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TABLE OF CONTENTS

CONTENTS

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

COMPANY PROFILE OF BANK OF BARODA

THEIR MISSION AND VISSION

THEIR LOGO

PRODCTS AT A GLANCE

BUSINESS

AWARDS

OUTLOOK

OBJECTIVE OF THE PROJECT

TRADE FINANCE

EXPORT

INTRODUCTION OF EXPORTS

SERVICES UNDER EXPORT

EXPORT FINANCE

TYPES OF EXPORT FINANCE

IMPORT

DEFINITION

SERVICES UNDER IMPORT

LETTER OF CREDIT

LIMITATIONS

CONCLUSION

SUMMARY

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BIBLIOGRAPHY

ACKNOWLEDGEMENT

I wish to express my deepest appreciation and gratitude to all the peoplethat have contributed to the completion of this dissertation. First of all , Ihad the great fortune to study under the supervision of The ChiefManager, Bank of Baroda International Business Branch, Mr.T.P.Singh.I am very grateful for his guidance and encouragement.

His profound knowledge of different perspectives of banking industryprovided me with the opportunity to broaden my knowledge and to make

significant progress. I am also very grateful for his due support andenthusiasm.

I also owe many thanks to The Joint Manager, Mr. Girish Agarwal andThe Senior Manger, Mr. D.K.Garg. As my mentors, they have providedme with a extremely useful feedback and advice.

A respect and very special appreciation goes to my Parents forencouraging and supporting me. I would also like to thank Ms. Vasudhafor believing in my ability and helping me in achieving my goals.

Finally , I dedicated this dissertation to my dearest people & my mother,who have always inspired me to challenge myself.

(Akriti Bansal)

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EXECUTIVE SUMMARY

FINANCE IS THE LIFE AND BLOOD OF ANY BUSINESS

Success or failure of any export or import order mainly depends upon the finance

available to execute the order. Nowadays trade finance is gaining great significance in

the field of international finance. Many Nationalized as well as Private Banks are

taking measures to help the exporter by providing them pre-shipment and post-

shipment finance at subsidized rate of interest. Some of the major financial

institutions are EXIM Bank, RBI, and other financial institutions and banks. EXIM

India is the major bank in the field of export and import of India. It has introduced

various schemes like forfeiting, FREPEC Scheme, etc. Even Government is taking

measures to help the exporters to execute their export orders without any hassles.

Government has introduced schemes like Duty Entitlement Pass Book Scheme, Duty

free Materials, setting up of Export Promotion Zones and Export Oriented Units, and

other scheme promoting export and import in India. Initially the Indian exporter had

to face many hurdles for executing an export order, but over the period these hurdles

have been removed by the government to smoothen the procedure of export and

import in India.

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BANK OF BARODA

Type Public (BSE:532134)

Industry

Banking

Financial services

Investment services

Founded 1908

Headquarters

Bank of Baroda,Baroda Corporate Centre,

Plot No - C-26, G - Block,

Bandra Kurla Complex,

MumbaiIndia

Key people M D Mallya, Chairman & Managing Director

Products

Finance and insurance

Consumer banking

Corporate banking

Investment banking

Investment management

Private banking

Private equity

Mortgages

Credit cards

Revenue Rs. 17754 crores (US$ 3.9 billion)

Total assets Rs. 2,274 crores (US$ 50 billion)

Website www.bankofbaroda.com

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VISION AND MISSION

Mission Statement

A saga of vision and enterprise

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It has been a long and eventful journey of almost a century across 25 countries.

Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda

Corporate Centre in Mumbai, it is a saga of vision, enterprise, financial prudence and

corporate governance.

It is a story scripted in corporate wisdom and social pride. It is a story crafted in

private capital, princely patronage and state ownership. It is a story of ordinary

bankers and their extraordinary contribution in the ascent of Bank of Baroda to the

formidable heights of corporate glory. It is a story that needs to be shared with all

those millions of people - customers, stakeholders, employees & the public at large -

who in ample measure, have contributed to the making of an institution.

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LOGO

Our new logo is a unique representation of a universal symbol. It comprises dual B

letterforms that hold the rays of the rising sun. We call this the Baroda Sun.

