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A REPORT ON
SUBMITTED TO:
SUBMITTED BY:
SHAFIA AHMAD
ENROLLMENT NO-09BS0002138
INDUSIND BANK
Submitted by:
SHAFIA AHMAD
(09BS0002138)
Submitted to:
AUTHORIZATION
Mr. Pradip Bhattacharya – the Company Guide and Prof.S.N. Mookherjee – the Faculty
Guide with the partial fulfillment of the requirement of Summer Internship Program
ACKNOWLEDGEMENTS
It is well established fact that behind every achievement lays an unfathomable sea of
gratitude to those who have extended their support and without whom the project would
never have come into existence, without their help the present work would never have
assumed its form. So with immense gratitude, I acknowledge all those whose guidance and
encouragement served as a “beacon light” and crowned my efforts with success.
I wish to express my gratitude to IndusInd Bank’s management for giving me an
opportunity to be a part of their esteemed organization and enhance my knowledge by
granting permission to pursue my Summer Internship Program under their kind guidance.
I am grateful to Mr. Subir Kumar Kundu, Head Forex, for his invaluable guidance and
cooperation during the course of the program. He provided me with his guidance and
support whenever needed that has been instrumental in completion of this project.
Shafia Ahmad
(09BS0002138)
SHAFIA AHMAD (09BS0002138) Page 5
TRADE FINANCE FOR SME EXPORTS TO BANGLADESH
TABLE OF CONTENTS
A. AUTHORIZATION 4
B. ACKNOWLEDGEMENT 5
1. ABSTRACT 8
2. INTRODUCTION 9
2.3. INTRODUCTION TO 16
INTERNATIONAL TRADE
FINANCE AND SME
2.4 OBJECTIVE 18
2.5 METHODOLOGY 18
2.6 LIMITATIONS 19
3. TRADE FINANCE 20
4. INDO-BANGLADESH TRADE 34
RELATION
5. DEFINATION OF SMESs IN 40
INDIA
SHAFIA AHMAD (09BS0002138) Page 6
TRADE FINANCE FOR SME EXPORTS TO BANGLADESH
6. FINDINGS 49
7. CONCLUSION 72
8. RECOMMENDATIONS 73
9. ATTACHMENTS 75
10. REFERENCES 79
1. ABSTRACT
Trade finance can serve as an important part of business as it offers various aspects of
managing finances for the company. It helps generate, manage, and establish various
finance practices like working capital, factoring solutions, banking solutions, loans,
guarantees, discounting, etc. Trade finance companies help reduce marketing cost and
increase your trade profitability. They also help in increasing the sales by promoting the
products, services or the website around the world. Trade finance companies help in
eliminating most of the commercial and political risk normally retained by the company or
any small or medium business owner. As businesses continue to source overseas suppliers
and open up new markets for their products, the impact on cash flow cannot be
underestimated. Companies are now looking beyond traditional bank financing such as an
overdraft to more creative methods that allow funding to be provided off the back of
existing trade cycles. Businesses can then release capital which can be used to offer
customer discounts or extend credit terms resulting in a competitive advantage for their
company.
Trade finance can serve as an important part of business as it offers various aspects of
managing finances for the company. It helps generate, manage, and establish various
finance practices like working capital, factoring solutions, banking solutions, loans,
guarantees, discounting, etc. Trade finance companies help reduce marketing cost and
increase your trade profitability. They also help in increasing the sales by promoting the
products, services or the website around the world. Trade finance companies help in
eliminating most of the commercial and political risk normally retained by the company or
any small or medium business owner.
The financing of small and medium-size enterprises (SMEs) has been a subject of great
interest both to policy-makers and researchers because of the significance of SMEs in
private sectors around the world.
2.INTRODUCTION
2.1.COMPANY PROFILE
IndusInd Bank derives its name and inspiration from the Indus Valley civilisation - a
culture described by National Geographic as 'one of the greatest of the ancient world'
combining a spirit of innovation with sound business and trade practices. Mr. Srichand P.
Hinduja, a leading Non-Resident Indian businessman and head of the Hinduja Group,
conceived the vision of IndusInd Bank. The Bank, formally inaugurated in April 1994 by Dr.
Manmohan Singh, Honourable Prime Minister of India who was then the country’s Finance
Minister, started with a capital base of Rs.1,000 million (USD 32 million at the prevailing
exchange rate), of which Rs.600 million was raised through private placement from Indian
Residents while the balance Rs.400 million (USD 13 million) was contributed by Non-
Resident Indians.
IndusInd Bank is one of the new generation private-sector banks in India, which
commenced its operations in 1994. The Bank caters to the needs of both Consumer &
Corporate Clients and has a robust technology platform supporting multi – channel
delivery capabilities. The Bank enjoys a patronage of 2 million customers and has a
network of 209 branches and 427 ATMs spread over 168 geographical locations in 28
states and union territories across the country. The Bank also has a Representative Office
in Dubai and London. The Bank’s total business (deposits plus advances) as on December
31, 2009 crossed Rs. 43,000 crore. The Bank is driven by state-of-the-art technology since
its inception. It has imulti-lateral tie-ups with other banks providing access to more than
21000 ATMs for its customers. It enjoys clearing bank status for both major stock
exchanges - BSE and NSE - and three major commodity exchanges in the country – MCX,
NCDEX, and NMCE. The various services provided by the bank are Personal Banking,
Wealth Management, Corporate Banking, International Banking, Investment Banking,
Treasury, Capital/Commodities, ASBA and NRI Services. It also offers DP facilities for stock
and commodity segments. Various facilities provided to exporters are Export Finance in
Rupees, Foreign Currency Denominated Loans for Working Capital/Capital Goods/Services
During the quarter, in a pioneering initiative in ‘Green Banking’ the Bank became the first
bank in Maharashtra to open a solar-power ATM. Subjects like sustainable development,
social responsibility and climate change are fast becoming part of the corporate vocabulary
and IndusInd is at the forefront of this change in the Indian banking sector. IndusInd Bank
offers special schemes to provide timely credit to Importers/Exporters at competitive
interest and exchange rates in Indian rupees well as foreign currency. The main categories
of granting trade finance are as under:
Importers to avail buyers’/ suppliers’ credit upto 6 months in foreign currency to finalise
import.
Suppliers’ credit is part of the contract between the importer in India and the supplier
abroad.
Exporter to avail pre-shipment credit and post-shipment credit in Indian rupee or foreign
currency.
