Академический Документы
Профессиональный Документы
Культура Документы
CHAPTER 1
INTRODUCTION OF BANK
A bank is
a financial
institution and
a financial
intermediary that
accepts deposits and channels those deposits into lending activities, either
directly or through capital markets. A bank connects customers that have
capital deficits to customers with capital surpluses Due to their critical
status within the financial system and the economy generally; banks
are highly regulated in most countries. Most banks operate under a
system known as fractional reserve banking where they hold only a
small reserve of the funds deposited and lend out the rest for profit. They
are generally subject to minimum capital requirements which are based
on an international set of capital standards, known as the Basel Accords.
1472
It
is
followed
by Berenberg
Bank of
Hamburg
Banking in the modern sense of the word can be traced to medieval and
early Renaissance Italy,
to
the
rich
3
cities
in
the
north
1.2
DEFINATION OF BANK:
Oxford Dictionary defines a bank as an establishment for custody
4. Giving Advances :
A bank lends out money in the form of loans to those who
require to it for different purposes.
1.4
Types of Bank.
1) Scheduled Bank
All banks which are included in the Second Schedule to the Reserve
Bank of India Act, 1934 are scheduled banks. These banks comprise
Scheduled Commercial Banks and Scheduled Cooperative Banks. The
type of banks comes under these Scheduled Commercial Banks and
Scheduled Cooperative Banks can be seen in the above figure. All most
all banks are Scheduled banks in India.
2) Commercial Banks
Commercial banks may be defined as, any banking organization that
deals with the deposits and loans of business organizations Commercial
banks issue bank checks and drafts, as well as accept money on term
deposits. Commercial banks also act as moneylenders, by way of
installment loans and overdrafts. Commercial banks also allow for a
variety of deposit accounts, such as checking, savings, and time deposit.
These institutions are run to make a profit and owned by a group of
individuals.
3) Public Sector Banks
These are banks where majority stake is held by the Government of India.
Examples of public sector banks are: SBI, Bank of India, Canara Bank,
etc.
7) Cooperative Banks
10
Import is when you buy something from another country and get
it shipped to you. The term import is derived from the conceptual meaning as to
bring in the goods and services into the port of a country. The buyer of such
goods and services is referred to an "importer" who is based in the country of
import whereas the overseas based seller is referred to as an "exporter". Thus an
import is any good (e.g. a commodity) or service brought in from one country to
another country in a legitimate fashion, typically for use in trade. It is a good
that is brought in from another country for sale Import goods or services are
provided to domestic consumers by foreign producers. An import in the
receiving country is an export to the sending country.
goods
or
services
are
provided
domestic producers
11
to
foreign consumers by
Meaning of Exporter:
Exporter's Bank:
Pay the exporter when it receives payments from the collecting bank.
Meaning of Importer:
12
Pay the bill as mention in the agreement (or promise to pay later).
Take the shipping documents (unless it is a clean bill) and clear the
goods.
Importer's Bank:
13
Release the documents to the buyer when the exporter's instructions have
been followed.
Remit the proceeds of the bill according to the Remitting Bank's schedule
instructions.
If the bill is unpaid / unaccepted, the collecting bank :
May arrange storage and insurance for the goods as per remitting bank
instructions on the schedule.
Protests on behalf of the remitting bank (if the Remitting Bank's schedule
states Protest)
Once payment is received from the importer, the collecting bank remits
the proceeds promptly to the remitting bank less its charges.
14
CHAPTER 2
The statutory basis for regulation of exports from India is the Foreign
Trade (Development and Regulation) Act 1992. The Government is empowered
to ban the export of certain goods from India and/ or restrict export in quantity,
value etc. by subjecting them are licensing procedure.
Export from the country is generally free. The export goods may be
classified under any of the following categories:-
15
incentives to an exporter:
3. Cash Incentives for exports viz. Tax breaks for export units, duty
drawback schemes.
