Banks in India offer various credit facilities to exporters both at pre-shipment stage (Packing Credit) and Post-shipment stage viz. Purchase of export bills, Discount of Export Bills, Negotiation of Export bills, Advance against Undrawn Balances on Export Bills, Advance against Retention Money, Advance against Duty Draw Back, Advance against Deemed Exports, Advance against the export of Goods for…
In simple words, the process of converting foreign currency liability of the exporter into Indian Rupee liability is called ‘crystallization of foreign currency export bills’. The purpose of crystallization is to transfer the exchange risk involved in a belated receipt of export bill payment to the exporter. The export bills negotiated/purchased/discounted by a bank are…
Normal Transit Period (NTP) is commonly misunderstood for the time taken for the goods to reach the destination. It is not so. The term Normal Transit period (NTP) used for the average period normally involved from the date of negotiation/ purchase/ discount of a bill, till the credit of that bill proceeds in the Nostro…
(This post elucidates information on who can open EEFC account, the documents required for opening EEFC account, what are the permissible credits and permissible debits allowed in the EEFC account) What is EEFC account? Ans.: EEFC account is the abbreviation of Exchange Earners Foreign Currency account. In this account the account holder maintains a current…
Further to its earlier circulars, Reserve Bank of India has clarified on the provisions of hedging in the ECB framework vide its circular (A.P. (DIR Series) Circular No. 15) dated 07.11.2016. The circular provides clarity on hedging ‘External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency to bring uniformity in hedging practice in…
The first two decades after independence, India had almost a constant peg against the US dollar at Rs.4.75/$, how the value of Indian Rupee drifted down to present level? In replying to the above question, I would like to add-on how our economy has been time and again battered due to various factors which led…
We all know that in the international trade of goods and services transactions takes place between the people belonging to different continents, languages, culture, and laws. Since the language used for communication of terms and conditions of LC may suggest different meaning in different parts of the world, people across the world realised the need…
Letter of credit (LC) also known as Documentary credit is an undertaking from a bank on behalf of its customer (importer/buyer) wherein the beneficiary (exporter) is fully assured of payment provided he fulfills his part of the sale contract embodied in Letter of Credit. To understand LC mechanism, let us take an example of a…
(This post explains the meaning of Standby LC, Green Clause LC, Red clause LC, Without Recourse LC, back to back LC, Revolving credit LC, Irrevocable Letter of Credit confirmed by advising bank, Irrevocable Credit not confirmed by advising bank, Irrevocable Credit, Revocable Credit etc.) Revocable credit: Credit may be either revocable or irrevocable. Revocable credits may…
Co-acceptance of bills means “an undertaking from the third party (Bank) to make payment to the drawer of the bill (seller/exporter) on due date even if the buyer/importer fails to make the payment on that date”. Thus, in the Co-acceptance of the bills, the bank which stands as co-accepter acts as a guarantor similar to LC…