Indian companies to avail foreign currency loans from banks in India out of banks foreign
currency resources in the form of FCNR(B) deposit.
Indian companies to avail foreign currency loan for exports at pre and post shipment stage
from the credit lines, made available by correspondent bank abroad at the rate fixed by
Reserve bank of India. Bank will advise Importer/Exporter to make the choice between
rupee and foreign currency finance (or deposit) depending on what is likely to be cost
effective. The economies of these facilities depends on the Rupee and foreign currency
interest rates, ruling forward premium, exchange rates movements, etc. Some of the
important aspects of economies are as under:
Credit on Imports:
a. Credit is limited to 6 months from the date of shipment or any longer period approved by
RBI.
b. Interest should not exceed prime or equivalent rate for currency of credit.
Export Credit
There are three alternatives available to exporters under export credit for availing bank
finance:
post-shipment stage(EBRD).
improvement in its asset quality. The rating also features in the Bank’s modest resource
and earnings profile, and average capitalisation levels.
2.2.OPERATING RESULTS(2008-2009)
Total business crossed Rs. 37,800 crores
Capital Adequacy Ratio stood at 12.33 % as against the minimum regulatory norm
of 9%.
Highest A1+ rating for its Certificates of Deposit by ICRA and the highest P1+ rating
Bagged The Economic Times Acer Intel Smart Workplace Award, in the Financial
Services category.
Mandated as Settlement Banker for Tea auctions at Kolkata, Siliguri, Coonoor and
Guwati.
Loans to grow at 30% CAGR over FY09-12E; SME to be sweet spot- Benefiting
from the small base, recovering economy and strong growth in corporate loan book,
IndusInd bank has registered above industry loan growth during past 4 quarters
(~20‐30%). As a strategy, going forward, bank intends to broad‐base its corporate
customer profile and will be focusing on high yielding SME loans to drive‐in robust
credit growth. Being a small bank, it makes sense for the bank to focus on SMEs
offering its high end technology products & services at better pricing and create a
niche for itself. We expect bank to register 30% CAGR in loans over FY09‐12E,
primarily driven by strong growth in corporate loans (primarily SME) and vehicle
loans. Bank has strong presence in consumer finance segment; however, off‐late
share of corporate loans too has increased in bank’s loan portfolio, indicating
increased activity on corporate side, which should further boost banks fee income.
Being a small bank, SME remains the key focus segment for the bank to generate fee
income, where it can offer its high end technology products and create a niche for
itself.
AUTOPARTS 30%
FOODS 12%
Global trade is the exchange of raw materials, goods and services across the geographical
borders of countries across the globe. Foreign trade got its first impetus from the industrial
revolution in the late eighteenth and early nineteenth century. Rapid development in
transportation facilities resulted in a surge in international trade in the twentieth century.
Today, international trade has taken the form of outsourcing and multinational companies
(companies that have a presence in several countries). Trade among nations induces
countries to specialize in particular products or in particular varieties of some products.
This results in a more efficient allocation and utilization of world resources. As the
producers benefit from specialization and economies of scale and the customers get a
wider range of products to choose from, the economic activities increases, thus giving a
push to the economic growth of the world.
In today’s global economy, many small and medium-sized companies are looking to banks,
and commercial lending organizations to satisfy the financial needs of a growing business.
International Trade Finance can offer Letters of Credit and coordinate with the nation’s top
factors to meet your company’s Purchase Order Financing and Accounts Receivable
Factoring needs.
The absence of an adequate trade finance infrastructure is, in effect, equivalent to a barrier
to trade. Limited access to financing, high costs, and lack of insurance or guarantees are
likely to hinder the trade and export potential of an economy, and particularly that of small
and medium sized enterprises.
SMEs have been playing a pivotal role in country’s overall economic growth, and have
achieved steady progress over the last couple of years. From the perspective of industrial
development in India, and hence the growth of the overall economy, SMEs have to play a
prominent role, given that their labour intensiveness generates employment. The SME
segment also plays a major role in developing countries such as India in an effort to
alleviate poverty and propel sustainable growth. They also lead to an equitable distribution
of income due to the nature of business. Moreover, SMEs in countries such as India help in
efficient allocation of resources by implementing labour intensive production processes,
given the abundant supply of labour in these countries, wherein capital is scarce.
The first and the foremost objective was to find out as to how to enhance trade
volumes of Indian SME’s with Bangladesh to benefits the economy of both the
countries.
Swot Analysis of Indian SME.
To what extent does the total exports of Indian SMEs contributes to Indian GDP.
To study current trade policies and improvements that can be made to ease the
trade relations.
Comparative Data on Overall Industrial Growth Rate, Employment, number of
Enterprises, Fixed Investment, Production of Micro, Small and Medium Enterprises
2.5. METHODOLOGY
Interacting with bank officials and other staffs of the Foreign Exchange department in the
bank to gain the knowledge of import and export finance and risk management and to learn
the procedures taken by the bank
Secondary Research based on:
1. Business Magazines
2. Internet Sources
3. Finance books.
1st PHASE: Understanding the concept of Trade Finance. Studying the concept of SME’S
and understanding the trade relation between India and Bangladesh.
2nd PHASE: Collection of the various data required for the project and analyzing them to
identify as to how the SME’s of India can increase their trade with Bangladesh.
3rd PHASE: Tabulation of the collected data and on the basis of that doing a detailed
analysis of the findings. On the basis of the detailed analysis giving the recommendations.
2.6.LIMITATIONS
It is a known fact to all that nothing and nobody in this world is perfect! However hard one
may try, but certain limitations – directly or indirectly are bound to crop up. Certain
aspects which have put limitations on this project are listed below.
The foremost limitation is the Time-Constraint. The time frame for the completion
of this project is 14 weeks which is undoubtedly a little less. As a result, full
utilization of ideas and creativity will remain limited.
