Banking Formalities

BANKING FORMALITIES SUCH AS NEGOTIATION OF DOCUMENTS dialogue inwardness the standard procedures that cuss performs which includes checking of the documents and giving value to the seller. The issue bank whitethorn issue the LC useable by negotiation with a nominated bank or it whitethorn bothow the LC to be freely negotiated with any bank. In the premier case, the beneficiary, that is the seller, has to present the documents only to that bank, which is the nominated bank.Nevertheless, the nominated bank is not bound to negotiate if it has not under taken a separate fabricatement debt instrument to the seller. The nominated bank may simply refuse to negotiate the documents haggard under the LC. This is because, by having been nominated by the issuing bank, it does not cook and undertaking to negotiate. If, however, the nominated bank has added its chip to the LC at the request of the issuing bank, thereby undertaking a separate payment obligation to the seller, hence i t has to honour its undertaking and pay for the documents d youngn under the LC if they argon in order (Article 9b).LC which does not nominate any bank is norm totallyy useable for negotiation with any bank in the country of the seller which is uncoerced to negotiate the documents. For the information of all traders, there are 4 types of negotiation practiced by banks around the world. They are 1. Negotiation without resort hotel 2. Negotiation with recourse 3. Negotiation against indemnity 4. Negotiation under reserve permit me explain Negotiation without recourse first and the rest at a later posting.A seller may present his documents drawn under LC nowa years to either a) The issuing Bank (bank that issues the LC) or b) The confirming bank (bank that adds its confirmation at the request of the issuing bank) or c) To his own bank If the seller chooses to present the documents directly either to the ISSUING BANK or to the positivistic BANK, these banks make payment WITHOUT RE COURSE to him. Meaning, the payment that has been paid to the seller shall not in any way become claimable by these banks in the fount the documents are found not in order after do such(prenominal) payment.These banks cannot have recourse to the seller because by issuing or confirming the LC, they have taken upon themselves the risk that the party from whom reimbursement is to be obtained may become insolvent. I hope this would give traders a general base of how the LC operates and the implications to buyer and seller. BANKING FORMALITIES OBTAINING fisticuffs CREDIT AND POST SHIPMENT pay boxing address Overview pugilism credence is a add/ notes acknowledgment facility blurbed to an merchandiseer in the Pre-Shipment stage.This loan facilitates the exporter to corrupt raw materials at competitive rates and manufacture or produce goods fit in to the requirement of the buyer and organize to have it packed for onward export.. The loaning institutions seek a Letter of poi nt of reference opened in favor of the exporter from the overseas buyer along with the irrevocable (cannot be canceled once drawn) corrupt put in favouring the exporter. Packing Credit facility exit cover all the working not bad(p) needs of the exporter including raw materials, wages, fisticuffs costs and all pre-shipment costs.Packing credit is easy for generally a period of 90 days and the exporter has to pay lower rate of interest compared to traditional Overdraft or notes Credit facility. Exporters use this facility so they can bid the about competitive price for export thus gaining more business opport unit of measurementies for export. Packing Credit Documents The borrower and/or the guarantors have to provide the following documents to the banks or the add institutions while submitting Packing credit Application. Certain documents may be demanded by the bank or the lending institutions in post potency configuration or on half-hourly basis. Address Proof Latest electrical energy/Telephone Bill or Receipt of Maintenance Charges or validated Passport or voters Identity Card or Purchase/Lease Deed/ Leave & License organization of dorm or Office Premises. * Identity Proof Valid Passport, PAN Card, Voters Card, Any separate photo identification issued by governing body Agencies. * rail line Proof VAT/CST Registration No. or MIDC Agreement or SSI Permanent Registration Certificate or Warehouse tax income or Shop & Establishment Act Certificate or feign of Lease Agreement along with the latest Rent paid Receipt. * Business Profile on clubs Letterhead. Partnership deed in case of partnership firms. * Certificate of incorporation, Date of Commencement of Business and catalogue of Title Deeds, Form 32 in for Addition or slice of Directors in case of companies. * Last