The sun is an excellent representation of what our bank stands for. It is the single

most powerful source of light and energy its far reaching rays dispel darkness to

illuminate everything they touch. At Bank of Baroda, we seek to be the source that

will help all our stakeholders realise their goals. To our customers, we seek to be a

one-stop, reliable partner who will help them address different financial needs. To our

employees, we offer rewarding careers and to our investors and business partners,

maximum return on their investment.

The single-colour, compelling vermillion palette has been carefully chosen, for its

distinctivenes as it stands for hope and energy.

We also recognize that our bank is characterised by diversity. Our network of

branches spans geographical and cultural boundaries and rural-urban divides. Our

customers come from a wide spectrum of industries and backgrounds. The Baroda

Sun is a fitting face for our brand because it is a universal symbol of dynamism and

optimism it is meaningful for our many audiences and easily decoded by all.

Our new corporate brand identity is much more than a cosmetic change. It is a signal

that we recognize and are prepared for new business paradigms in a globalised world.

At the same time, we will always stay in touch with our heritage and enduring

relationships on which our bank is founded. By adopting a symbol as simple and

powerful as the Baroda Sun, we hope to communicate both.

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PRODUCTS AT A GLANCE

Bank of Baroda is an India-based company. The Company's solutions includes

personal banking, which includes deposits, gen-next services, retail loans, credit

cards, debit cards, services and lockers; business banking, which includes deposits,

loans and advances, services and lockers; corporate banking, which includes

wholesale banking, deposits, loans and advances and services, and international

business, which includes non-resident Indian (NRI) services, foreign currency credits,

ECB, offshore banking, export finance, import finance, correspondent banking, trade

finance and international treasury. It also offers services, such as domestic operations

and Forex operations. It also offers rural banking services, which include deposits,

priority sector advances, remittance, collection services, pension and lockers.

Business

Retail banking It offers products and services such as deposits, loans, credit and

debit cards, demat services, remittances, ECS (electronic clearing services,

government business, etc.

Rural and agri banking It offers products and services such as deposits, agricultural

loans, lockers services, etc to rural customers and agricultural sector.

Corporate banking It provides project finance, film finance, foreign currency loans,

working capital finance, treasury products, etc to the corporate sector.

SME BoB also offers products and services to SME sector.

Wealth Management It provides wealth management services to companies in areas

of insurance and mutual funds. In insurance it offers services to HDFC and National

Insurance Company. In mutual funds it provides services to UTI, Birla Sun Life,

Reliance Mutual Fund, Sundaram BNP Paribas, Franklin Templeton Investments and

Baroda Pioneer Asset Management Company.

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Deposits Products

Bankof Baroda offers various deposit plans that you can choose from depending onthe term period, nature of deposit and its unique saving and withdrawal features.

Apart from competitive interest rates and convenient withdrawal options, our depositplans offer other features such as overdraft facility, outstation cheque collections, safedeposit lockers, ATM's etc.

Choose from Fixed, Current and Savings Deposit plans.

Fixed deposits are categorised into deposits with a term period of less than 12 months,more than 12 months and recurring deposits. These deposit plans offer convenientsolutions to both working individuals as well as senior citizens.

Current and saving deposits are ideal for individuals who wish to take advantage ofmultiple benefits within the same plan and even be eligible to opt for overdrafts.

Baroda Internet Banking

"Baroda Connect" is an internet banking facility introduced as an alternative deliverychannel for rendering effective customer service on 24 X 7 basis. It offers uniquecustomized services to both Retail & Corporate customers.

All customers can register under Baroda Connect for View and / or Transactionfacility

Under VIEW facility customer can:

View Account summary of all operative, deposit and loan accounts

View all multiple Account information online with a single userid

Get Account statements

Under Transaction facility customer can (in addition to the above VIEW

facilities)

Transfer funds immediately or schedule for a future date to self linked and Third

party

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Pay through Online Tax - Direct and Indirect taxes online such as Excise

Duty, Service Tax, Customs Duty, Income Tax etc.

Pay through Baroda Easy Pay - utility bills like electricity, mobile etc ,

Donations, Subscription, Travel plan booking online

Pay school/institutional fees

Book Rail Ticket - IRCTC

View all trade finance related facilities availed eg. Export / Import LC, Inland/

Export Bills, Forward Contracts Bank Guarantees, Packing Credit account etc Use upload facility for single debit-multiple credit, multiple debit-multiple

credit and single credit-multiple debit.

