Trade Services Presentation

8/8/2019 Trade Services Presentation

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Trade Finance is the science that describes themanagement of money, banking, credit,

investments and assets for international trade

transactions.

Trade Finance Services by Banks are the

services offered to traders when bank

executes payment on behalf of its client to

the sellers bank, to pay seller forGoods/Services received or to be received.



International trade

Flow of Productive

Factors eg. ServicesFlow Of Commodity

International Trade



...... For providing financial assistance to exporters and importers, and

for functioning as the principal financial institution for coordinating the

working of institutions engaged in financing export and import of goods

and services with a view to promoting the countrys international

trade

shall act on business principles with due regard to public

interest

EXPORT-IMPORT BANK OF INDIA



Project & Services Exports

Exports of projects and services, broadly categorised into Civil engineering construction

projects, Turnkey projects, Consultancy services.

Over the past two decades, increasing number of contracts have been secured by Indian

companies in West Asia, North Africa, Sub Saharan Africa, South & South East Asia, CIS

and Latin America.

Such projects have supplemented the efforts of the host country governments in

achieving their developmental objectives.

Promoting Project Exports

Projects Currently Under Execution with Exim Bank Support

No. of Contracts : 211 Value of Contracts : US$ 12.8 bn

No. of Countries : 38 No of Indian companies : 43

EXIM BANK



IMPORTS

Oversees exporter may require a client to pay

some of full amount in advance for goods to

be exported.

This might be in Foreign Currency

Exporter would dispatch goods only after he

receives payment.



Services by Banks

Advance Remittance

Full Payment in advance

Dispatch of goods only after payment

Proof indicating cost of goods & insistence of paymentby Oversees Seller

If cost is more than USD 100,000 then guarantee frominternational bank or unconditional LOC is required

Delivery within 6 months, if extended must furnishdocumentary support with extended bank guarantee.



Direct Remittance

Dispatch of goods done first and then remit

payment for goods Once documents regarding shipping of goods

submitted to bank, payment is made.



Import Collection

Goods exporter sends shipment documents to

bank. Bank intimates client about this & takesauthorization for payment.

Sight Bill :- Documents against Payment

See documents, give permission

for payment, take documents

Usance Bill :- Documents against Payment

Acceptance letter from client is

taken & documents are released.Payment is made on due date.



EXPORTS

Pre-shipment finance

Post-shipment finance



Definition:

Financial assistance extended to the exporter fromthe date of receipt of the export order till the date of shipment is known as pre-shipment credit .

Such finance is extended to an exporter for the purpose of procuring raw materials, processing, packing, transporting,warehousing of goods meant for exports.

Maximum period of 180 days

Exporter can obtain 90% of the FOB value of the order or 75% of the CIF value of theorder.

PRE-SHIPMENT FINANCE



o Purchase raw material, and other inputs

o Assemble the goods in the case of merchant exporters.

o Store the goods in suitable warehousestill the goods are shipped.

o Packing, marking and labeling of goods.

o Pre-shipment inspection charges.

o Purchase of heavy machinery and other capital goods

o Consultancy services.

o Export documentation expenses.

IMPORTANCE OF PRE-SHIPMENT

FINANCE



Packing Credit ± Packing Credit in Indian R u pee

± Packing Credit in Foreign Currency (PCFC)

Advance Against Hypothecation

Advance Against Pledge

Advance Against Red L/C

Advance Against Back-To-Back L/C

Advance Against Exports Through ExportHouses

Advance Against Duty Draw Back (DBK)

FORMS OR METHODS OF

PRE-SHIPMENT FINANCE



This facility is provided to an exporter who satisfies thefollowing criteria:

A ten digit Importer - Exporter Code ( IE Code )number allotted by DGFT.

Exporter should not be in the caution list of RBI.

If the goods to be exported are not under OGL (OpenGeneral License), the exporter should have the requiredlicense /quota permit to export the goods.

REQUIREMENTS FOR GETTING

PACKING CREDIT



Definition:

Post Shipment Finance is a kind of loan provided by a

financial institution to an exporter or seller against a shipment that has already been made.

Export finance is granted from the date of extending

the credit after shipment of the goods to therealization date of the exporter proceeds. Exportersdon¶t wait for the importer to deposit the f unds.

POST SHIPMENT FINANCE



Export Bills Purchased / Discounted

Export Bills Negotiated

Advance Against

± Export Bills Sent On Collection Basis

± Export On Consignments Basis

± Un-drawn Balance

± Claims Of Duty Drawback

TYPES OF POST SHIPMENT

FINANCE



Competitiveness ± Exporter able to offer creditterms to buyer

Energized Cash flows ± Producer receives cashfrom export proceeds u pfront and can continue

production activities.

Expansion Of Client Base ± Exporter able toexpand client base due to availability of financing

BENEFITS TO EXPORTERS



Definition:

A formal document issued by a bank on behalf of customer, stating the conditions under which thebank will honour the commitment of the customer

The letter of credit is also known as banker¶s commercial credit or documentary letter of credit.

L/C used in domestic trade are calledinland L/C¶s.

LETTER OF CREDIT



Importer or Applicant

Issuing Bank

Beneficiary

Advising Bank

Negotiating/ The Paying Bank.

PARTIES TO ALETTER OF CREDIT



1. ContractSeller

(Beneficiary)Buyer

Applicant

2. Documentary

credit Application

ISSUING

BANK.

3. Documentary creditAdvising Bank

4. Advice of

Documentay

credit

LETTER OF CREDIT THE

PROCESS



Irrevocable L/C

Revocable L/C

Negotiation Credit

Confirmed or Unconfirmed credit

Revolving credits

Back To Back Credits

Red Clause L/C

Transferable Credits

Traveller¶s L/C

S pecial Credits

TYPES OF LETTER OF CREDIT



Definition

Financial transaction whereby a business sells

its accounts receivable to a third party called a factor (financial institution) at a discount in

exchange for immediate money with which to

finance continued business.

Financial option for the management of

receivables

FACTORING



Customer Client

Factor

(1) Credit Sale

of Goods

(2) Invoice

(3)

Su bmit

InvoiceCopy

(4)Payment

u pto 80%

initially

(6) Pays

the

balance

(5) Pays the amount

(In recourse type

customer pays

through client)

FLOW CHART OF FACTORING

Trade Services Presentation

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