4. Providing Infrastructure facilities viz. Free trade Zones Export Zones etc.
17
18
ELIGIBILITY:
Pre shipment credit is only issued to that exporter who has the export
order in his own name. However, as an exception, financial institution can also
grant credit to a third party manufacturer or supplier of goods who does not
have export orders in their own name. In this case some of the responsibilities
of meeting the export requirements have been out sourced to them by the main
exporter. In other cases where the export order is divided between two more
than two exporters, pre shipment credit can be shared between them.
PACKING CREDIT
PACKING CREDIT is any loan or advance granted or any other credit provided
by a bank to an exporter for financing the purchase, processing, manufacturing
19
21
23
The amount does not exceed US$ 100 per import transaction, and
The interest does not exceed LIBOR + 0.5% for credit unto 1 year,
and LIBOR + 1.25% for periods beyond 1 year.
25
The exporter cannot get any benefit under the letter of credit without
shipping the goods and submitting documents to the bank. Therefore, the
importer is certain to get the supply.
2. Delivery on time:
As the exporter submits documents in time for negotiation, it
reaches the opening bank in time. This enables the importer not only to collect
the documents on time but also to collect the goods from the customs.
3. Overdraft facility:
When the importer falls short of payment, he can take possession
of the documents against overdraft facility
26
27
4. No bad debts:
As the payment is guaranteed by the opening bank, the exporter is free
from the problem of bad debt. In case the exporter holds a confirmed letter of
credit, there is double guarantee by the opening bank & the confirming bank.
5. No liability:
In case of confirmed letter of credit and without recourse clause, the
liability of the exporter comes to an end as soon as he hands over the relevant
documents to the bank.
6. Certainty of payment:
The importer cannot refuse to take possession of the goods and to clear
the payment when the terms of payment are the letter of credit. This problem
of no possession of goods and non-payment may arise in case of D/P and D/A.
28
29
2. Transferable Credit:
A letter of credit is transferable only if it is expressly designated by the
issuing bank. The beneficiary of such a credit has the right to request the
nominated bank to transfer the credit to another party or more than one party if
partial shipment is permitted. The transferable credit can be transferred once
only.
5. Revolving Credit:
30
CHAPTER 3
ROLE OF BANKS IN EXPORT AND IMPORT FINANCE
Along with public sector banks, the foreign banks also provide financial
assistance to Indian exporters. They offer financial facilities to exporters and
thereby contribute for export promotion. In addition, the exchange banks also
provide banking and financial facilities to importers from their respective
countries.
31
Foreign banks offer various financial services to exporters from their home
country. For example, they issue letter of credit to their clients and also provide
financial facilities. They collect payment for goods imported and arrange to
32
The documentary bills of exchange may be sent to these banks and collect
payment for the goods.
Along with such services, the foreign banks (also called foreign exchange
banks) also provide many facilities to Indian Exporters who open the account in
such banks.
For example, they arrange to make payment for the goods imported. They
also provide discounting facility to Indian exporters and also offer various types
of guarantees. Exports proceeds are also collected on behalf of Indian exporters
as a result; immediate cash is available to exports.
1. Commercial Banks
2. Export Import Bank of India (EXIM Bank)
3. Reserve Bank of India (RBI)
33
8.
a)
b)
c)
EXPORT IMPORT BANK OF INDIA plays fourpronged role with regard to India's foreign trade: those of a co-coordinator, a
source of finance, consultant and promoter. EXPORT IMPORT BANK OF
INDIA is the Coordinator of the Working Group Mechanism for clearance of
Project and Services Exports and Deferred Payment Exports (for amounts above
a certain value currently US$ 100 million).The Working Group comprises
EXPORT IMPORT BANK OF INDIA, Government of India representatives
(Ministries of Finance, Commerce, External Affairs), Reserve Bank of India,
Export Credit Guarantee Corporation of India Ltd. and commercial banks who
are authorized foreign exchange dealers. This inters- institutional Working
Group accords clearance to contracts (at the post-award stage) sponsored by
commercial bank or EXPORT IMPORT BANK OF INDIA, and operates as a
one-window mechanism for clearance of term export proposals. On its own,
EXPORT IMPORT BANK OF INDIA can now accord clearance to project
export proposals up to US$ 100 million in value.
