I
had mentioned in my earlier articles about the Pre-Shipment and Post Shipment
Export Credit Advances available to Corporates (Pre-shipment
Credit / Post-Shipment
Credit). These are the short term facilities [maximum period of upto 360 days (preshipment) and
365 days (postshipment)] for boosting the exports from the
country. The interest rate to be
charged in these lines are not controlled/capped by Reserve Bank of India (RBI).
In
order to ensure availability of long term finance at internationally competitive
pricing to the exporters, RBI in May 2014 has allowed
exporters having a minimum of three years satisfactory track record to receive
long term export advance upto maximum tenor of 10 years to be utilized for
execution of long term supply contract for export of goods subject to certain
conditions. The exporter is allowed to provide SBLC/BG from banks in
India for guaranteeing the export performance. Some of the key
conditions of the guidelines are as following:
1. Firm irrevocable
supply orders should be in place.
2. Company should have
capacity, systems and process in place
3. Such advances should
be adjusted through future exports.
4. Rate of interest
payable, if any, should not exceed Libor + 200 bps.
5. Double financing for
working capital for execution of export orders should be avoided.
6. SBLC/BG facility
will be extended by banks only for guaranteeing export performance.
7. BG/SBLC may be
issued for a term not exceeding 2 years at a time and further rollover of not
more than 2 years at time may be allowed subject to satisfaction with relative
export performance as per the contract.
8. BG/SBLC should cover
only the advance on reducing balance basis.
9. BG/SBLC issued from India in favour of overseas
buyer should not be discounted by the overseas branch/subsidiary of bank in
India.