export credit refinance

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  • 1. EXPORT CREDITREFINANCE(ECR) BUVANA.H

2. AGENDAGENERAL DEFINITIONSINTRODUCTIONCLASSIFICATIONFACILITIES OFFERED BY EXIM BANKRBI MASTER CIRCULAR ON ECR FACILITY SPECIAL ECR FACILITY 2 3. GENERAL DEFINITIONS Exporter: A person who sends goods or commodities to aforeign country. Export credit: Loan facility extended to an exporter by a bank inthe exporters country. 4. INTRODUCTION Export Credit Refinancing (ECR) provides analternative short term pre- and post-shipment financingto direct/indirect exporters to promote export ofmanufactured products, agricultural products andprimary commodities. It is available to a manufacturer or trading companywith ECR credit line duly established with anyparticipating commercial bank. 5. PROCESS FLOWRBIREFINANCE APPROACH65 APPROACH 2 SELLER/EXPORTER BANKCREDIT3RECEIVE EXPORT ORDER4 1 BUYER/IMPORTER 6. ECR-CLASSIFICATIONPre-shipment : Financing before exportation of goods.After securing the purchase order for the goods, you canproceed to finance working capital requirement forproduction of merchandisePost-shipment : Financing after the shipment of thegoods on credit or usance terms. 7. Contd. METHOD OF FINANCINGPRE-SHIPMENT POST- SHIPMENT ECR ECRCERTIFICATE OF BILLORDER-BASEDPERFORMANCEDISCOUNTING 8. FACILITIES OFFERED BY EXIM BANKFacilityPre-shipment ECRPost-Shipment ECRMethod of Order-Based Certificate ofBill DiscountingFinancing Financing is againstPerformance (CP)Financing againstthe export orderFinancing is againstexport documentsreceived from certificate ofoverseas buyer or performance (CP)direct exporter.issued by EXIMBankMargin of Up to 95% on value Up to 95% of ECR,Up to a maximumFinancing of export order. DLC, ECR, DPO or of 100% of export LPObill value. Subject Direct Indirectto availability of Exporter ExporterECR credit limit 100% of80% ofwith the export local sales commercial bank value of and EXIM Banks proceeding administrative limit. 12 month 9. FacilityPre-shipment ECR Post-Shipment ECRTenor Up to a maximum 120 days rollover Up to a maximumof 120 days is allowed183 days.Repayment Upon:-Upon: - Export proceeds; or receipt of export Post-shipment proceedsproceeds; or.maturity of the post-shipment bill whichever is earlier. 10. Master Circular on Export Credit Refinance Facility 11. CONTD EXPORT CREDIT REFINANCE RUPEE DOLLARREFINANCE REFINANCE (CIRCULAR DT (CIRCULAR DT JAN JULY 2,2012)14,2013) 12. PART A ( RUPEE REFINANCE )1.INTRODUCTION : The Reserve Bank of India (RBI) provides export creditrefinance facility to banks under Section 17(3A) of theReserve Bank of India Act 1934. This facility is given on the basis of banks eligibleoutstanding rupee export credit both at the pre-shipmentand post-shipment stages. The quantum of refinance is fixed from time to timebased on the stance of monetary policy of the RBI. 13. 2.Eligible InstitutionsAll scheduled banks (excluding RRBs), which areauthorized dealers in foreign exchange.3. LimitAt present, the scheduled banks are provided exportcredit refinance to the extent of 50.0 per cent of theoutstanding export credit eligible for refinance. This limit has increased from 15.0 per cent to 50.0per cent, effective fortnight beginning June 30, 2012, toenhance credit flows to the export sector. 14. 4. Interest Rate Export credit refinance facility is available at the RepoRate under the Liquidity Adjustment Facility (LAF), asannounced from time to time. Interest shall be payable with monthly rests and theamounts of such interest calculated on daily balanceswould be debited to the current account of the banks atthe end of respective month or earlier when the balanceoutstanding is wiped out.5. Margin RequirementNo margin is required to be maintained. 15. 6. Duration The ECR is repayable on demand or on the expiry of fixedperiods not exceeding one hundred and eighty days.7. Collateral RBI extends the export credit refinance against the Demand Promissory Note (DPN) of banks supported by a declaration that they have extended export credit and the outstanding amount eligible for refinance is not less than the loan/advance from the RBI. 16. 