PROCEDURES TO OBTAIN EXPORT FINANCE

Exporters obtain packing credit and postshipment credit to meet working capital needs. The procedure in export financing is as follows: 1. Application: The exporter must make an applicationin prescribed form to the bank. The application must be supported with relevant documents such as: (A) In case of Packing Credit (a) An undertaking stating that the advance will be utilised for the specific purpose in respect of export of goods. (b) An undertaking stating that the shipment will be effected within certain limit and submit the relevant shipping documents to the bank in time. (c) Agreement of hypothecation or letter of pledge. (d) Demand pronote signed on behalf of the company / firm. (e) Letter of continuity signed on behalf of the company / firm. (f) Confirmed export order andor LC In original. (g) Appropriate policy / guarantee of ECGC. (h) Ant other documents as required by the banks.

(B) In case of Post Shipment Credit (a) Shipping documents attested by custom authorites. (b) Demand pronote signed on behalf of the company / firm. (c) Letter of continuity signed on behalf of the company / firm. (d) Certificate of the Board of Directors resolution. (e) Letter of authority to operate the account.

2. Processing of applications: The application is processed taking into considearion the following: (a) Documentary evidence in the form of export order / LC (in the case of packing credit) and shipping document (in case of post-shipment) or correspondence exchanged between the applicant and the importer. (b) Credit worthiness of the applicant. 3. Sanctioning of Loan: If the applicantion is found in order the bank sanctions the amount. Normally the loan is sanctioned depending upon FOB value export order / LC or market value of the goods whichever is less. 4. Loan agreement: Before disburdement of loan, the banks require the exporter to execute a formal loan agreement. The loan agreement contains terms and conditions relating to the loan.

5. Loan disbursement: Normally, paking credit / post shipment advances are not sanctioned in lump-sum but are distributed in a phased manner.

6. Maintenance of accountts: As per RBI directives, banks must maintain separate accounts in respect of each preshipment / post-shipment advance. However, running accounts are permitted in case of units in EPZ / SEZ and 100% EOUs.

7. Monitorinf of accounts: The bank advancing packing cresit / post-shipment should monitor the use of packing credit by the exporter, i.e. whether the amount is used for export purpose or not.

8. Repayment: As soon as the export proceeds and / or incentives are received, the exporter should repay the amount to bank advancing credit. Normally the advancing bank realises the export proceeds and then makes necessary entries in the exporters account.