38
Payments for export are open to risks even at the best of times. The
risks have assumed large proportions due to political and economic charges in
the world. A civil war in a country may block or delay the payment for exports.
Economic difficulties or BOP position may also force a country to restrict
payments outflow to the exporters.
It is also possible that the buyer may turn insolvent or may refuse to
make the payment. In light of the above, the export business though may appear
lucrative is fraught with risks, With a view to protect a shelter to the exporters
against
the
export
risks,
EXPORT
CREDIT
AND
GURANTEE
39
40
1.
2.
3.
4.
Standard Policy
Specific Policy
Financial Guarantees
Other
41
i.
ii.
iii.
iv.
v.
vi.
COMMERC
IAL
BANKS
FUND
BASED
ASSISTANC
E
NON FUND
BASED
ASSISTANC
E
Other Services:
a) They collect export proceeds from the importer and credit the
same to
exporters account.
b) The banks assist the exporter in the collection of useful information on
the credit worthiness of the foreign buyer through their foreign agents.
c) The banks issue bank drafts in case of payment of freight charges and
such other charges.
d) The banks send the duplicate copy of GR form to the RESERVE BANK
OF INDIA after realization of export proceeds.
e) The banks issue bank certificates in respect of export sales value, which
are useful for claiming incentives.
44
CHAPTER 4
1
.C le a n
1.Clean
P
aym en t
Payment
s
s
2
.P a y m e
2.Payme
n
t
nt
C
o lle c t io
Collectio
n
of B
ills
n of
Bills
in
in
In
te r n a t i
Internati
o
nal
onal
Tr
ade
Trade
3
.L e t te r
3.Letter
o
f Credit
C re d it
of
L
/c
L/c
There are 3 standard ways of payment methods in the export import trade
international trade market:
1. Clean Payment
2. Collection of Bills
3. Letters of Credit L/c
Advance Payment
In advance payment method the exporter is trusted to ship the
goods after receiving payment from the importer.
Open Account
In open account method the importer is trusted to pay the exporter
after receipt of goods.
The main drawback of open account method is that exporter
assumes all the risks while the importer get the advantage over the
delay use of company's cash resources and is also not responsible
for the risk associated with goods.
CHAPTER 5
48
Nostro Account:
The Demand Draft Deposit account belonging to a domestic
bank maintained in an overseas bank denominated in foreign currency is nostro
account.
Vostro Account:
The Demand Draft Deposit account belonging to a domestic
bank maintained in an domestic bank denominated in domestic currency is
vostro account.
A list of the various document required in cross border trade is given
below:
Commercial Invoice
Bills of Lading/Airway Bill
Marine Insurance Policy and Certificate
Bills of Exchange
Consular Invoice
Customs Invoice
Certificate of Origin
49
Bill of Lending is
the most important document in foreign trade. A Bill of Lending serves the
following proposes.
50
51
CHAPTER 6
FOREIGN TRADE POLICY
In line with the above focus, the FOREIDN TRADE POLICY lays down two
major objectives:
55
I. To double our percentage share of global merchandise trade within the next
five years; and
Main strategies announced for the five sectors outlined in the FOREIGN
TRADE POLICY are as follows:
(i) In agriculture, a new scheme called Vishesh Krishi Upaj Yojana was
introduced to boost exports of fruits, vegetables, flowers, minor forest produce
and their value added products. Export of these products would qualify for duty
free credit entitlement equivalent to 5 per cent of the value of exports. In
addition, the policy made capital goods imported for agriculture under the
Export Promotion Capital Goods (EPCG) scheme duty free.
(ii) The package for gems and jeweler sector includes:
(a) Duty free import of consumables for metals other than gold and platinum up
to 2 per cent of the value of exports; (ii) duty free re-import entitlement for
rejected jeweler up to 2 per cent of the value of exports;
(iii) duty free import of commercial samples of jeweler increased to Rs. 1 lakh;
and (iv) allowing import of gold of 18 carat and above under the replenishment
scheme.