3.TRADE FINANCE
“Trade Finance is the science that describes the management of money, banking,
credit, investments and assets for international trade transactions”
Trade finance is a specific topic within the financial services industry. It is much
different, for example than commercial lending, mortgage lending or insurance. It is
concerned with international trade. A product is sold and shipped overseas; therefore, it
takes longer to get paid. Extra time and energy is required to make sure that buyers are
reliable and creditworthy. In addition, foreign buyers- just like domestic buyers- prefer to
delay payment until they receive and resell the goods. Due diligence and careful financial
management can mean the difference between profit and loss on each transaction.Trade
Finance enables credit worthy businesses to fund purchases from suppliers (particularly
wholesalers, distributors and manufacturers.)Trade finance provides alternative solutions
that balance risk and payment
Trade Finance refers to the institutions, laws, regulations and other systems related
to the following three activities:
2. Provision of support services to manage the risk involved in these transactions, and
Companies involved with trade finance include importers and exporters, financiers,
insurers and other service providers. The Main Players are:
• Government agencies
• International Agencies
There are many types of financial tools and packages designed to facilitate the financing of
trade transactions. They are:
a) Documentary Credit
This is the most common form of the commercial letter of credit. The issuing bank will
make the payment, either immediately or at a prescribed date, on the presentation of
stipulated documents. These documents include shipping and insurance documents, and
commercial invoices. The documentary credit arrangement offers an internationally used
method of attaining a commercially acceptable undertaking by providing for payment to
be made against presentation of documentation representing the goods, and making
possible the transfer of title to those goods. A letter of credit is a precise document
whereby the importer’s bank extends credit to the importer and takes responsibility in
paying the exporter.
b) Countertrade
Most emerging economies in today’s time face the problem of limited foreign exchange
holdings. One way to overcome this constraint is to promote and encourage countertrade.
Today’s modern countertrade appears in so many forms that it is difficult to devise a
definition. It generally encompasses the idea of subjecting the agreement to purchase
goods or services to an undertaking by the supplier to take on a compensating obligation.
The seller is required to accept goods or other instruments of trade in partial or whole
payment for its products.
(i) Barter exchange: In case of barter agreements, there are exchanges of goods for
goods. For example: there can be exchange of cotton for wheat. This transaction is not a
sale but it is a barter transaction. In a sale there is an exchange of goods for price and
the price is paid in money. In case of exchange of money for money it is a transaction of
exchange and not a sale.
(ii)Counter purchase – The exporter undertakes to buy goods from the importer or
from a company nominated by the importer, or agrees to arrange for the purchase by a
third party. The value of the counter purchased goods is an agreed percentage of the prices
of the goods originally exported.
c) Pre-Shipping Financing
It is for the period prior to the shipment of goods, to support pre-export activities like
wages and overhead costs. It is especially needed when the inputs for production must be
imported. It provides additional working capital for the exporter. Pre-shipment financing is
especially vital to smaller enterprises because the international sales cycle is usually longer
than the domestic sales cycle. Pre-shipment financing can take the form of short term loans,
overdrafts and cash credits.
d) Post-Shipping Financing
This is financing for the period following shipment. The ability to be competitive often
depends on the trader’s credit term offered to buyers. Post-shipment financing ensures
adequate liquidity until the purchaser receives the products and the exporter receives
payment. Post-shipment financing is usually for a short term.
e ) Buyer’s Credit
f) Supplier’s Credit
A financing arrangement under which an exporter extends credit to the buyer in the
importing country to finance the buyer’s purchases.
In addition to financing issues, traders are also subject to various other risks, which can be
either commercial or political. Commercial risk arises from factors like the non-acceptance
of goods by buyer, the failure of buyer to pay debt, and the failure of foreign banks to
honour documentary credits. Political risk arises from factors like war, riots and civil
commotion, blockage of foreign exchange transfers and currency devaluation. Export credit
insurance involves insuring exporters against such risks. It is commonly used in Europe,
and its vitality is increasing in the United States as well as in developing markets. The
types of export credit insurance used vary from country to country and depends on traders’
perceived needs. The most commonly used ones are as follows:
Short-term Export Credit Insurance – Covers periods not more than 180 days.
Protection includes pre-shipment and post-shipment risks, the former covering the
period between the awarding of contract until shipment. Protection can also be
covered against commercial and political risks.
Medium and Long-term Export Credit Insurance – Issued for credits extending
longer periods, medium-term (up to three years) or longer.
Investment Insurance – Insurance offered to exporters investing in foreign
countries.
Exchange Rate Insurance – Covers losses as a result of fluctuations in exchange rates
between exporters’ and importers’ national currencies over a period of time.
Export credit insurance mitigates the financial impact of the risk. There are specialized
financial institutions available that offer insurance cover, with premiums dependent on the
risk of the export markets and export products.
Export credit guarantees are instruments to safeguard export-financing banks from losses
that may occur from providing funds to exporters. While export credit insurance protects
exporters, guarantees protect banks offering the loans. They do not involve the actual
provision of funds, but the exporters’ access to financing is facilitated. An export credit
guarantee is issued by a financial institution, or a government agency, set up to promote
exports. Such guarantee allows exporters to secure pre-shipment financing or post-
shipment financing from a banking institution more easily. Even in situations where trade
financing is commercially available, companies without sufficient track records may not be
looked upon favourably by banks. Therefore, the provision of financial guarantees to the
banking system for purveying export credit is an important element in helping local
companies go into exporting. The agency providing this service has to carefully assess the
risk associated in supporting the exporter as well as the buyer.
A letter of credit (LC) is a document issued by a bank to carry out a buyer’s or importer’s
specific instructions regarding a trade transaction. The LC specifies the nature of the trade
transaction to be conducted, including the dates and destination for shipping merchandise,
the necessary documents to be sent by the seller, the method of payment, dates by which
the transaction should be completed, and the condition the seller must satisfy to receive
payment. These detailed instructions follow a standard format described in the Uniform
Customs and Practices for Documentary Credits, International Chamber of Commerce (ICC)
Publication Number 500, known as UCP500.
The Uniform Commercial Code and the Uniform Customs and Practices for Documentary
Credits published by the United States Council of the International Chamber of Commerce
set forth the covenants governing the Issuance and negotiation of letters of credit.
All letters of credit must be issued:
The major parties of LC transactions are the buyer (Applicant) and seller (Beneficiary) and
their respective banks acting on their behalf. The issuing bank issues the LC and acts on
behalf of the buyer. The advising bank acts as an financial agent on behalf of the beneficiary
verifying the documents, authorizing the payment to the seller and submitting the
documents to the issuing bank. The relationship between the buyer and the seller and their
respective banks under an LC provides the buyer and the seller with additional protection
against commercial and international risks. For the buyer using an LC substitutes the
creditworthiness of the issuing bank for his own. For the seller this substitution reduces
the risk of non payment as the issuing bank commits to pay the seller if the documents so
provided is correct. The buyer has no right to inspect the merchandise under an LC. The
role of the bank involved is solely to review the documents required by the LC. They do not
concern themselves with the quality or the nature of the merchandise. For the buyer , once
the LC has been successfully performed, the payment obligation must be honored. Letter of
credit should be well-defined, written clearly, and understood by both the parties prior to
engaging in the transaction to avoid the risk at a later stage.