Yet another channel for reaching out to your Bank Account - Your Mobile Phone.Bank of Baroda offers Baroda M-Connect- the mobile banking facility that will

help you do bankingtransactions using your mobile phone.

Features

Easy to register, download and start the using Baroda M Connect

Secure way of transacting banking business

Any model, any make - M-Connect will work perfectly. (Java enabled

models) No charges - Absolutely FREE

No restriction on number of transactions. Cumulative maximum in a day is

Rs.50000/-

Benefits

View the account balance, mini statement

Funds transfer to accounts with Bank of Baroda & to other bank accounts

through (NEFT) One can also seek services like Cheque book request, stop payment of cheque,

Request for loans, etc. Bills payment - Most of the utility bills can be paid through your mobile using

M-Connect - MTNL. BSNL. Reliance, Vodafone, etc.

Mobile recharge can be done Booking of movie tickets

Booking of Air tickets for travel in India; the portal will be able to provide

fare-wise list of availability for the given segment

Awards

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BoB was among the top 10 marketers according to survey conducted by

Business Today.

BoB received the Best Bank award in the home loan category at Outlook

Money NDTV Awards

The bank won Elite Category Award for excellence in marketing and brand

communication at Association of Business Communicators of India awards.

Outlook

BoB and Maruti Suzuki have entered into memorandum of understanding for carfinancing. The tie up will cover 600 Maruti dealers and all BoB branches in India.

The PSU bank is set to enter life insurance with UK-based Legal and General Group

in first quarter of 2009.

OBJECTIVE OF THE PROJECT

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In the light of growing need & importance of exports and imports for our country it is

of utmost importance that everyone should have an insight in the field of trade

finance. In the course of last decade, the trade scenario in India has undergone a

tremendous change. The liberalization initiated by the government, the keen

competition in the market place & the rapid increase in the trading of services have all

combined to change the picture completely .It is in this context that Bank of Baroda

offers me practical overview covering various aspects of trade finance

Areas covered in this project are related to concept and types of export finance etc.

I hope that this project would provide one, some essential information that will be

useful to in future.

TRADE FINANCE

Trade finance is related to international trade.

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While a seller (the exporter) can require the purchaser (an importer) to prepay forgoods shipped, the purchaser (importer) may wish to reduce risk by requiring theseller to document that the goods have been shipped. Banks may assist by providingvarious forms of support. For example, the importer's bank may provide a letter ofcreditto the exporter (or the exporter's bank) providing for payment upon presentation

of certain documents, such as a bill of lading. The exporter's bank may make a loan(by advancing funds) to the exporter on the basis of the export contract.

Other forms of trade finance can include trade credit insurance, export factoring,forfaiting and others. In many countries, trade finance is often supported by quasi-government entities known as export credit agencies that work with commercial

banks and other financial institutions.

In short, trade finance means money lent to exporters or importers.

Trade finance offers a wide range of Export/Import Trade Finance services to

facilitate the International business. It is extended both at Pre-shipment and at Post-shipment stages. Services include Issuance of Letters of Credit , Export Billsnegotiation , Confirmation of Letters of Credit , Import / Export Documentarycollection and more.

EXPORTS

IMPORTS

INTRODUCTION OF EXPORTS

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

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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.

Though India s export compared to other countries is very small, but one of the most

important aspects of our export is the strong linkages it is forging with the world

economy which is a great boon for a developing nation like India.

SERVICES UNDER EXPORT

Letter of Credit Advising

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The Bank advises Letters of Credit opened by our branches in India or abroad or by

our Correspondent Banks, to the beneficiaries in Singapore, after due authentication

of the SWIFT or the original received through mail/courier. In case of need and at the

request of the Issuing Bank we will consider adding our confirmation to the Letter of

Credit.

In case of need and at the request of the Issuing Bank we will consider adding our

confirmation to the Letter of Credit.

Export Letter Of Credit Negotiation

We extend post-shipment finance to exporters by way of negotiation of documents

presented under Letters of Credit, if such documents are drawn in strict compliance

with the terms and conditions of the relative L/C, with utmost care and promptness.

In case of issuance bills, we also provide discounting facility to the exporters, subject

to fulfillment of terms and conditions of limits sanctioned.

