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Export Finance
Mercantile Bank always gives priority to its export-oriented customers. Export finance constitutes an important part of an exporter’s requirement of finance. Exporters require finance at two different stages of their export operation. At each phase, exporter’s need different types of finance:
a. Pre-Shipment Credit / Finance:
Export Cash Credit (Hypothecation / Pledge):
ECC is essentially a short term credit and allowed to supplement requirement of finance of an exporter to meet genuine costs and expenses related to the exportable commodity. It is allowed to execute a specific export order or to execute multiple exports against ECC limit. Maximum ECC limit would be 90% of FOB value of export L/C. For allowing ECC limit, exporters past 3 years export performance to be considered. For the purpose of extending ECC, L/C of those importers will not be accepted, whose record of past payments is not satisfactory i. e. has record of late payment, non payment, payment at discount.
Export Cash Credit against Trust Receipt:
In this case, the required credit is sanctioned against trust receipt; since the exportable goods are remain in the custody of the exporter. The exporter is to execute a stamped export trust receipt in favor of bank where a declaration is made that goods purchased with financial help of bank are held in trust for the bank. This type of credit is required for processing, packing and rendering of goods in exportable condition and when it seems that the exportable goods can not be taken into banks custody. The first class party with collateral security is considered for extending this type of credit.
Advance against Anticipatory Letter of Credit:
This type of Letter of Credit contains a clause written or typed in red ink by the issuing / negotiating bank to give advance a portion / full amount of the credit as described / stipulated in thee credit to the beneficiary of the credit for procurement of exportable goods. This advance is made at the risk of the L/C issuing bank.
Back to Back Letter of Credit:
The export letter of credit backs a second letter of credit which is used to pay a supplier. When the exporter received a export letter of credit from the overseas buyer for export of goods, but the concerned exporter are not the actual manufacturer/ producer of the exportable goods. He is required to collect the goods/ raw materials from the actual producer/ manufacturer. In such a situation the exporter request his bank to open a letter of credit in favor of the actual producer against the export letter of credit he has obtained. In this situation bank open a letter of credit in favor of the actual producer of the goods keeping the export letter of credit as security. Since the letter of credit on the strength of and backed by the export letter of, the second letter of credit called back to back letter of credit. Bank may provide pre-shipment credit facilities up to 90% of export order including BTB LC. However banks are generally not in favor of back-to-back letters of credit as a means o financing export transactions due to risk they are exposed to.
Packing Credit:
Packing credit is essentially a short term credit with a fixed repayment date granted by the bank to an eligible exporter for the purpose of buying, processing, manufacturing, packing and shipping of the goods meant for export. Such facility is allowed to an exporter just at a time when he has the foreign buyers order by way of confirmed export letter of credit or a firm contract against the security or Railway/ Steamer/Truck receipt evidencing transportation of goods to the port. When the order is executed, the packing credit gets out of the proceeds of the bill drawn on the foreign buyer. PC is allowed to an exporter having Trade license and valid ERC limit. It is allowed either on case-to-case basis or under limit.
SOD (Export):
SOD (Export) is a head of liability, created by the bank in making payment of import bills (at maturity) drawn against BTB L/C. BTB L/C generally is opened on usance basis against Master L/C opened on sight basis. The rational behind opening BTB L/C on usance basis is to be enabled to make payment against BTB L/C on receipt of payment against corresponding export made against sight L/C. This is possible as the maturity date (usually 90-180 days) of BTB L/C comes later than that of the sight L/C. Despite the above arrangement, many a times export proceeds are not received in time or even before the maturity date of the BTB L/C. In such a situation and in order to meet up the payment obligation, bank has to make payment against BTB L/C by creating SOD (Export) a liability head under forced situation. The liability is generally adjusted on receipt of export proceeds. SOD (Export) carries usual interest from the date of creation of liability to the date of adjustment. When SOD (Export) liability is created bank has to keep strong watch on repatriation of export proceeds.
b. Post-Shipment Credit / Finance:
Negotiation of Export Documents (FDBP):
After the shipment of goods banks extend credit to the exporter receiving proper export documents from them.
Purchase of Documents against DP or DA Bills:
At the rate of exchange rate committee the authorized dealer’s bank purchase/discount DP or DA bills from the exporters.
Advanced against Documentary Bills Surrendered:
When the exporters fail to receive the export documents negotiated by the bank due to discrepancy then they surrender the documents to the bank for collection basis. In this case, certain percentage of export value is financed to the exporters by the bank.
Corporate Banking
Funded Credit Facility
1.1 CC (Hypo)
1.2 SOD (G) or OD
1.3 SOD(WO)
1.4 SOD(FO)
1.5 Loan (FO)
1.6 Time Loan
1.7 LTR
1.8 PC
1.9 ECC
1.10 IDBP
1.11 FDBP(F)
1.12 FBP
1.13 IBP
1.14 Loan Against EDF
1.15 OD(Export)
1.16 Lease Finance (LF)
1.17 Hire Purchase (HP)
1.18 Term Loan
1.19 HBL(Com)
1.20 Loan(General) or Loan (G)
1.21 Syndication Loan & Structured Finance
Non-Funded Credit Facility
2.1 Letter of Credit (L/C)
- Sight L/C
- Usance or Deferred Payment (DP) L/C
- UPAS L/C (Usance Payable at Sight)
- Stand By letter of Credit
- Back to Back (BTB) L/C
2.2 ABP
2.3 Bank Guarantee (BG)
- Bid Bond (BB)
- Performance Guarantee (PG)
- Advance Payment Guarantee (APG)
- Retention Money Guarantee/Retention Bond/ Warrantee Guarantee
- Payment Guarantee/ Suppliers Credit Guarantee
- Guarantee against Counter Guarantee of other Bank
- Customs Guarantee
- Other Bank Guarantees