triple years Trading, Profit & passing game A/c. and Balance Sheets (duly signed by a Chartered control wherever applicable). * Last one years Bank statement of the Firm. * If animated loan, then sanctioning letter and repayment schedule of the same. * Firm/Companys PAN Cards. * Individual Income Tax Returns of the Individual/Partners/Directors for last three years. Last one years Bank statement of Individuals, Partners, Directors . * SEBI formalities in case of listed companies. * Share Holding pattern of Directors duly certified by a Chartered Accountant. * List of the Existing Directors of the company from the Registrar of the Companies. Packing Credit Process 1. Personal interview /discussions is held with the customers by the banks officials. 2. Banks Field Investigation team visits the business specify/work role of the applicant. (All the documents submitted are verified by the bank with the originals so as to cover the authenticity of the same. 3. Bank verifies the track record of the applicant with the common information sharing bureau (CIBIL). 4. In case of fresh projects the bank analyses the tush ground of the applicant/firm/company and the Technical feasibility/fiscal viability of the project based on various parameters and withal the existing merchandise conditions. 5. Depending on the size of the project the file is put up for sanction to the appropriate level of authority. SANCTION AND DISBURSEMENT 1. On approval/sanction, the sanction letter ,is issued specifying the terms and conditions for the outlay of the loan.The acceptance to the terms of sanction is taken From the Applicant. 2. The processing charges as specified by the bank have to be paid to proceed further with the disbursement procedure. 3. The documentation procedure takes place viz. Legal opinion of various property documents and also the valuation reports. (Original Documents to title of the immovable assets are to be submitted) 4. All the necessary documents as specified by the legal dept. , according to the terms of sanction of the loan of the bank are perpetrated.Disbursement of the loan takes place after the Legal Dept. Certifies the nicety of execution document Post shipment finance Pre-shipment is also referred as boxing credit. It is working capital finance provided by mercenary banks to the exporter prior to shipment of goods. The finance required to meet various expenses sooner shipment of goods is called pre-shipment finance or packing credit DEFINITION fiscal assistance extended to the exporter from the date of receipt of the export order till the date of shipment is known as pre-shipment credit.Such finance is extended to an exporter for the conclusion of procuring raw materials, processing, packing, transporting, warehousing of goods meant for exports. IMPORTANCE OF FINANCE AT PRE-SHIPMENT STAGE * To purchase raw material, and other inputs to manufacture goods. * To assemble the goods in the case of merchant exporters. * To store the goods in suitable warehouses till the goods are shipped. * To pay for packing, sign and labelling of goods. * To pay for pre-shipment inspection charges. * To i mport or purchase from the domestic foodstuff heavy machinery and other capital goods to produce export goods. To pay for consultancy services. * To pay for export documentation expenses. FORMS OR METHODS OF PRE-SHIPMENT FINANCE 1. Cash Packing Credit Loan In this type of credit, the bank ordinarily grants packing credit advantage initially on unsecured basis. Subsequently, the bank may wonder for security. 2. Advance Against Hypothecation Packing credit is assumption to process the goods for export. The advance is given against security and the security remains in the self-command of the exporter. The exporter is required to execute the hypothecation deed in favour of the bank. . Advance Against Pledge The bank provides packing credit against security. The security remains in the possession of the bank. On order of battle of export proceeds, the bank makes necessary entries in the packing credit bill of the exporter. 4. Advance Against Red L/C The Red L/C received from the i mporter authorizes the local bank to grant advances to exporter to meet working capital requirements relating to processing of goods for exports. The issuing bank stands as a guarantor for packing credit. 5. Advance Against successive L/CThe merchant exporter who is in possession of the original L/C may request his bankers to issue Back-To-Back L/C against the security of original L/C in favour of the sub-supplier. The sub-supplier thus gets the Back-To-Bank L/C on the basis of which he can obtain packing credit. 