The 4 major parties of an LC are the buyer, the issuing bank, the advising bank, and the
beneficiary. Their roles in the transactions are :
The buyer commonly called the account party submits an application requesting an
LC with specific instructions on how to proceed with the LC.
The beneficiary is also the seller who, by accepting the LC sent to him\her, must
agree to its terms and conditions. The terms of an LC usually require shipping goods
or services and submitting the necessary commercial and financial documents to the
banks involved with the LC. Once all the obligations have been fulfilled, the
beneficiary receives payment for his or her merchandise as stated in the LC.
The issuing bank issues the LC. By doing so the issuing bank substitutes its credit
risk for that of the buyer. Once issued, the bank makes itself responsible for the
payment outlined in the LC.
The advising bank receives the LC, verifies its authenticity, and delivers , it to the
beneficiary. It is common for the advising bank to be a correspondent bank of the
issuing bank.
Risk: Risk is evenly spread between seller and buyer provided all terms and conditions are
adhered to.
Pros: Payment after shipment. A variety of payment, financing and risk mitigation options
Cons: Process is complex and labor intensive Relatively expensive in terms of transaction
costs.
IRREVOCABLE
REVOCABLE
The opposite is a revocable LC. This type of LC can be cancelled by the issuing bank
at any time without the permission of the other parties. Consequently, a revocable
LC is seldom used in international trade transactions. To be revocable an LC must
state that it is revocable.
STRAIGHT
SIGHT
USANCE
A usance LC is one that calls for a payment at a future date rather than at sight.
Under this type of LC, usance(time) drafts will be presented with the required
documents. If the documents comply with the LC terms , the draft is “honoured the
drawee bank by accepting it for payment at the specified future date. Because the
accepted draft is a negotiable instrument, it has an additional advantage to the
beneficiary. The beneficiary may elect to receive funds prior to the draft maturity
date by requesting the drawee\accepting bank to pay the draft amount on a
discounted basis.
NEGOTIABLE
TRANSFERABLE
A) OPENING OF THE LC
EXPORTER,INDIA IMPORTER,BANGLADESH
OPENING OF LETTER
FORWARDS LC TO OF CREDIT APPLIES TO
B) UTILIZATION OF LC
EXPORTER,INDIA IMPORTER,BANGLADESH
SHIPS GOODS
(BENEFICIARY) (APPLICANT)
MONEY
MONEY UTILISATION OF LETTER OF
CREDIT DOCUMENTS
DOCUMENTS
INDUSIND BANK
AGRANI BANK,
INDIA MONEY
BANGLADESH
(ADVISING BANK) DOCUMENTS
(OPENING BANK)
From a supervisory perspective, risk is the potential that events, expected or unanticipated,
may have an adverse impact on the bank’s capital or earnings.
There are nine categories of risk for bank supervision purposes. These risks are: credit,
interest rate, liquidity, price, foreign currency translation, transaction, compliance, strategic,
and reputation..
The risks associated with trade financing are: credit, foreign currency translation,
transaction, compliance, strategic, and reputation.
TRANSLATION
Credit Risk
Credit risk is the current and prospective risk to earnings or capital arising from an
obligor’s failure to meet the terms of any contract with the bank or otherwise to perform as
agreed. Credit risk is found in all activities in where success depends on counterparty,
issuer, or borrower performance. It arises any time bank funds are extended, committed,
invested, or otherwise exposed through actual or implied contractual agreements, whether
reflected on or off the balance sheet.
Although trade finance has a low loss ratio historically, it is a very specialized area, and a
bank that lacks the appropriate expertise may experience losses because of improper
structuring, poor documentation, unfamiliarity with a country’s business practices, or
improper pricing. A bank should ensure that documents on shipments of goods are proper
and thorough. Any bank engaging in trade finance should thoroughly analyze the risks. In
issuing a letter of credit for a domestic importer, the bank must evaluate the importer’s
repayment capacity as it would that of any other type of borrower. In confirming or
accepting as collateral a foreign bank’s letter of credit, a U.S. bank must evaluate the risk
that the foreign importer/bank may not be able to raise the dollars required to repay the
transaction because of capital controls in the importing country.
Foreign currency translation risk is the current and prospective risk to earnings or capital
arising from the conversion of a bank’s financial statements from one currency into
another. It refers to the variability in accounting values for a bank’s equity accounts that
result from variations in exchange rates which are used in translating carrying values and
income streams in foreign currencies to U.S. dollars. Market-making and position taking in
foreign currencies should be captured under price risk. In a trade transaction, foreign
currency translation risk arises from the exposure to fluctuations in exchange rates
whenever payments involve foreign currencies. The level of risk depends on the currency
involved in the transaction, whether the bank creates an open position, the size of any
maturity gap, and settlement uncertainties.
When the U.S. exporter is paid by the foreign importer with a dollar denominated draft,
exchange risk may arise from transfer problems. Transfer problems may occur when the
foreign importer is located in a country that is having difficulties accumulating hard
currency reserves. In those circumstances, the foreign importer may have the local
currency to repay its debt but be unable to purchase the dollars because of central bank
controls over the sale of hard currency. The payment instructions to the foreign importer’s
bank could allow payment to be received from the foreign importer in local currency with
the stipulation that, when foreign exchange in U.S. dollars is allocated by the government
authorities for the transaction, it should be remitted to the exporter’s U.S. bank. Depending
on the scarcity of foreign exchange in the foreign importer’s nation, the wait may be longer
than anticipated, exposing the U.S. bank to exchange risk if it discounted the draft.
Transaction Risk
Transaction risk is the current and prospective risk to earnings or capital arising from
fraud, error, and the inability to deliver products or services, maintain a competitive
position, and manage information. Risk is inherent in efforts to gain strategic advantage,
and in the failure to keep pace with changes in the financial services marketplace.
Transaction risk is evident in each product and service offered. Transaction risk
encompasses: product development and delivery, transaction processing, systems
development, computing systems, complexity of products and services, and the internal
control environment.