(iii) As far as the handlooms and handicrafts sector is concerned, the FOREIGN
TRADE POLICY announced that a new Handicraft Special Economic Zone
would be established. In addition, duty sops for trimmings and embellishments
imported by handlooms and handicraft producers were increased to 5 per cent of
the value of exports.
57
(iv) In the leather and footwear sector, the duty-free entitlements of import
trimmings, embellishments and footwear components were increased to 3
percent. This is expected to help the leather and footwear sector save up to 5 per
cent of its import costs. In addition, duty free import of specified items for
leather sector was increased to 5 per cent of the value of exports.
(i) Served from India brand will be created to catapult India the world over as a
major global services hub.
(iii) Individual service providers who earn foreign exchange of at least Rs. 5
lakh, and other service providers who earn foreign exchange of at least Rs. 10
lakh would be eligible for a duty credit entitlement of 10 per cent of total
foreign exchange earned by them.
58
(v) Five Star (export of Rs. 5,000 crore).a star export house was entitled to get
license, certificate, permissions and customs clearances for both imports and
59
60
(i) Biotechnology Parks to be set up in the country having all the facilities of
100 per cent EXPORT ORIENTED UNITs.
(ii) The Board of Trade to be revamped and given a clear and dynamic role.
(iii) Financial assistance to be provided to export for meeting their costs and
legal expenses related to trade matters like anti-dumping action and
countervailing duties in other countries.
(iv) Although the DEPB (Duty Entitlement and Pass book Scheme) is as it
covers 52 per cent of India's exports and is easy to administer.
CHAPTER 7
INFORMATION OF BANK OF INDIA
62
63
65
67
FINDINGS
While selling abroad, importers may undergo Credit risk, Currency
risk, Carriage risk and Country risk. These risks can be insured to a great
extent by taking appropriate steps. Credit risk against the buyer can be
covered by insisting upon an irrevocable letter of credit from the overseas
buyer. An appropriate policy from Export Credit and Guarantee
Corporation of India Ltd. can also be obtained for this purpose. Country
risks are also covered by the ECGC. As regards currency risk, i.e.
possible loss due to adverse fluctuation in exchange rate, importer should
obtain forward cover from his bank authorized to deal in foreign
exchange. Alternatively, he should obtain export order in Indian rupees.
Carriage risk, i.e. possible loss of cargo in transit can be covered by
taking a marine insurance policy from the general insurance companies.
Indian exporters while selling abroad may face various commercial
and political risks. The commercial risks may arise due to insolvency of
the buyer; failure of the buyer to make the payment due within the
specified period; or buyer's failure to accept the goods, subject to the
given conditions. While, the political risks may be due to imposition of
restrictions by the Government of the buyer's country or any Government
action which may block or delay the transfer of payment made by the
68
69
BOI collect import bills on behalf of their client from third party.
BOI provide NOSTRO A/C services to importer and exporter.
BOI discount bills in form of Letter Of Credit
Negligible scope/ small scope for default in EXIM finance
repayment is speculated by the bank, after due risk assessment
CONCLUSION
Credit and finance is the life and blood of any business whether
domestic or international. The payment terms however depend upon the
71
72
ANNEXURE
73
Yes
No
Yes
No
3. Do you discount bill drawn under letter of credit as well as outside it?
Ans:
Yes
No
Yes
No
5. Do you hold any charge /mortgage /pledge over their assets through
which you can recover your outstanding loan?
Ans:
Yes
No
74
Yes
No
No7. Are you giving bill discounting facility to non bank customers as
well?
Ans:
Yes
No
Yes
No
75
APPENDIX
76
BIBLIOGRAPHY
77
Jeff Madura.
C.Jeevanandam.
Charles WL Hill.
Scott B. Macdonald.
WEBLIOGRAPHY
WWW.yahoo.co.in
WWW.google.co.in
WWW.rediff.com
WWW.eximbank.org
78