Sunday, 5 July 2015

All You Want To Know About International/ Trade Finance



What are the different types of international financing?
Following are the ways of availing international financing:
  • Medium to Long term:
    • External Commercial Borrowings (ECB): It is a commercial loan in the form of bank loans, buyers’ credit, suppliers’ credit, and securitized instruments.
    • Foreign Currency Convertible Bonds (FCCBs):A bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency. It is subscribed by a non-resident in foreign currency and convertible into ordinary share of issuing company.
    • Foreign Currency Exchangeable Bond (FCEB): A bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency. It is subscribed by a non-resident in foreign currency and convertible into ordinary share of some other company.
  • Short term:
    • Trade credits (for importers): It includes suppliers’ credit or buyers’ credit for business import.
    • Export Credit: The exporter can avail pre-shipment and/ or post shipment credit either in rupees or foreign currency.
  • What is pre-shipment finance?
    Pre-shipment finance is any loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards rendering of services.
  • What is post -shipment finance?
    Post-shipment finance is any loan or advance granted or any other credit provided by a bank to an exporter of goods / services from India from the date of extending credit after shipment of goods / rendering of services to the date of realisation of export proceeds as per the period of realization
  • What is an EEFC A/c?
    Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer (i.e. a bank) dealing in foreign exchange. It is a facility provided to foreign exchange earners, so that the account holders do not have to convert foreign exchange into Rupees and vice versa.

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