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Packing Credit- Running Account

Packing Credit- Running Account

In the cases of commodity exports, the exporters have to procure raw material, manufacture the export product and keep the same ready for shipment, in anticipation of export orders from the overseas buyers. This is in view of, seasonal availability of raw materials or when the time taken for manufacture and shipment of goods is more than the delivery schedule as per export contracts. Having regard to the difficulties of the exporters in availing of adequate pre-shipment credit in such cases, RBI has authorized the banks to extend packing credit running account for commodity exports. Running account facility is available only to those exporters whose track record has been good. The facility is also to Export Oriented Units (EOUs) or Units in Free Trade Zones or Export Processing Zones (EPZs) and Special Economic Zones (SEZs).

Under Pre-shipment Credit ‘Running Account’ facility, the bank opens separate cash credit account of exporters and allow them to withdraw the money for the purpose of procuring raw materials, manufacture the export products without insisting on prior lodgment of letters of credit / firm export orders. Nevertheless, it is obligatory on the part of the exporter to produce letters of credit/firm orders within a reasonable period of time to be decided by the banks for such facility.

Liquidation of outstanding in running account:

In the case of ‘Running Account’, each export bill will be individually marked by the bank to monitor the period of advance. When the bank receives the export bill for negotiation or collection, the export proceeds will be marked against the earliest outstanding in the account on ‘First-in-First-Out’ (FIFO) basis. Banks would monitor that export credit available in respect of individual pre-shipment credit does not go beyond the period of sanction or 360 days from the date of advance. Packing credit can also be marked-off with proceeds of export documents against which no packing credit has been drawn by the exporter.  Sub-suppliers are not eligible for Running account facility.

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