from daily to monthly basis, which results in notional excess utilization over and above the sanctioned limits in case of weakening Rupee.
The Committee was of the view that denomination of facility in foreign currency would ensure that exporters are insulated from Rupee fluctuations. Banks are advised that they may compute the overall export credit limits of the borrowers on an on-going basis say monthly, based on the prevalent position of current assets, current liabilities and exchange rates and re-allocate limit towards export credit in foreign currency, as per the bank's own policy.
This may result in increasing or decreasing the Indian Rupee equivalent of foreign currency component of export credit. Alternatively, banks may denominate foreign currency FC component of export credit in foreign currency only with a view to ensuring that the exporters are insulated from Rupee fluctuations.
The FC component of export credit, sanctioned, disbursed and outstanding will be maintained and monitored in FC. In case full amount of PCFC or part thereof is utilised to finance domestic input, banks may apply appropriate spot rate for the transaction. As regards the minimum lots of transactions, it is left to the operational convenience of banks to stipulate the minimum lots taking into account the availability of their own resources.
However, while fixing the minimum lot, banks may take into account the needs of their small customers also. Banks should take steps to streamline their procedures so that no separate sanction is needed for PCFC once the packing credit limit has been authorised and the disbursement is not delayed at the branches.
In certain cases, viz. Banks should also satisfy about the valid reasons as to why PCFC extended for shipment of a particular commodity cannot be liquidated in the normal method. In such cases, interest will be payable on the rupee equivalent of principal amount at the rate applicable to ECNOS at pre-shipment stage plus a penal rate of interest from the date of advance after adjustment of interest of PCFC already recovered. It will also be in order for the banks to remit the amount to the overseas bank, provided the PCFC was made available to exporter from the line of credit obtained from that bank.
Banks should closely monitor the production of firm order or LC subsequently by exporters and also the end-use of funds. It has to be ensured that no diversion of funds is made for domestic use. Banks may charge the exporters the funding cost, if any, involved in absorbing mismatches in respect of the prepayment beyond one month period.
In terms of paragraph 5. Banks are also permitted to allow an exporter to book forward contract on the basis of confirmed export order prior to availing of PCFC and cancel the contract for portion of drawal used for imported inputs at prevailing market rates on availing of PCFC. Banks are permitted to allow customers to seek cover in any permitted currency of their choice which is actively traded in the market, subject to ensuring that the customer is exposed to exchange risk in a permitted currency in the underlying transaction.
While allowing forward contracts under the scheme, banks may ensure compliance of the basic Foreign Exchange Management requirement that the customer is exposed to an exchange risk in the underlying transaction at different stages of the export finance. The rupee export packing credit is allowed to be shared between an export order holder and the manufacturer of the goods to be exported. Similarly, banks may extend PCFC also to the manufacturer on the basis of the disclaimer from the export order holder through his bank.
PCFC granted to the manufacturer can be repaid by transfer of foreign currency from the export order holder by availing of PCFC or by discounting of bills. Banks should ensure that no double financing is involved in the transaction and the total period of packing credit is limited to the actual cycle of production of the exported goods.
The facility may be extended where the banker or the leader of consortium of banks is the same for both the export order holder and the manufacturer or, the banks concerned agree to such an arrangement where the bankers are different for export order holder and manufacturer.
The sharing of export benefits will be left to the mutual agreement between the export order holder and the manufacturer. In all such cases, it has to be ensured by banks that there is no double financing for the same transaction. The applicable benefits such as credit of eligible percentage of export proceeds to EEFC Account etc. Surplus of export proceeds available after adjusting relative export finance and credit to EEFC account should not be allowed for setting off of import bills.
For the purpose of reckoning banks' performance in extending export credit, the rupee equivalent of the PCFC may be taken into account. Banks are also allowed to rediscount export bills abroad at rates linked to international interest rates at post-shipment stage. It will be comparatively easier to have a facility against bills portfolio covering all eligible bills than to have rediscounting facility abroad on bill by bill basis.
There will, however, be no bar if rediscounting facility on bill to bill basis is arranged by a bank in case of any particular exporter, especially for large value transactions. Banks may arrange a " Bankers Acceptance Facility" BAF for rediscounting the export bills without any margin and duly covered by collateralised documents.
The exporters, on their own, can arrange for themselves a line of credit with an overseas bank or any other agency including a factoring agency for discounting their export bills direct subject to the following conditions:. In case, these are routed through any other bank, the latter will first arrange to adjust the amount outstanding under packing credit with the concerned bank out of the proceeds of the rediscounted bills.
The Scheme will cover mainly export bills with usance period upto days from the date of shipment inclusive of normal transit period and grace period, if any. There is, however, no bar to include demand bills, if overseas institution has no objection to it. In case borrower is eligible to draw usance bills for periods exceeding days as per the extant instructions of FED, Post-shipment Credit under the EBR may be provided beyond days. For operational convenience, the BAF Scheme may be centralised at a branch designated by the bank.
It is possible that banks hold bills in their own portfolio without rediscounting. However, in case of need, the banks should also have access to the local market, which will enable the country to save foreign exchange to the extent of the cost of rediscounting.
Further, as different banks may be having BAF for varying amounts, it will be possible for a bank which has balance available in its limit to offer rediscounting facility to another bank which may have exhausted its limit or could not arrange for such a facility. The rupee equivalent of the discounted value of the export bills will be payable to the exporter and the same should be utilised to liquidate the outstanding export packing credit.
In case of overdue bills, banks may charge interest from the due date to the date of crystallization as per the interest rate policy of the bank. Interest rate as per RBI interest rate directive for post-shipment credit in rupees will be applicable from the date of crystallisation.
As stated in paragraph 6. In respect of export credit to exporters at internationally competitive rates under the schemes of 'Pre-shipment Credit in Foreign Currency' PCFC and 'Rediscounting of Export Bills Abroad' EBR , banks are free to determine the interest rates on export credit in foreign currency with effect from May 5, Banks should open Export Counsel Offices to guide exporters particularly the small ones and those taking up non-traditional exports.
The Group has come out with a comprehensive set of recommendations most of which have been accepted and communicated to banks. Annex 1. Accordingly, in consultation with select banks and exporters, a Gold Card Scheme was drawn up.
The Scheme envisages certain additional benefits based on the record of performance of the exporters. The Gold Card holder would enjoy simpler and more efficient credit delivery mechanism in recognition of his good track record.
The salient features of the Scheme are:. All creditworthy exporters, including those in small and medium sectors, with good track record would be eligible for issue of Gold Card by individual banks as per the criteria to be laid down by the latter. Gold Card under the Scheme may be issued to all eligible exporters including those in the small and medium sectors who satisfy the laid down conditions.
Gold Card holder exporters, depending on their track record and credit worthiness, will be granted better terms of credit including rates of interest than those extended to other exporters by the banks.
Applications for credit will be processed at norms simpler and under a process faster than for other exporters. The interest equalisation benefit will be available from the date of disbursement up to the date of repayment or up to the date beyond which the outstanding export credit becomes overdue.
However, the interest equalisation will be available to the eligible exporters only during the period the scheme is in force. Procedure for claiming reimbursement of interest equalisation benefit already passed on to eligible exporters.
The sector-wise consolidated reimbursement claim for the period April 1, to November 30, for the amount of interest equalisation already passed on to eligible exporters should be submitted to RBI by December 15, Claims for reimbursement will be considered for settlement only after receipt of this certificate.
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