6. Advance Against Exports Through Export Houses Manufacturer, who exports through and through export houses or other agencies can obtain packing credit, provided such manufacturer submits an undertaking from the export houses that they have not or will not avail of packing credit against the same transaction. . Advance Against calling Draw Back (DBK) DBK means refund of customs duties paid on the import of raw materials, components, parts and packing materials used in th e export production. It also includes a refund of central excise duties paid on native materials. Banks offer pre-shipment as come up as post-shipment advance against claims for DBK. 8. finical Pre-Shipment finance Schemes * Exim-Banks scheme for grant for Foreign Currency Pre-Shipment Credit (FCPC) to exporters. * Packing credit for Deemed exports. SOME SCHEMES IN PRE-SHIPMENT STAGE OF FINANCE . PACKING CREDIT SANCTION OF PACKING CREDIT ADVANCES There are sure factors, which should be considered while sanctioning the packing credit advances viz. 1. Banks may relax norms for debt-equity ratio, margins etc but no compromise in respect of viability of the marriage proposal and integrity of the borrower. 2. Satisfaction about the capacity of the execution of the orders within the stipulated era and the management of the export business. 3. Quantum of finance. 4. Standing of credit opening bank if the exports are covered under letters of credit. 5.Regulations, political and financ ial conditions of the buyers country. DISBURSEMENT OF PACKING CREDIT After proper sanctioning of credit limits, the disbursing branch should ensure To inform ECGC the details of limit sanctioned in the prescribed format within 30 days from the date of sanction. a) To contend proper documentation and compliance of the terms of sanction i. e. creation of mortgage etc. b) There should be an export order or a letter of credit produced by the exporter on the basis of which disbursements are normally allowed.In both the cases following particulars are to be verified 1. Name of the Buyer. 2. good to be exported. 3. Quantity. 4. Value. 5. Date of Shipment / Negotiation. 6. Any other terms to be complied with. 2. FOREIGN CURRENCY PRE-SHIPMENT CREDIT (FCPC) * The FCPC is available to exporting companies as well as commercial banks for lending to the former. * It is an additional window to rupee packing credit scheme available to cover both the domestic i. e. indigenous imported inputs. The exporter has two options to avail him of export finance. To avail him of pre-shipment credit in rupees then the post shipment credit either in rupees or in remote currency denominated credit or discounting /rediscounting of export bills. * To avail of pre-shipment credit in foreign currency discounting/rediscounting of the export bills in foreign currency. * FCPC will also be available both to the supplier EOU/EPZ unit and the receiver EOU/EPZ unit. Pre-shipment credit in foreign currency shall also be available on exports to ACU (Asian Clearing Union) countries with effect from 1. 1. 1996.Eligibility PCFC is extended only on the basis of confirmed /firms export orders or confirmed L/Cs. The Running account facility will not be available under the scheme. However, the facility of the liquidation of packing credit under the first in first out method will be allowed. Order or L/C Banks should not insist on conformity of export order or L/C for every disbursement of pre-shipment credit , from exporters with consistently good track record. Instead, a system of periodical submission of a statement of L/Cs or export orders in hand, should be introduced.Sharing of FCPC Banks may extend FCPC to the manufacturer also on the basis of the disclaimer from the export order. Export Finance HSBC is a market leader in Export Finance, recognised through one-year Dealogic surveys. Through a team of professionals in strategic locations globally, Export Finance arranges medium- and long-term financing for HSBC clients in the public and private sector crossways the globe buying capital goods and services. Finance can cover leatherneck assets, aircraft, power generation equipment, infrastructure development, manufacturing equipment, oilfield services and a host of other goods and services.Export Finance also features regularly in the financing of limited recourse projects, as a project financing tool. Export Finance uses presidential term guarantee programmes, Export Cred it Agencies (ECAs), in an exporting country to credit enhance the financing to the buyer, thereby achieving highly competitive pricing for the buyer. It also allows borrowers to access a new pool of risk capital, often with appetite for extended tenors relative to traditional bank financing. Export Finance provides structuring, arranging, documentation and distribution services for clients in relation to almost all ECAs.