Types of forms of Pre-shipment Finance
Following special schemes are available lo in respect of pre-shipment finance
(a) Extended Packing Credit Loan: It is extended to those exporters rated as first class exporters by the commercial banks on the basis of their creditworthiness. It is granted for making advance payment to the suppliers for acquiring goods to be exported. Such advance is generally clean, i.e., granted without any documentary evidence for a very short period of time.
(b) Packing Credit Loan (Hypothecation): it is extended for the acquisition of raw materials, work-in-process or finished goods meant for exports. The goods so acquired are treated as security for sanctioning of loan. Under this facility, the exporter is required to execute a hypothecation deed in favour of the bank, while the possession of goods remains with the exporter.
(c) Packing Credit Loan (Pledge): It is extended for the acquisition of seasonal raw materials or raw materials in odd or bunched lots. Export takes place in due course after processing as per the shipping and delivery schedule agreed upon by the overseas buyer. The documents relating to raw materials are pledged with the bank while the possession remains with the exporter.
(d) Secured Shipping Loan: Secured shipping loan can be obtained once the goods are handed over to the transport operator or clearing and forwarding agent for shipment. It is released against lorry receipt or railway receipt. It is extended for a very short duration considering the time taken for dispatch of goods to the port and completion of shipping and customs formalities.
(e) Advances against Red Clause L/C: If the exporter desires to obtain packing credit then he should request the importer to open red clause L/C. Red clause L/C authorises the local banks to grant advances to exporters to meet their working capital requirement for the processing of export order. Such advances are guaranteed by the issuing bank.
(f) Advance against Cheque or Draft: If exporter has received direct payments from abroad by means of cheques or drafts, then the bank may grant expo credit at concessional rate to the exporters having a good track record, till the time of realisation of the proceeds of the cheques or draft. The banks however, must satisfy themselves that the proceeds are against an export order.
(g) Packing Credit Facilities for Consultancy Services: In case of consultancy services, exports do not involve physical movement of goods out of Indian customs territory. In such cases, pre-shipment finance can be provided by the bank to allow the exporter to mobilise resources like technical personnel and training them.
(h) Racking Credit Facilities to Deemed Exports: Deemed exports made to multilateral funds aided projects and programmes, under orders secured through global tenders for which payments will be made in tree foreign exchange, are also eligible for concessional rate of interest facility both at pre and post-supply stages.
(i) Pre-Shipment Credit in Foreign Currency (PCFC): EXIM bank has introduced a scheme for Indian exporters to enable them to avail pre-shipment credit in foreign currencies to finance the cost of imported inputs for manufacture of export products. The credit period for an advance under PCFC cannot exceed 180 days.
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