Ans. POST-SHIPMENT FINANCE
It may be defined as "any loan or advance granted or any other credit provided by n bank to an exporter of goods from India from the date of extending the credit after shipment of goods to the date of realization of export proceeds. It includes any. loan or advance granted to an exporter on consideration of or on the security of, any duty drawback or any cash receivables by way of incentive from the government.
Let
us now discuss various types of post-shipment finance
Negotiation
of Export Documents Under Letters of Credit
Where the exports are under letter of credit arrangements, the banks will negotiate the export bills provided it is drawn in conformity with the letter of credit. When documents are presented to the bank for negotiation under L/C, they should be scrutinized carefully taking into account all the terms and conditions of the credit. All the documents tendered should be strictly in accordance with the L/C terms. It is to be noted that the L/C issuing bank undertakes to honour its commitment only if the beneficiary submits the stipulated documents. Even the slightest deviation from those specified in the LIC can give an excuse to the issuing bank of refusing the reimbursement of the payment that might have been already made by the negotiating bank.
Purchase/Discount
of Foreign Bills
Purchase or discount facilities in respect of export bills drawn under confirmed export contracts are generally granted to exporters who enjoy bill purchase/discounting limits sanctioned by the bank. As the security offered by the issuing bank under letter of credit arrangement is not available, the financing bank is totally dependent upon the credit worthiness of the foreign buyer. The documents, under the Documents against Payment (DIP) arrangements, are released through foreign correspondent only when payment is received. Whereas in the case of Documents against Acceptance (DIA) bills, documents are delivered to the overseas importers against acceptance of the draft to make payment on maturity. Since the financing banks are open to the risk of non-payment, ECGC policies issued in favour of exporters and assigned to banks are insisted upon.
Advance
against Bills Sent on Collection
Post-shipment finance is granted against bills sent on collection basis in the following situations :
i) when the accommodation available under the foreign bills purchase limit is exhausted
ii) when some export bills drawn under L/C have discrepancies
iii) where it is customary practice in the particular line of trade and in the case of exports to countries where there are problems of externalization.
Advance
against Goods Sent on Consignment
Sometimes exports are effected on consignment basis. In such condition payment is receivable to sale of goods. Goods are exported at the risk of exporter for sale. The banks may finance against such transaction subject to the exporter enjoying specific limit for such purpose. The overseas branch1 correspondent of the bank is instructed to deliver documents against Trust Receipt.
Advance
against Export Incentives
Advances against the export incentives are given at the pre-shipment stage as well as the post-shipment stage. However, the major part of the advance is given at the post-shipment stage. The advance is granted to an exporter in consideration of or on the security of any duty drawback incentives receivable from the Government. The banks follow their own procedure in granting the advance. The most common practice is to obtain a power of attorney from the exporter executed in their favour by the banks. It is sent to the concerned government department like the Director General of Foreign Trade, Commissioner of Customs, etc. These advances are not granted in isolation. It is granted only if a11 other types of z. export finance are extended to the exporter by the same bank.
Advance
against Undrawn Balances
In some of the export business, it is the trade practice that the bills are not drawn for the full invoice value of the goods. A small part of the bills is left undrawn for payment after adjustments due to difference in weight quality, etc. Advances are granted against such undrawn balances. In this case the export proceeds must be realized within 90 days.
Advance
against Retention Money
Banks grant advances against retention money, which is payable within one year from the date of shipment, the advances are granted up to 90 days. If such advances extend beyond one year, they are treated as deferred payment advance which are also eligible for concessional rate of interest.
Post-shipment
Export Credit Guarantee and Export Finance Guarantee
Post-shipment finance given to exporters by banks through purchase, negotiation or discount of export bills or advances against such bills qualifies for this guarantee. Exporters are expected to hold appropriate shipments or contracts policy of ECGC to cover the overseas credit risks.
Post-shipment
Credit in Foreign Currency
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