Transaction risk is also referred to as operating or operational risk. This risk is particularly
high in trade transactions because of the high level of documentation required in letter of
credit operations. Many transactions evolve readily from letters of credit to sight drafts or
acceptances or to notes and advances, collateralized by trust or warehouse receipts.
Repayment often depends on the eventual sale of goods and the accuracy of
documentation. Thus, the documents required to secure payment under the letter of credit
should be properly handled.
Compliance Risk
Compliance risk is the current and prospective risk to earnings or capital arising from
violations of, or nonconformance with, laws, rules, regulations, prescribed practices,
internal policies and procedures, or ethical standards.
Compliance risk also arises in situations where the laws or rules governing certain bank
products or activities of the bank’s clients may be ambiguous or untested. Compliance risk
exposes the institution to fines, civil money penalties, payment of damages, and the voiding
of contracts. Compliance risk can lead to a diminished reputation, reduced franchise value,
limited business opportunities, reduced expansion potential, and an inability to enforce
contracts.
Compliance risk can be overlooked because it often blends into transaction risk and
operational processing. In trade transactions, failure to comply with domestic and
SHAFIA AHMAD (09BS0002138) Page 31
TRADE FINANCE FOR SME EXPORTS TO BANGLADESH
international laws, such as the anti-boycott provisions of the Export Administration Act or
regulations enforced by the Department of the Treasury, Office of Foreign Asset Control
may result in fines and prevent the bank from collecting on a transaction.
The bank must be aware of the laws of the country in which the counterpart to the
domestic customer is located. The bank must ensure that collection and penalty procedures
stipulated in the contract are enforceable in the foreign country. For this reason many
banks rely on foreign correspondent bank relationships in the countries where they are
active but lack branches.
Strategic Risk
Strategic risk is the current and prospective risk on earnings or capital arising from
adverse business decisions, improper implementation of decisions, or lack of
responsiveness to industry changes. This risk is a function of the compatibility of an
organization’s strategic goals, the business strategies developed to achieve those goals, the
resources deployed against these goals, and the quality of implementation. The resources
needed to carry out business strategies are both tangible and intangible. They include
communication channels, operating systems, delivery networks, and managerial capacities
and capabilities. The organization’s internal characteristics must be evaluated against the
impact of economic, technological, competitive, regulatory, and other environmental
changes.
Strategic risk in trade financing arises when a bank does not know enough about the region
in which it is doing business or the financing product it is using. A bank considering
whether to finance trade must carefully develop its financing strategy.
Reputation Risk
Reputation risk is the current and prospective impact on earnings and capital arising from
negative public opinion. This affects the institution’s ability to establish new relationships
or services or to continue servicing existing relationships. This risk may expose the
institution to litigation, financial loss, or a decline in its customer base. Reputation risk
exposure is present throughout the organization and includes the responsibility to exercise
an abundance of caution in dealing with its customers and community.
Risk Management
In reviewing risk, examiners should determine that a bank has adequate safeguards in
place to identify, measure, monitor, and control risks inherent in the trade finance area.
Such safeguards include policies, procedures, internal controls, and management
information systems governing trade finance activities. The importance of strong internal
controls in this area cannot be overemphasized. There is a growing incidence of counterfeit
letters of credit, totaling millions of dollars. Often, these counterfeit instruments are not
identified in a timely manner. A significant amount of funds can be released before the
schemes are detected. Bankers should closely monitor every detail of a letter of credit
transaction.
Examiners should also assess the capabilities of the trade finance staff and the adequacy of
their training. A bank’s trade finance policy should identify the target market, prospective
customers, and desirable countries, and it should set country limits and minimum
standards for documentation. The bank’s trade credit administration system should be
documented in a complete and concise manner and should include, when appropriate,
narrative descriptions, flowcharts, copies of forms, and other pertinent information.
There is always the risk that a shipment will be damaged or destroyed, the wrong goods
will be shipped, or the quality of goods (especially if the goods are agricultural) will be
lower than stipulated. Insurance coverage is crucial to protect the buyer, the seller, and the
issuing bank from loss. Banks should not issue commercial letters of credit without
satisfactory insurance coverage.
The two Governments i.e. India and Bangladesh recognized the need and requirement of
each other in the context of their developing economies undertake to explore all
possibilities, including economic and technical cooperation, for promotion, facilitation,
expansion and diversification of trade between the two countries on the basis of equality
and mutual benefit.
Relationship with India is important for Bangladesh in its greater interest. This is because
India is Bangladesh's close-door neighbour and has high 'geo-political' importance in the
sub-continent. There have been various attempts to promote greater trade between India
and Bangladesh under the provision of SAPTA (South Asian Preferential Trading
Agreement) and SAFTA (South Asian Free Trade Area).
The trading relationship between India and Bangladesh is currently of special interest in
both countries for a number of reasons. Firstly, there are urgent and longstanding
concerns in Bangladesh arising from the perennial, large bilateral trade deficit with India,
and from the large volumes of informal imports from India across the land border which
avoid Bangladesh import duties. These concerns have been particularly acute on the
Bangladesh side in the context of discussions between the two governments of the
possibility of a bilateral free trade agreement along the lines of the India-Sri Lanka FTA.
Secondly, even though (because of the disparity in the size of the two economies) India’s
trading relationship with Bangladesh is much less significant for it than it is for Bangladesh,
closer economic integration with Bangladesh is nevertheless seen as a very important way
of reducing the economic and political isolation of the seven Indian eastern and north
eastern states from the rest of the country. Finally, both countries have long shared
common objectives for closer economic integration within the South Asia region, and these
have recently been re-emphasised by signing on to SAFTA, which is to come into force in
January 2006. Under SAFTA, the preferential tariffs agreed in the various rounds of SAPTA-
- so far largely ineffective in generating much intra-regional trade-- will continue, but a
number of ambitious new objectives have been enunciated. These include the eventual
elimination of tariffs and non-tariff barriers on trade between the members, the
harmonisation of Customs procedures and documentation, the facilitation of banking
relationships, and cooperation and improvements in the infrastructure for regional trade
and cross-border investments.
Under four rounds of negotiations, India had offered concessions on 2,927 products (at 6-
digit HS Classification), of which 2,450 products were offered exclusively to least developed
countries (LDCs) including Bangladesh. Later, India offered 100 per cent tariff concessions
on 16 product groups consisting of 40 tariff lines to Bangladesh during the trade review
talks in April 2002, held in Dhaka. Duty-free access was announced for items under another
39 tariff lines during the trade review talks held in March 2003.
