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PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC)

FEMA - Foreign Exchange Management - By: - malay pota - Dated:- 16-8-2017 - What is Pre - shipment credit? When an exporter avail any credit facilities, in the form of loan and or advance from a bank for the purpose of financing the purchase of inputs packing material for manufacturing and packing of the final products to be exported it is called Pre -Shipment Credit. Generally, the bank approves the pre - shipment credit on production of copy of irrevocable letter of credit opened by the overse .....

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s and packing material for purchasing from the domestic as well as international market and make their final product internationally competitive. The authorised dealers have been permitted to finance at LIBOR/EURO LIBOR/EURIBOR. Currency of Finance PCFC can be financed in any freely transferable Currency as per permission of Reserve Bank of India. However, presently the PCFC is granted in US Dollar, EURO, and GBP subject to availability of fund. PCFC can be extended in the currency other than ex .....

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ncluding at pre shipment and post shipment as per the existing methods however, the foreign currency part of it will be work out on the basis of latest available FEDAI rate. Period of Credit: PCFC, as in the case of Rupee-shipment credit is initially available for a specified period as may be decided by sanctioning authorities after taking in to consideration relevant factors with a maximum period of 180 days and branches should monitor the end use of the credit as in case of Rupee credit. Advan .....

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asury Branch Mumbai. The rate of interest is to be charged on PCFC availed of at the rate agreed at the time of disbursal. However, the rate of interest may be changed in tune with the movement in LIBOR/EURO LIBOR/EURIBOR. The rate of interest therefore may differ for each drawal if drawls is in tranches. On any earlier outstanding loans, the rate of interest would be the rate originally fixed at the time of drawls. Bank may avail line of credit from any bank outside India for funding PCFC. In s .....

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should be recovered from the exporter. However, no gains are to be passed on to the borrower. Any extension beyond 180 days and up to 270 days may be granted at the option of the branch after approval of the Regional Office, subject to the underlying export order / letter of credit is valid for shipment. Extension beyond 270 days up to 360 days may be granted only under exceptional circumstances after obtaining necessary approval of the Regional office. In case of extension beyond 180 days the .....

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edit adjusted not in an approved manner plus commission @ 0.125% or applicable rate. Margin Margin on PCFC advances should be as per sanction terms. Actual margin to be maintained is margin as per sanction terms or EEFC components, whichever is higher. At the time of fixing margin it must be ensured that there is enough margins available to cover the discount/interest on Foreign Currency bills discounted at the post shipment stage. Amount of Credit For operational convenience, amount advanced un .....

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Letter of credit or export order to date of availment of PCFC in any of the convertible currency including forex portion to meet imported input cost. Excess production cost over FOB value of Export Contract Sometimes it may happen particularly in case of Agro products that the Packing Credit required in excess of the FOB value ( Free On Board value).The PCFC would be available only up to the exportable portion of the product as the export bill/invoice tendered to the buyer will be inadequate to .....

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e goods to be exported. The bank may extend the facilities to the manufacturer only after receipt of the disclaimer from the holder of the export order. The repayment of the PCFC granted to the manufacturer by transfer of foreign currency from the export order holder availing PCFC by discounting of bill. It should be ensured that there should not be double financing involved in the transaction and total period of the packing credit is limited to the actual production cycle of the goods actual ex .....

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r supplies from one EOU,EPZ,SEZ unit to another EOU,EPZ,SEZ PCFC may be made available to both supplier EOU,EPZ, SEZ and receiver EOU,EPZ,SEZ. The buyer will have the PCFC after receipt of goods from the supplier. The PCFC availed by the buyer will be distributed by its Banker by transferring the foreign currency fund to the supplier for liquidating the PCFC availed by the supplier unit. The buyer will avail post shipment finance after effecting and liquidating the PCFC availed . PACKING CREDIT .....

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lt for the relatively new exporter to have Packing Credit Facilities available that too pre shipment which is very essential for the new exporters. Export Credit Guarantee Corporation (ECGC) provides Packing Credit Guarantee with a view to have better facilities of packing credit from Banker of the borrower. ECGC provide guarantee that if the realisation of export of the for which PCFC has been given is not realised, ECGC will make good the export realisation and pay money to the PCFC lender on .....

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ry expenses in connection with such contracts are also eligible for cover under the Guarantee. The requirement of lodgement of Letter of Credit or export order for granting packing credit advances is waived if the bank grants such advances in accordance with the instructions of the Reserve Bank of India in that respect. What are the general conditions regarding Packing Credit Guarantee? The Guarantee is issued for a period of 12 months based on a proposal from the bank, covers all the advances t .....

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nding advances and to take suitable action to prevent or to minimize the loss including any action that may be suggested by ECGC. The bank will be entitled to claim 66 2/3% of its loss from ECGC if the entire amount due from the exporter is not recovered within a period of four months from the due date of repayment. The claims are payable if ECGC is satisfied that the bank had conducted the account with normal banking prudence and has also complied with the terms and conditions of the Guarantee. .....

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