8. Minimum Amount of Availment The minimum amount of availment under thisfacility is Rupees one lakh and multiples thereof.9. Place of Availment This facility can be availed of at centres whereverthe Reserve Bank has a Banking Department. 17. 10. Penalties10.1 In the event of a scheduled bank having irregularavailment of export credit refinance, a penal rate of interest asdecided by the Reserve Bank from time to time will be chargedon the outstanding loan or loans.10.2 An illustrative (but not exhaustive) list of instances onwhich penal rate would be applicable for irregular availment ofexport credit refinance is set out below:a) Utilisation of ECR exceeding the total limit.b) Wrong calculation/reporting of refinance limit by banks.c) Non-repayment of refinance within 180 days.d) Delay in reporting excess utilisation by banks. 18. 11. Documentation11.1 The banks have to execute the following documents foravailing of export credit refinance facility (AnnexII): financeprojECRCIRCULAR-1.doca) A stamped agreement in Form No. DAD 297b) A Demand Promissory Note (DPN) in Form No. DAD 295 A.c) Board Resolution in Form No. DAD 298d) For enhancement of limit, a letter in Form No. DAD 299 and also a fortnightly declaration in form No.DAD.389 19. e) In terms of Para 7.30 of Banking DepartmentManual, Agreements and letters of extension of limit need notbe renewed so long as there is no change in the terms thereof.Promissory notes given by the borrowing banksshould, however, be renewed within three years of their datesof execution notwithstanding their outstandings in loanaccount. 20. 12. Reporting Requirement12.1 The availing banks are required to report their outstandingexport credit eligible for refinance within five days from therelevant date in the format provided in Annex III.13. Condition13.1 It is essential that the outstanding borrowings at all timesare fully covered by the borrowing banks holding of exportbills/amount of eligible pre-shipment advances as reported intheir latest declaration. If at any time it is found that the totalamount of bills held by banks/amount of eligible pre-shipmentadvances covered by the declaration fall below the amountborrowed, the banks should forthwith adjust or repay excessrefinance from the RBI. 21. Special Export Credit RefinanceFacility 22. PART-B ( DOLLAR REFINANCE ) Swap Facility for Expansion of Export Credit in Foreign CurrencyINTRODUCTION: With a view to further enhancing the flow of credit to theexport sector, the Reserve Bank of India has introduced a USDollar-Rupee swap facility to support incremental Pre-shipment Export Credit in Foreign Currency (PCFC) bybanks.Scheduled banks (excluding Regional Rural Banks (RRBs))will have the option to access rupee refinance to the extent ofthe swap with the Reserve Bank under a special export creditrefinance facility. 23. INTEREST RATE: The rupee rate of interest charged on refinanceavailed of under the special export refinance facilitywill be the prevailing repo rate under the LiquidityAdjustment Facility (LAF), currently at 7.75 per cent. The swap facility will be available to scheduledbanks (excluding RRBs) from January 21, 2013 tillJune 28, 2013 for fixed tenor of 3/6 months. . 24. The overall cap for the banking system works out toUS Dollar 6.5 billion.Under the swap arrangement, a bank can buy USDollars up to its eligible swap limit from the ReserveBank and simultaneously sell the same amount of USDollars forward as per the term of the swap at theprevailing market rates for swaps of similar tenor. At theend of the swap term, the bank will exchange with theReserve Bank, the US Dollars against the rupees. 25. PROCESS FLOW RBI BUY US$ AGAINST APPROACH RUPEES 43APPROACH 2 SELLER/EXPORTER BANK CREDIT 5RECEIVEEXPORTSELL US$ ORDER6 7 1 FORWARD BUYER/IMPORTMARKETER

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