How to liquidate packing credit loan without post-shipment finance

The loans and advances granted to an exporter for procuring materials, processing, manufacturing or packing of goods at the pre-shipment stage are called Packing Credit (PC) facility. These types of facilities are also available for the working capital requirement to an exporter for the rendering of services to the overseas buyer. The packing credit loan can be released either in stages or in one lump sum, as per executing requirement of the orders or L.C terms. Each packing credit granted by the bank for different orders is normally considered as a separate account for the purpose of monitoring the period of loan released.

Normally, the packing credit loan or running account is liquidated out of proceeds of export bills purchase, discount etc. In the process, the pre-shipment liability of the borrower is converted into post-shipment credit. However, in some occasions subject to mutual agreement between the exporter and the banker, the PC outstanding can also be repaid/ prepaid out of balances in EEFC A/c.The exporter can also liquidate packing credit advance from his rupee resources to the extent exports have actually taken place. The existing packing credit may also be marked-off with proceeds of export documents against which no packing credit has been drawn by the exporter. However, if the packing credit advance is not liquidated/ repaid. in the above manner, such advance is not eligible for any concessional rate of interest usually available to packing credit facility and banks are free to decide the rate of interest on such advances. If the packing credit is availed in foreign currency, it cannot remain outstanding beyond 180 days. If export does not take place even after 360 days PCFC should be converted to Rupee liability at TT selling rate and the bank is free to decide the rate of interest on such advances.

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