Export Documentary Collection

In case of export bills not backed by any Letter of Credit, we agree to handle such

documents on collection basis, by acting as the Exporters Agent, by sending the

documents to the importers bank (if nominated) or through our correspondent-bank,

for realization of the bill amount.

Buyers Credit

We offer Buyers Credit against unconditional undertaking from the importers bank,

where the importer is not able to obtain credit terms from the exporter. We step in toprovide finance to the importer, by paying the exporter on sight basis and accepting

payment from the importer on a future date. These financing are extended at most

competitive rates and charges.

Collection Of Bills

(a) Sight Bil

(b) Usance Bill

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Sight Bill

Under a sight draft arrangement the exporter forwards all shipping documents,invoices, insurance certificates, etc. along with his draft drawn at sight on the importerthrough his bank to the importer's bank overseas with instructions that the documents

can only be released to the importer upon his payment of the draft. There are someadvantages to the exporter and importer by this method of payment. The title to andcontrol of merchandise normally remain with the exporter or his agent until the drafthas been paid and the buyer is not obligated to pay for the goods until he receives thedocuments.It is of 25 day.

Usance Bill

Usance means period of credit or term. Usance bill is a bill of exchange which allowsthe drawee to have period of credit or term. The usance can begin from the date of the

bill of lading or from the date of acceptance by the drawee and is stated in days ormonths. This is an essential feature of acceptance credits. It is generally of 90 days.

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Baroda Gold Card

Golden Opportunity for Exporters

FEATURES OF THE PRODUCT :

Who are Eligible :

All exporters, including those in small and medium sectors, having a good

track record and credit worthiness depending on the credit Rating done as perbank's norms.

The account should be "Standard" continuously for three years and should not

be in the caution list of ECGC or RBI.

However, export firms making losses for the past three years or havingoverdue export bills in excess of 10% of the previous years' turnover are noteligible for Gold Card.

LIMITS :

Based on the credit needs of the exporter appropriate limits for both Pre-

shipment/Post shipment will be sanctioned for a period of three years subjectto annual review of account.

A stand-by limit of not less than 20 percent of the assessed limit may be made

additionally granted for facilitating urgent credit needs for executing suddenorders.

Rate of Interest :

Base Rate plus 0.75/1.00 % (as per internal credit rating) in case of Rupee

Credit or LIBOR plus 200 bps for FC export credit.

Concessional rate of interest is available on Post-shipment rupee export credit

for 365 days as against the applicable period of 90 days at present.

Tenor :

The Gold Card will be issued for a period of three years and will be renewed

for a further period of 3 years unless any adverse/irregularities are noticed.

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TYPES OF ACCOUNT USED IN

EXPORT

Nostro Account

A Nostro Account is an account denominated in a foreign currency established

through your local bank at a bank in the respective country of the currency

desired.Our account in Foreign Currency with the banks at overseas centre. The terms

"nostro" and "vostro" are derived from Latin terms meaning "ours" and "yours"

respectively. For example, if you live in the United States and ask you local bank to

set up a Euro account for you, they will most likely open a "Nostro Account" with a

correspondent agent bank in the European Union that they have a banking relationship

with for that specific purpose. The Euro bank will set up the account, but it is not a

typical checking account. These accounts are treated differently on the books of the

bank. Transactions to and from these accounts may only be wire transfers to ensure

identity credentials are monitored and that special handling is used. Generally,

companies will use these types of accounts when they often either buy or sell in

another country but do not have a physical presence that would afford them usage of a

typical checking account arrangement.

VOSTRO ACCOUNT

A vostro bank account is that account in which the others bank account inINR with our A category branch is called vostro account.

A vostro account can be useful in the Forex, or foreign exchange, industries,where money needs to go to market in foreign markets and be traded intoforeign currency, or alternately, kept as a foreign currency to thatdestination market. Parties holding vostro accounts are acting on behalf oftheir customers to get returns. This also happens in a wide variety of stocktrading or stock options trading situations, where a broker is the party that

holds the vostro account for clients.

LORO ACCOUNT

A loro account is an account seen from the vantage point of a third-party. It is notours or yours but rather, theirs. A loro account is an account held by one party,administrated by a second party, and audited or assessed by an outside interest. Loroaccounts are most often used in syndicated financing, and are not common in many

parts of the financial industry. It is a third party account.

