Introduction to Export Finance Essay

recognize and finance is the life and blood of any business whether domestic or international. It is more important in the case of merchandise transactions due to the prevalence of novel non-price competitive techniques encountered by exportationers in different nations to enlarge their sh ar of world markets. The selling techniques are no languisher confined to mere calibre price or delivery schedules of the products but are extended to payment borders offered by exporters. bighearted payment terms usually score over the competitors not save of capital equipment but alike of consumer goods. The payment terms however depend upon the availability of finance to exporters in relation to its quantum, cost and the boundary at pre-shipment and post-shipment stage. Production and manufacturing for substantial supplies for exports take time, in case finance is not available to exporter for production.They exit not be in a position to book large export order if they hold outt have sufficient fiscal funds. Even merchandise exporters require finance for obtaining products from their suppliers. This project is an act to throw light on the various sources of export finance available to exporters, the schemes implemented by ECGC and EXIM for export promotion and the recent developments in the form of tie-EXIM tie-ups, credit policy announced by RBI in Oct 2001 and TRIMS.Concept of exporting financeThe exporter may require short term, medium term or long term finance depending upon the types of goods to be exported and the terms of statement offered to overseas buyer. The short-term finance is required to bring working capital needs. The working capital is used to meet regular and recurring needs of a business firm. The regular and recurring needs of a business firm refer to purchase of altogether material, payment of wages and salaries, expenses like payment of rent, advertising etc. The exporter may also require term finance. The term finance or term loans, wh ich is required for medium and long term financial needs such as purchase of fixed assets and long term working capital. Export finance is short-term working capital finance allowed to an exporter. Finance and credit are available not only to help export production but also to sell to overseas customers on credit.Objectives of Export Finance* To track technical & Non-commercial or political risks attendant on granting credit to a foreign buyer. * To cover natural risks like an earthquake, floods etc.An exporter may avail financial assistance from any bank, which considers the ensuing factors a) handiness of the funds at the required time to the exporter. b) Affordability of the cost of funds.AppraisalAppraisal means an approval of an export credit proposal of an exporter. While appraising an export credit proposal as a commercial banker, obligation to the following institutions or regulations needs to be adhered to. Obligations to the RBI under the Exchange Control Regulations ar e* review to be the banks customer.* Appraise should have the Exim code enactment allotted by the Director General of Foreign Trade. * Partys name should not appear under the watchfulness list of the RBI. Obligations to the Trade Control Authority under the EXIM policy are* Appraise should have IEC number allotted by the DGFT.* Goods must be freely exportable i.e. not falling under the forbid list. If it falls under the negative list, then a valid license should be there which allows the goods to be exported. * Country with whom the Appraise wants to trade should not be under trade barrier.Obligations to ECGC are* Verification that Appraise is not under the Specific Approval list (SAL).* Sanction of Packing Credit Advances.Guidelines for banks dealing in Export FinanceWhen a commercial bank deals in export finance it is bound by the ensuing guidelines a) Exchange control regulations.b) Trade control regulations.c) Reserve Banks directives issued through IECD.d) Export Credit Gua rantee Corporation guidelines.e) Guidelines of Foreign Exchange Dealers Association of India.