INDIA’S MERCHANDISE TRADE WITH BANGLADESH
Indicator Units Expression Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08
Exports Rs.crore Ival 201356 209018 255137 293367 375340 456418 571779 655864
Imports Rs.crore Ival 228307 245200 297206 359108 501065 660409 838048 1005159
Trade - - -
Balance Rs.crore Ival -26951 -36182 -42069 -65741 125725 203991 266269 -349295
Total
external
debt Rs.crore Ival 472625 482328 498804 491078 581802 616144 746918 892912
Market
borrowings Rs.crore Ival 141464 140018 130593 116164 137509 142166 211906 290668
Export
credit Rs.crore Ival 27625 26110 23750 20553 21976 24175 31237 41413
Commercial
borrowings Rs.crore Ival 113839 113908 106843 95611 115533 117991 180669 249255
HS-HARMONIZED CODE
In 2004 India’s officially recorded exports to Bangladesh were about $1.7 billion but its
imports from Bangladesh were just $78 million. Indian exports to Bangladesh grew very
rapidly during the 1990s, and have continued to grow since 2000. By contrast Bangladesh
exports to India-almost zero in the early 90s-have stagnated at very low levels at well
below $100 million annually. In inflation adjusted US dollars they are presently about the
same as they were 20 years ago during the 1980s. Since 1996/97 Indian exports to
Bangladesh (in nominal US dollars) have been growing at 9.1% annually, just slightly above
the general rate of growth of its total merchandise exports (8.4%), but India’s imports from
Bangladesh over the same period have grown on average at only 3% annually, compared to
average growth of its total imports of 9.2%. Consequently Bangladesh’s bilateral trade
deficit with India has been increasing rapidly, on average at about 9.5 % annually. For
India, trade with Bangladesh is a very small part of its total trade-just over one percent
since the mid-1990s, and currently about 3 percent of its total exports and a miniscule
share (0.01%) of its total imports. For Bangladesh, however, India has now become the
largest single source of its imports.
Prospects for bilateral trade to rise are greater when one country has a clear comparative
advantage in products that figure prominently in the import structure of another country.
India has a ‘revealed comparative advantage’ in many goods which is why Indian imports
to Bangladesh have been growing over the years. Bangladesh, on the other hand, has
relatively limited scope for enhancing its exports because it lacks a similar `revealed
comparative advantage’
$USMILLION
Non-tariff barriers.
Bangladesh
Export policies.
Para-tariffs.
P: Provisional. R: Revised
Note : 1. Figures in brackets represent percentage to total exports.
2. Leather & manufactures include finished leather, leather goods, leather garments, footwear of leather & its components and
saddlery & harness.
3. Engineering goods comprise ferro alloys, aluminium other than products, non-ferrous metal, manufactures of metals,
machine tools, machinery and equipments,
transport equipments, residual engineering items, iron and steel bar/rod etc., primary and semi-finished iron and steel,
electronic goods, computer software and
project goods.
4. Textiles and Textile Products includes: (a) cotton yarn, fabrics, made-ups etc., (b) natural silk yarn, fabrics made-ups etc., (c)
manmade yarn, fabrics, made-ups
etc., (d) manmade staple fibre, (e) woolen yarn, fabrics, made-ups etc., (f) readymade garments, (g) jute and jute manufactures,
(h) coir & coir manufactures and (i) carpets
With the advent of planned economy from 1951 and the subsequent industrial policy
followed by Government of India, both planners and Government earmarked a special role
for small-scale industries and medium scale industries in the Indian economy. Due
protection was accorded to both sectors, and particularly for small scale industries from
1951 to 1991, till the nation adopted a policy of liberalization and globalization. There is no
universal definition of small and medium enterprises. In some countries, there are certain
objective standards, which classify the units as micro, small or medium enterprises
depending on the number of employees. In some other countries, annual turnover of the
company determines the size of an enterprise. The concept of size is also a relative
phenomenon with reference to the local economies, since a large company in a small
country could possibly be considered as a small company in a larger country.
The Micro, Small and Medium Enterprises Development Act, 2006 has come into force on
2nd Oct 2006. Under the Act, the SMEs category in India comprises:
(A) Micro Enterprises
(B) Small Enterprises
(C) Medium Enterprises
The criteria fixed for identification are tabulated below for easy reference:
• Operational flexibility
• Import substitution
SMEs have been established in almost all-major sectors in the Indian industry such
as:
Others 36%
• They are unable to capture market opportunities, which require large production
facilities and thus could not achieve economies of scale, homogenous standards and regular
supply.
• They are experiencing difficulties in purchase of inputs such as raw materials, machinery
and equipments, finance, consulting services, new technology, highly skilled labor etc.
• Small size hinders the internalization of functions such as market research, market
intelligence, supply chain, technology innovation, training, and division of labor that
impedes productivity.
• Emphasis to preserve narrow profit margins makes the SMEs myopic about the
innovative improvements to their product and processes and to capture new markets.
• They are unable to compete with big players in terms of product quality, range of
products, marketing abilities and cost.
• And most importantly, absence of a wide range of Financing and other services those are
available to raise money and sustain the business.
STRENGTH WEAKNESS
OPPORTUNITY THREAT
Drawing from the experiences of countries that have successfully promoted the export
competitiveness of SMEs, the following section lays down the strategy for Indian SMEs to
achieve their export potential and make them increasingly export oriented. Promoting the
export competitiveness of SMEs needs the active involvement of various stakeholders –
government, the private sector and the international community. This section has
addressed policy recommendations for them.
ROLE OF GOVERNMENT
Creating a business-friendly environment: The points for the creation and further
development of a business-friendly environment enabling SMEs to start exporting, or to
help consolidate the activities of SMEs that are already exporting are outlined below:
a) Combating of corruption and redtapism that hinder the growth and export potential of
SMEs.
Provided the local suppliers’ capacities are sufficient to meet the needs of foreign investors
efficiently, these measures include:
formation as tax-deductible expenses and granting foreign investors a special status that
entitles them to various types of fiscal or financial incentives.
a) Training facilities,
d) Scientific hubs,
e) Investment funds,
f) Incubators, etc.
A wide range of measures could also be considered at the B2B level to boost the export
capacities of SMEs in India. Key factors and possible measures include:
TNCs: In manufacturing, TNCs and their foreign affiliates can do more to drive or guide the
competitiveness upgrading of selected local SMEs suppliers and subcontractors.