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TYPES OF CURRENCY USED IN

EXPORT

INR - IndianUS$ - American

EURO European

AUD Australian Dollar

JPY Japanese Yen

GBP Great Briatian Pound Sterling

CHF - Switzerland

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TYPES OF MESSAGE USED IN

EXPORT IN RECEIVING PAYMENT

The Message used in receiving export payment called SWIFTMESSAGE. Theseare also called Financial message. The message no

is 103,202 and 400.

(a)MT 103:

This is the payment message. It is very important message for banker. It shows thismuch amount is remit by bank. Sometimes Nostro account itself send message MT

103.Then banker can credit the customer account.

(b) MT 202:

It is also the payment message for the bills and cover funds. In this 103 and 202 istaken into consideration. Only documentary bills has to be paid.

(c) MT 400:

It is the message informing us that the particular bill has been realised. This is the

payment intimation. It may be claen checks and documentary bill.

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EXPORT FINANCE

INTRODUCTION

Credit and finance is the life and blood of any business whether domestic or

international. It is more important in the case of export transactions due to the

prevalence of novel non-price competitive techniques encountered by exporters in

various nations to enlarge their share of world markets. The selling techniques are no

longer confined to mere quality; price or delivery schedules of the products but are

extended to payment terms offered by exporters. Liberal payment terms usually score

over the competitors not only of capital equipment but also of consumer goods. The

payment terms however depend upon the availability of finance to exporters in

relation to its quantum, cost and the period at pre-shipment and post-shipment stage.

Production and manufacturing for substantial supplies for exports take time, in case

finance is not available to exporter for production. They will not be in a position to

book large export order if they don t have sufficient financial funds. Even

merchandise exporters require finance for obtaining products from their suppliers.

This project is an attempt to throw light on the various sources of export finance

available to exporters, the schemes implemented by ECGC and EXIM for export

promotion and the recent developments in the form of tie-EXIM tie-ups, credit policy

announced by RBI in Oct 2001 and TRIMS.

CONCEPT OF EXPORT FINANCE:

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.

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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.

OBJECTIVES OF EXPORT FINANCE

To cover commercial & Non-commercial or political risks attendant on

granting credit to a foreign buyer.

To cover natural risks like an earthquake, floods etc.

An exporter may avail financial assistance from any bank, which considers the

ensuing factors:

(a) Availability of the funds at the required time to the exporter.

(b) Affordability of the cost of funds.

APPRAISAL

Appraisal means an approval of an export credit proposal of an exporter. While

appraising an export credit proposal as a commercial banker, obligation to the

following institutions or regulations needs to be adhered to.

Obligations to the RBI under the Exchange Control Regulations are:

Appraise to be the bank s customer.

Appraise should have the Exim code number allotted by the Director General

of Foreign Trade.

Party s name should not appear under the caution list of the RBI.

Obligations to the Trade Control Authority under the EXIM policy are:

Appraise should have IEC number allotted by the DGFT.

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Goods must be freely exportable i.e. not falling under the negative list. If it

falls under the negative list, then a valid license should be there which allows

the goods to be exported.

Country with whom the Appraise wants to trade should not be under tradebarrier.

Obligations to ECGC are:

Verification that Appraise is not under the Specific Approval list (SAL).

Sanction of Packing Credit Advances.

GUIDELINES FOR BANKS DEALING IN EXPORTFINANCE:When a commercial bank deals in export finance it is bound by the ensuing

guidelines: -

(a) Export Credit Guarantee Corporation guidelines.

(b) Guidelines of Foreign Exchange Dealers Association of India.

(c) Foreign Exchange Management Act-1999.

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ECGC

The Export Credit Guarantee Corporation of India Limited (ECGC) is a companywholly owned by the Government of India based in Mumbai,Maharashtra.

It provides export credit insurance support to Indian exporters and is

controlled by theMinistry of Commerce. Government of India had initially

set up Export Risks Insurance Corporation (ERIC) in July 1957. It was

transformed into Export Credit and Guarantee Corporation Limited

(ECGC) in 1964.

What does ECGC do?

Provides a range of credit risk insurance covers to exporters against loss in

export of goods and services.

