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.doc  EXPORT FINANCE .doc (Size: 304.5 KB / Downloads: 13)


Export in simple words means selling goods abroad. International market being a very wide market, huge quantity of goods can be sold in the form of exports.
Export refers to outflow of goods and services and inflow of foreign exchange.
Export occupies a very prominent place in the list of priorities of the economic set up of developing countries because they contribute largely to foreign exchange pool.
Exports play a crucial role in the economy of the country. In order to maintain healthy balance of trade and foreign exchange reserve. It is necessary to have a sustained and high rate of growth of exports.
Exports are a vehicle of growth and development. They help not only in procuring the latest machinery, equipment and technology but also the goods and services, which are not available indigenously. Exports leads to national self-reliance and reduces dependence on external assistance which howsoever liberal, may not be available without strings.


The exporter may require short term, medium term or long term finance depending upon the types of goods to be exported and the terms of statement offered to overseas buyer.
The short-term finance is required to meet “Working Capital” needs. The working capital is used to meet regular and recurring needs of a business firm. The regular and recurring needs of a business firm refer to purchase of raw material, payment of wages and salaries, expenses like payment of rent, advertising etc.
The exporter may also require “Term Finance”. The term finance or term loans, which is required for medium and long term financial needs such as purchase of fixed assets and long term working capital.
Export finance is short-term working capital finance allowed to an exporter. Finance and credit are available not only to help export production but also to sell to overseas customers on credit.


1. Cash Packing Credit Loan:

In this type of credit, the bank normally grants packing credit advantage initially on unsecured basis. Subsequently, the bank may ask for security.

2. Advance Against Hypothecation:

Packing credit is given to process the goods for export. The advance is given against security and the security remains in the possession of the exporter. The exporter is required to execute the hypothecation deed in favour of the bank.

3. Advance Against Pledge:

The bank provides packing credit against security. The security remains in the possession of the bank. On collection of export proceeds, the bank makes necessary entries in the packing credit account of the exporter.

4. Advance Against Red L/C:

The Red L/C received from the importer 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 Back-To-Back L/C:

The 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.

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