1. Study of Alternate modes of Trade Finance Solutions offered to MSMEs at HSBC, Chandigarh

2. Introduction
The HSBC group has been named after its founding members,
The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between China and Europe.
HSBC has vigorously developed its role as one of the leading banking and financial services organisations in the world.
3. HSBC in India has retained the Group's pioneering streak by being an active partner in the development of the Indian banking industry - even giving India its first ATM way back in 1987.
4. HSBCs Firsts in India

1985
First bank to computerize operations
1987
First bank to provide ATMs
1994
First bank to provide online access to accounts
1995
First bank to introduce off branch ATMs

5. 1999
First bank to integrate electronic banking platform .
2004

First bank to offer repayment flexibility for personal loan to
customers
2005

First bank to provide a score card based unsecured overdraft offering to theIndian SME.
6. TRADE FINANCE
TRADE: Trade is the voluntary exchange of goods, services or both. Trade is also called commerce.
A mechanism that allows trade is called a market.
Trade between two traders is called bilateral trade,
while trade between more than two traders is called multilateral trade.
7. Trade involves:
Domestic trade
International trade.
8. Flow of international trade transaction
Seller/exporter
Buyer/importer
Goods shipped
Payment received
Docs given to exp bank
Docs given to importer
Payment
sent
Exporters bank
Importers bank
Docs transferred to overseas banker
9. Definition of trade finance
Trade finance refers to innovative, custom-engineered financial products and services that meet a countrys import and export needs.
Trade finance is completely different from regular commercial bank lending or insurance.
10. It refers to innovative financial products and services that assist domestic traders , importers and exporters to fulfill their financing needs.
Trade Finance is a source of working capital for many traders in need of financing to procure, process or manufacture products before sale in future.
11. Trade Finance As A Source Of Working Capital Need
Businesses need funds to finance their working capital needs.
Thisdepends on various factors related to their working capital cycle.
working capital cycle refers to the period of time which elapses between the point at which cash begins to be expended on the procurement of raw material, production of a product and the collection of cash from a customer.
12. Between each stage of this working capital cycle there is a time delay,
A business first needs to ascertain the duration of the their working capital cycle
i.e. the period starting from procurement of raw material , work in progress, finished goods, sale, to the stage of receiving payments for the credit sale done.
After estimating the requirement then the firm takes the decision on the various modes to be used to finance working capital
13. mode would be decided on the basis of which stage requires the funding .
For example a rice manufacturer would require to stock his annual consumption of raw rice during its season, thus he will opt for ware house financing ,
Whereas a seller whose funds get blocked in the credit sales stage would opt for factoring services
14. Categorization of MSMEs by HSBC.
For its services HSBC defines MSMEs on the Basis of:
Turnover
* CIB : The LLCs having relations with HSBC in more than 5 countries
15. FACTORING
A 'factor' makes the conversion of receivables into cash possible.
It is both a financial as well as a management support to a client
It is a method of converting a receivable into a productive asset (viz., cash) by selling receivables to a company that specialises in their collection and administration.
16. In factoring the a financial institution(factor) buys
the accounts receivables of the client,
& pays upto 80% of the amount immediately on the agreement , the remaining amount is paid to the client , when the customer pays debt.
17. Mechanism of factoring
The factor will evaluate the credit worthiness of the seller (client) and its debtors.
the factor will then consider purchasing all the accounts receivables of the sellers credit worthy debtors.
The possession of these receivables now lies with the factor.
Upon receipt of the invoice, factor pays around 80% (the prepayment percentage decided) to the client .
18. invoice
client
customer
Selling goods on credit
Pays the amt to factor
Submits the Invoice copy
Pays up to 80 % initially & balance on receipt of payment
HSBC
19. Types Of Factoring Solutions Provided By Hsbc
Domestic factoring
Invoice discounting
Export factoring
20. Warehouse receipt financing
It is a short- term loan , provided by the bank for
6-11 months.
Pledge to the bank.
On behalf of commodity , bank provides the loans
till then the goods are in custody of the bank.
HSBC provides loan against 7 commodities i.e wheat,
Rice , caster, cashew ,cotton, pulses and oil seeds.
21. Parties to the WRF contract
The borrower: who uses the warehouse receipt to produce the commodities as a security.
Lender :usually a bank which looks upon it as a secure way to lend its funds and increase its clientele.
Warehouse operator.
22. Structure of WRF
Provides NOC
From existing working capital banker
LENDER
ABC
Provides short term finance against pledge of stocks
23. Mechanism of WRF at HSBC
Borrower pledges the commodities in the favour of the bank.
Borrower identifies a warehouse and that is approved by the bank.
Bank appoints the collateral manager.
Collateral manager issues the warehouse receipt ,certifying the quality and quantity of the commodity stored.
Bank disburses the corresponding loan amount to the borrower.
24. Borrower makes payment and receives the release order.
Bank advises the collateral manager to release the stock.
Borrower presents the release order and bank makes the payment.
25. THANK YOU