Offers guarantees to banks and financial institutions to enable exporters toobtain better facilities from them.

How does ECGC help exporters?

Offers insurance protection to exporters against payment risks

Provides guidance in export-related activities

Makes available information on different countries with its own credit ratings

Makes it easy to obtain export finance from banks/financial institutions

Assists exporters in recovering bad debts

Provides information on credit-worthiness of overseas buyers

Need for export credit insurance

Payments for exports are open to risks even at the best of times. The risks haveassumed large proportions today due to the far-reaching political and economicchanges that are sweeping the world. An outbreak of war orcivil warmay block ordelay payment for goods exported. Economic difficulties or balance of payment

problems may lead a country to impose restrictions on either import of certain goodsor on transfer of payments for goods imported. In addition, the exporters have to face

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commercial risks ofinsolvency or protracted default of buyers. The commercial risksof a foreign buyer goingbankrupt or losing his capacity to pay are aggravated due tothe political and economic uncertainties. Export credit insurance is designed to protectexporters from the consequences of the payment risks, both political and commercial,and to enable them to expand their overseas business without fear of loss.

Credit Guarantee of ECGC Premium on Packing Credit:

Bank compulsorily charge exporters ECGC premium on pre-shipment credit. Nowthis is a risk which banks are covering and for this they should not recover from theexporter. However, these are recovered from the exporter in most cases. If the bankswant to cover their risk then they are most welcome to do so but they must pay thecharge for the same and if for some reason there is a claim then they should lodge theclaim with ECGC rather than recovering the same first from the party. For the postshipment credit it is the exporter who has to take a cover and the party pays for thesame but for pre shipment credit the exporters are being cornered; otherwise the limitsare not sanctioned.

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Foreign Exchange Dealer's Association

of India(FEDAI) was set up in 1958 as an Association of banks dealing in foreign exchangein India (typically called Authorised Dealers - ADs) as a self regulatory body and isincorporated under Section 25 of The Companies Act, 1956. It's major activitiesinclude framing of rules governing the conduct of inter-bank foreign exchange

business among banks vis--vis public and liaison with RBI for reforms anddevelopment of forex market.

Presently some of the functions are as follows:

Guidelines and Rules for Forex Business.

Training of Bank Personnel in the areas of Foreign Exchange Business.

Accreditation of Forex Brokers

Advising/Assisting member banks in settling issues/matters in their

dealings.

Represent member banks on Government/Reserve Bank of India/Other

Bodies.

Announcement of daily and periodical rates to member banks.

Due to continuing integration of the global financial markets and increased pace of

de-regulation, the role of self-regulatory organizations like FEDAI has also

transformed. In such an environment, FEDAI plays a catalytic role for smooth

functioning of the markets through closer co-ordination with the RBI, other

organizations like FIMMDA, the Forex Association of India and various market

participants. FEDAI also maximizes the benefits derived from synergies of

member banks through innovation in areas like new customized products, bench

marking against international standards on accounting, market practices, risk

management systems, etc.

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Foreign Exchange Management Act

Foreign Exchange Management Act or in short (FEMA) is an act that provides

guidelines for the free flow of foreign exchange in India. Foreign ExchangeManagement Act was earlier known as FERA (Foreign Exchange Regulation Act),which has been found to be unsuccessful with the proliberalisation policies of theGovernment of India.

FEMA is applicable in all over India and even branches, offices and agencies locatedoutside India, if it belongs to a person who is a resident of India.

Some Highlights of FEMA

It prohibits foreign exchange dealing undertaken other than an authorised person;Italso makes it clear that if any person residing in India, received any Forex payment(without there being a corresponding inward remittance from abroad) the concerned

person shall be deemed to have received they payment from a nonauthorised person.

There are 7 types of current account transactions, which are totally prohibited, andtherefore no transaction can be undertaken relating to them. These include transactionrelating to lotteries, football pools, banned magazines and a few others.

FEMA and the related rules give full freedom to Resident of India (ROI) to hold orown or transfer any foreign security or immovable property situated outside India.

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TYPES OF EXPORT FINANCE

The export finance is being classified into two types viz.

Pre-shipment finance.

Post-shipment finance.