National governments, local authorities, TNCs and SMEs associations should be involved in
efforts to identify the optimal division of labor among individual SMEs, large firms and
central/local governments in developing countries so as to enable duplication of the
successes of the best exporting SME clusters and industrial districts
TNCs’ business linkages for exporting SMEs should be part of the UN agenda: TNCs
and other large firms could play a more driving role in enhancing local SME development,
and SME export competitiveness in particular, through various forms of FDI and business
linkages.
SMEs’ access to finance: The international community should play a more active role in
facilitating SMEs’ access to finance. This can be achieved in the following ways:
a) Enhancing SME export credit and long-term finance: Facilitating SME access not only to
short-term export credit but also to long-term loans for the expansion of SME export
capacity. The issue of credit collateral and guarantees should be revised. Foreign buyers,
TNCs and other business linkage makers should be invited as facilitators or guarantors.
6.FINDINGS
The MSE sector has maintained a higher rate of growth vis-à-vis the overall
industrial sector as would be clear from the comparative data on growth rates of
production.
*: PROJECTED
As per the latest 4th Census the projected corresponding figure for the year 2008-09
was 285 lakh enterprises generating employment for about 659 lakh persons. The
following chart depicts the number of enterprises, employment and the magnitude
of fixed investment in MSMEsector.
2004-2005 118.59
2005-2006 123.42
2006-2007 261.01
2007-2008* 272.79
2008-2009* 285.16
*PROJECTED DATA
*PROJECTED DATA
2004-05 429796
2005-06 497842
2006-07 709398
2007-08* 790759
2008-09* 880805
*PROJECTED DATA
B. Portfolio
A. Direct investment investment Total (A+B)
Year
Rs. US $ Rs. US $ Rs. US $
crore million crore million crore million
1990-91 174 97 11 6 185 103
1991-92 316 129 10 4 326 133
1992-93 965 315 748 244 1713 559
1993-94 1838 586 11188 3567 13026 4153
1994-95 4126 1314 12007 3824 16133 5138
1995-96 7172 2144 9192 2748 16364 4892
1996-97 10015 2821 11758 3312 21773 6133
1997-98 13220 3557 6794 1828 20014 5385
1998-99 10358 2462 -257 -61 10101 2401
1999-00 9338 2155 13112 3026 22450 5181
2000-01 18406 4029 12609 2760 31015 6789
2001-02 29235 6130 9639 2021 38874 8151
2002-03 24367 5035 4738 979 29105 6014
2003-04 19860 4322 52279 11377 72139 15699
2004-05 27188 6051 41854 9315 69042 15366
2005-06 39674 8961 55307 12492 94981 21453
2006-07 103367 22826 31713 7003 135080 29829
2007-08 138276 34362 109741 27271 248017 61633
Note : 1 Data for 2007-08 and 2008-09 are provisional.
2. Data from 1995-96 onwards include acquisition of shares of Indian companies by non-
residents under Section 6 of FEMA, 1999. Data on such acquisitions are included as part of
FDI since January 1996.
3. Data on FDI have been revised since 2000-01 with expanded coverage to approach
international best practices. Data from 2000-01onwards are not comparable with FDI data
for earlier years.
5. Direct Investment data for 2006-07 include swap of shares of 3.1 billion.
1998-99 990859
1999-00 1043497
2000-01 989351
2001-02 1141530
2002-03 1348151
2003-04 1469298
2004-05 2107519
2005-06 1934143
2006-07 1975885
2007-08 1999187
THROUGH THE ABOVE DATA I TRIED TO STUDY THE EFFECT OF FII ON INDIAN
EXPORTS TO BANGLADESH.THE RESULT OF WHICH WAS THAT THE FII
INVESTMENTS HAS NO SIGNIFICANT EFFECT ON THE INDIAN EXPORTS TO
BANGLADESH
FROM THE GRAPHS WE CAN SEE THAT WPI PLAYS AN IMPORTANT ROLE IN BOOSTING
INDIAN EXPORTS TO BANGLADESH.
INDIAN EXPORTS TO
YEARS IIP DATA BANGLADESH
Dec-99 166.1 26523.96
Jan-00 163.2 20837.76
Feb-00 161.6 24669.51
Mar-00 174.5 29688.46
Apr-00 156.5 27033.18
May-00 160 29301.59
Jun-00 154.9 24069.11
Jul-00 156.5 21193.13
Aug-00 157.7 15604.58
Sep-00 158.7 17896.48
Oct-00 157.4 21580.57
Nov-00 163.3 55563.23
Dec-00 172.1 61545.6
Jan-01 170.2 47926.4
Feb-01 166.4 35705.1
Mar-01 178.6 41398.62
Apr-01 160.4 29684.78
May-01 162.5 41115.94
Jun-01 159 40598.53
Jul-01 160.4 50893.51
Aug-01 162.2 40864.88
Sep-01 161.7 44350.93
Oct-01 162.2 36639.63
Nov-01 167 38934.23
Dec-01 177.1 24143.33
Jan-02 176.9 24848.39
Feb-02 170.3 27248.18
Mar-02 184.2 37202.52
Apr-02 167 39041.34
May-02 169.2 22644.84
Jun-02 166.2 40517.23
Jul-02 171.8 37364.14
Aug-02 172.2 28376.68
Sep-02 171.8 32249.12
3) The estimates of employment for the period 2002-03 to 2005-06 have been revised. The
Third All-India Census surveyed the units registered upto 2000-01, while its reference
period was 2001-02. Adjustments have been made in the estimates using the number of
units registered with State/UTs Government after 31.3.2001.
In the recent years, Indian authorities have taken several steps to address factors
that constrain SME financing and developments, and the World Bank has provided
support through an SME Financing and Development Project. The Government of
India and the Small Industries Development Bank of India (SIDBI), which is the apex
bank for SMEs in India) requested the World Bank to support efforts to remove
constraints to SME access to finance (including term financing), and to foster SME
development. A Bank project involving funding of US$120 million for SME financing
and development was subsequently developed. The Project was approved on
November 30, 2004, and became effective on April 4, 2005 and is currently
scheduled to close on June 30, 2009. The objective of the Project was to improve
SME access to finance and business development services, thereby fostering SME
growth, competitiveness and employment. The Small and Medium Enterprises
Financing and Development Project has been designed to improve access to finance
for SMEs. The lending from the original project covered 927 SMEs spread across 10
Indian states.
