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Role of Banks in Export Business back
Major domestic, foreign and international banks provide range of services to their customers involved in import and export operations. These services falls in four main categories Financial services, Handling Export Documents, Non Financial services and Foreign Exchange Operations.
If you are planning to operate in international trade, it is important to cultivate your banking relationships early and often. Begin by establishing a strong personal relationship with the bankers whose support you will need as your enterprise progresses.
Financial Services :
Financing is the core service provided by the banking sector to exporters. It was strongly believed that the most effective incentive to exporter would be in the form of cheaper and more spread credit availability. Credit requirement of exporters are :
  1. Short Term Credit
  2. Medium Term Funding
Handling the Export Documents :
Our exchange control regulations require that payment for exporters should be settled through the medium of a bank authorized to deal in foreign exchange. The exporters lodge their exports bills with their authorized dealers for scrutiny and dispatch to the overseas buyer through the medium of overseas correspondent bank of the authorized dealers.
The usual procedure in handling the export documents and providing credits by the bank is as under :
1. Exporter enters in to a confirmed contract with the foreign buyer to sell specified goods at specified rates to be shipped by a definite time.
2. Exporter on the basis of confirmed order, acquires, good/processes them and arranges for shipment before the time framed fixed by the buyer.
3. Exporter tenders to the bank the shipping documents as per the conditions/ terms of the contract with buyer. The usual and important documents are as under :
  • Shipping bills of Lading / Airway bill
  • Marine Insurance policy
  • Invoice in required copies
  • Packing list in required copies
  • Certificate of analysis, specification, weight lists
  • Certificate of origin of goods/consumer invoice and certificate of origin as is required (duly certified by the chamber of commerce)
  • Form GR/SDF (duly stamped by the custom authorities
  • Any other documents required under contract
  • Bill of exchange
  • Copy of shipping bill ( Exchange control copy) generated by the Indian custom EDI (computer)system , duly stamped by the cu/toms authorities
4. Bank will scrutinize theses documents and transmit them to their foreign correspondent/branch for presentation to the drawee for acceptance/payment.
5. On receipt of payment advice, banks credit the exporter with the Rupee equivalent of the foreign currency amount converted at the market T.T. buying rate.
Non Financial Services :
Connections
Through its branch and correspondent bank relationships throughout the world, your bank may be able to provide you with names and references for potential buyers of the commodities or product you wish to sell. At the very least your banker should be able to supply you with a letter of introduction to an officer of a bank abroad. To find a good source of supply you may need to follow up on a number of leads.
Client Information
International banks are also in position to assist in securing information on the reputation, capabilities and creditworthiness of firms and individuals with whom you may consider doing business.
Counseling Services
Banks with their widespread experience in export areas are in a position to offer advice on rules and regulations, documentations, etc. The major advantages are as under :
  • Better and more efficient service to clients
  • Fewer errors
  • Bankers develop specialist commodity knowledge , which put them in a position to advise client
  • Helps build long term relationships
Foreign Exchange Management Facilities
With the advent of the near full convertibility of rupee, managing foreign exchange is an essential feature of the export strategy. To do this effectively the exporter needs information and advice as to :
  • Exchange rates
  • Forward premiums
  • Hedging instruments
RBI Guidelines on Guarantees :
1- Big Bonds and Performance Bonds or Guarantee for Exports
A). Foreign Exchange Stipulations
In terms of Notifications No. FEMA 8/2000-RB, authorized dealers have the permission to give performance bond or guarantee in favor of overseas buyers on account of bona fide exports of India. Prior approval of RBI should be obtained by the authorized dealers for issue of performance bonds/guarantees in respect of caution listed exporters. Before issuing any such guarantee, they should satisfy themselves with the bona fide of the applicant and his capacity to perform the contract and also the value of bid/guarantee as a percentage Of the value of the contract/tender is reasonable and according to the normal practice in international trade and that terms of contract are in the accordance with the foreign Exchange Management Regulations.
B). Other Stipulations
With a view to boost exports, bank should adopt a flexible approach in the matter of obtaining cover and earmarking of assets/credit limits, drawing power, while issuing bid bonds and performance guarantees for export purposes. Banks may however safeguard their interests by obtaining an Export Performance Guarantee of ECGC, wherever considered necessary. ECGC would provide 90% cover for bid bonds, provided the banks give an undertaking not to insist on cash margins. In other cases, where such counter guaranteed of ECGC are not available for whatever reason, the bank may stipulate a reasonable cash margin only where it is considered absolutely necessary as they satisfy themselves generally about the capacity and financial position of the exporter while issuing such bids bond/guarantee.
 
 

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  • Agricultural and Processed Food Products Export Development Authority (APEDA)
    (Ministry of Commerce & Industry, Govt. of India)

  • NCUI Building 3, Siri Institutional Area, August Kranti Marg, New Delhi - 110 016
    Phone : 91-11-41486013, 20863919, 20867008, 20867007