Page 103 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes Finance up to 100% of the export value is possible as compared to 80-85% financing
available from conventional export credit programmes

As forfeiting offers without recourse finance to an exporter, it does not impact the exporter’s
borrowing limits. Thus, forfeiting represents an additional source of funding, contributing
to improved liquidity and cash flow

Provides fixed rate finance; hedges against interest and exchange risks arising from deferred
export credit

The exporter is freed from credit administration and collection problems
Forfeiting is transaction-specific. Consequently, a long-term banking relationship with
the forfeiter is not necessary to arrange a forfeiting transaction

Exporter saves on insurance costs as forfeiting obviates the need for export credit insurance
Simplicity of documentation enables rapid conclusion of the forfeiting arrangement.
Source: www.eximbankindia.com

Task 1. Visit a bank branch in your area. Find out the different schemes on offer for
both pre- and post-shipment finance.
2. Visit the offices of SBI Factors or visit their website and prepare a detailed
study of the type of schemes offered by them to the exporters. Also explore the
success of their schemes against the traditional finance options.

Self Assessment

Fill in the blanks:
1. Concessional interest rates and liberal schemes have been introduced in India by the
............................. through the Reserve Bank of India (RBI).
2. ............................. credit is provided to the exporters for meeting their need of getting the
shipment ready.

3. The amount of PC extended normally will not exceed the ..................... value of the export
order
4. ............................. finance can be granted up to 100% of the invoice value

5. Exim Bank works as a facilitator between the Indian exporter and the overseas ...........................
agency.
6. In a forfeiting transaction, the exporter surrenders, ........................ to him, his rights to
claim for payment on goods delivered to an importer, in return for immediate cash
payment from a forfeiter.
7. Pre-shipment Rupee Credit is extended to finance ......................... funding requirement of
export contracts.

8. The purpose of ................................................ programme is to provide a boost to project
export efforts of companies having a good track record and sound financials.
9. ................................ is Euro Inter-Bank Offered Rate, the rate released by the European
Banking Federation, used for euro inter-bank loan transactions between banks in the euro
region.

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