A US$ 400 million additional financing loan to the SIDBI was signed on 5 June, 2009
by representatives from the Government of India, SIDBI and the World Bank.
The Securities and Exchange Board of India (SEBI), issued norms on separate stock
exchanges for SMEs during November, 2009 so as to give them more options to raise
capital. At present, around 90% of the 2.61 crore MSMEs depend on either banks or
informal sources to finance their business. Setting up of a separate stock exchange
for SMEs is not so simple. Two requirements are to be fulfilled. One is to reduce the
cost of compliance and the second is to safeguard the investors from any undue risk.
The SEBI has laid the groundwork to allow SMEs to list on SME Exchanges. SMEs
have always complained of difficulty in accessing to both debt and equity capital. It
is perceived that registration of companies from the SME sector is essential so as to
raise capital from the stock exchange.
SMERA is India’s premier credit rating agency in the micro, small, & medium
enterprise segment. It focuses primarily on the Indian SME segment. The primary
objective is to provide ratings that are comprehensive, transparent and reliable. It
takes into account the financial condition and several qualitative factors that have
bearing on credit worthiness of the SME.
The credit guaranty fund and credit linked capital subsidy scheme has been built in
order to support the SMEs. Credit rating helps in cost efficiency and innovation to be
undertaken by SMEs, and helps the bank to go for less riskier lending venture,
provided the credit rating is done in a scientific way. The Exim Bank of India in India
has also provided financial solutions to the SMEs.
7.CONCLUSION
My Project dealt with Trade Finance for SME Exports to Bangladesh as a part of
International Trade Finance at IndusInd Bank. There are many types of financial tools and
packages designed to facilitate the financing of trade transactions. Exporting is considered
to be one way of stimulating growth of SMEs, gradually improving the quality standards of
SME products, and capturing more global shares. Boosting the contribution of Small and
Medium Enterprises in total exports of India is vital to India’s future Economic growth.
According to the Union Ministry, MSMEs, with addition of Medium enterprises in their fold
are now a sector that contributes up to 40% to the gross industrial manufacturing value
added to the economy, 35% to India’s exports directly and around 8% to India’s GDP.
Numbering more than 13 Mn units and employing around 33 Mn. people, as per the
Ministry and no matter which other data set is used, the sector is proved to be the second
largest employer after agriculture.
My experience as an Intern at IndusInd Bank plays a very important role in the learning
aspect of my MBA course which has helped me gain practical exposure and knowledge.
8.RECOMMENDATIONS
SMEs which constitute more than 80 per cent of the total number of industrial enterprises
and form the backbone of industrial development in India now are not export competitive
and contribute only about 34 per cent of exports. Boosting the contribution of small and
medium enterprises in total exports of India is vital to India’s future economic growth,
which can be promoted in the following manner:
a) Independent SMEs specializing in specific niches and highly profiled productions; SMEs
that link up with TNCs or large domestic exporting firms; and SMEs that are part of clusters
and networks in order to reinforce their external competitiveness be encouraged.
b) Special emphasis should be put on linkages between TNCs and SMEs as a way to enhance
the export competitiveness of SMEs. Linking up with TNCs is increasingly perceived as a
way for SMEs to solve their traditional problem of access to certain critical resources, the
most important of which are finance, technology and managerial skills, as well as to new
markets.
d) Exclusive Stock Exchange for SMEs- A stock exchange purely dedicated for SMEs seems
to be the next big thing. A SME‐focused stock exchange is likely to boost the confidence of
SMEs planning to tap the capital market to raise low cost capital. Currently only companies
with a minimum paid up capital of Rs 100 million and a market capital of Rs 250 million are
eligible to list on NSE while those with a post issue capital of Rs 30 million and a minimum
market cap of Rs 50 million are eligible to list on the BSE. Thus SMEs which in spite of
having a good track record of growth but do not meet this criteria are kept away from the
listed category.
Some examples of SME dedicated stock exchanges include AltX, Africa’s first alternative
exchange for SMEs, a partnership between the Johannesburg Stock Exchange Ltd and the
Department of Trade and Industry and AIM, a sub market of the London Stock Exchange
that allows smaller companies to float shares with a more flexible regulatory system as
compared to the main market. The creation of an SME stock exchange will also help in
bridging the gap between private equity players, venture capitalists and the SMEs.
e) Providing Foreign currency export finance and much of that is extended to SME
exporters who benefit from the lower cost and natural hedging that it provides. The
relative lower cost of foreign currency funding helps SMEs become more competitive
against exports from other countries. Assisting SME exporters in multiple ways including
leveraging our relationship with large global retailers to extend finance to their Indian
vendors who are typically SMEs. This helps the SME vendor meet their increasing working
capital requirements since the reality is that more and more of the large buyers are
extending their payment terms. Setting customized solutions, for example, we set up a
special process where suppliers to one of the large buyers in the apparel segment, can now
get payments against export documents in four days compared to 10-15 days. This process
helps the SME client reduce their working capital borrowings, and consequently costs.
9.ATTACHMENTS
Freight Insurance Commissio Whether the FOB Date of GRI/PP/ No. date &
amount amount as n/ Discount export is in value/ realisation SDF form category of
as per per paid/ freely FOB value of export No. applicable
Bill of insurance payable convertible actually proceeds licence
lading/ Company's currency or realised
Freight bill/ in Indian in free
memo Receipt Rupees Foreign
Exchange
/Rupees
[10] [11] [12] [13] [14] [15] [16] [17]
We further declare that the aforesaid particulars are correct. (Copies of invoices relevant to these
exports and Customs attested EP. Copy of relevant Shipping Bill is attached for verification by the
bank).
Article X
The two Governments agree to cooperate effectively with each other to prevent
infringement and circumvention of the laws, rules and regulations of either country in
regard to matters relating to foreign exchange and foreign trade.
Article XI
The two Governments agree to accord, subject to their respective laws and regulations,
reasonable facilities for the holding of trade fairs and exhibitions and visits of business and
trade delegations sponsored by the Government concerned.
Article XII
In order to facilitate the implementation of this Agreement, the two Governments shall
consult each other at least once in a year or earlier as and when necessary, and shall review
the working of the Agreement with special attention to the asymmetries between the two
countries.
Article XIII
st
This amended Agreement shall come into force on the 1 April, 2006. It shall remain in
force for a period of three years. It may be extended by a further period of three years by
mutual consent subject to such modifications as may be agreed upon.
10.REFERENCES