Banking News

Export credit facility for service exporters


The Exporters of services may seek finances from banks for their requirements to buy consumables, supplies, and wages. Such exporters shall register with the Electronic and software Export Promotion Council or Services Export Promotion Council or with Federation of Indian Export Organizations, as applicable to their unit to be qualified for working capital export credit (both for pre and post shipment purposes). There shall be a time lag between the outlays of working capital expense and actual receipt of payment from the service consumer or his principal abroad. There shall be valid Working Capital gap i.e. service is provided first while the payment is received some time after an invoice is raised. Service exporter Company will raise the invoice as per the contract, and they would utilize the funds of export proceeds to repay the export credit availed of from the bank.

Repayment of loans:

Each packing credit loan granted by the bank is normally considered as a separate account for the purpose of monitoring the period of loan released. Packing Credit can be released either in stages or in one lump sum, as per executing requirement of the orders or L.C terms. The packing credit loan or running account is liquidated out of proceeds of export bills purchase, discount or negotiation. In the process, the pre-shipment liability of the borrower is converted into post-shipment credit.

Repayment/liquidation of packing credit with the substitution of proceeds of another export documents may also be possible. This could be with export documents relating to any other order covering the same or any other commodity exported by the exporter. Substitution of contract in this way is allowed only on the bank is satisfied that it is commercially necessary and unavoidable. Banks should also satisfy themselves about the valid reasons as to why packing credit extended for shipment of a particular commodity cannot be liquidated in the normal method. The substitution of a contract is allowed when the exporter maintains the account with the same bank or it has the approval of the members of the consortium if any. Subject to certain conditions the exporter can also liquidate packing credit advance from his rupee resources to the extent exports have actually taken place.

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