PRE-SHIPMENT FINANCE

MEANING :

Pre-shipment is also referred as packing credit.It is working capital finance

provided by commercial banks to the exporter prior to shipment of goods. The finance

required to meet various expenses before shipment of goods is called pre-shipment

finance or packing credit.

DEFINITION:

Financial 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 purpose 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, marking and labelling of goods.

To pay for pre-shipment inspection charges.

To import or purchase from the domestic market heavy machinery and other

capital goods to produce export goods.

To pay for consultancy services.

To pay for export documentation expenses.

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FORMS OR METHODS OF PRE-SHIPMENT FINANCE:

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 hisbankers 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 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.

7. Advance Against Duty Draw Back (DBK):

DBK means refund of customs duties paid on the import of raw materials,

components, parts and packing materials used in the export production. It also

includes a refund of central excise duties paid on indigenous materials. Banks offer

pre-shipment as well as post-shipment advance against claims for DBK.

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8. Special Pre-Shipment Finance Schemes:

Exim-Bank s 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

1. PACKING CREDIT SANCTION OF PACKING CREDIT ADVANCES:

There are certain factors, which should be considered while sanctioning the packing

credit advances viz.

i. Banks may relax norms for debt-equity ratio, margins etc but no

compromise in respect of viability of the proposal and integrity of the

borrower.

ii. Satisfaction about the capacity of the execution of the orders within the

stipulated time and the management of the export business.

iii. Quantum of finance.

iv. Standing of credit opening bank if the exports are covered under letters of

credit.

v. Regulations, political and financial conditions of the buyers country.

DISBURSEMENT OF PACKING CREDIT:

After proper sanctioning of credit limits, the disbursing branch should ensure: Toinform ECGC the details of limit sanctioned in the prescribed format within 30 days

from the date of sanction.

a)To complete 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.

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In both the cases following particulars are to be verified:

i. Name of the Buyer.

ii. Commodity to be exported.

iii. Quantity.

iv. Value.

v. Date of Shipment / Negotiation.

vi. 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 foreign 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.

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Order or L/C :

Banks should not insist on submission 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.

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POST-SHIPMENT FINANCE

MEANING:

Post shipment finance is provided to meet working capital requirements after the

actual shipment of goods. It bridges the financial gap between the date of shipment

and actual receipt of payment from overseas buyer thereof. Whereas the finance

provided after shipment of goods is called post-shipment finance.

DEFINITION:

Credit facility extended to an exporter from the date of shipment of goods till the

realization of the export proceeds is called Post-shipment Credit.

IMPORTANCE OF FINANCE AT POST-SHIPMENT STAGE:

To pay to agents/distributors and others for their services.

To pay for publicity and advertising in the over seas markets.

To pay for port authorities, customs and shipping agents charges.

To pay towards export duty or tax, if any.

To pay towards ECGC premium.

To pay for freight and other shipping expenses.

To pay towards marine insurance premium, under CIF contracts.

To meet expenses in respect of after sale service.

To pay towards such expenses regarding participation in exhibitions and trade

fairs in India and abroad.

To pay for representatives abroad in connection with their stay board.

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FORMS/METHODS OF POST SHIPMENT FINANCE

1. Export bills negotiated under L/C:The exporter can claim post-shipment finance by drawing bills or drafts under L/C.

The bank insists on necessary documents as stated in the L/C. if all documents are in

order, the bank negotiates the bill and advance is granted to the exporter.

2. Purchase of export bills drawn under confirmed contracts:

The banks may sanction advance against purchase or discount of export bills drawn

under confirmed contracts. If the L/C is not available as security, the bank is totally

dependent upon the credit worthiness of the exporter.

3. Advance against bills under collection:

In this case, the advance is granted against bills drawn under confirmed export order

L/C and which are sent for collection. They are not purchased or discounted by the

bank. However, this form is not as popular as compared to advance purchase or

discounting of bills.

4. Advance against claims of Duty Drawback (DBK):

DBK means refund of customs duties paid on the import of raw materials,

components, parts and packing materials used in the export production. It also

includes a refund of central excise duties paid on indigenous materials. Banks offer

pre-shipment as well as post-shipment advance against claims for DBK.

5. Advance against goods sent on Consignment basis:

The bank may grant post-shipment finance against goods sent on consignment basis.

6. Advance against Undrawn Balance of Bills:

There are cases where bills are not drawn to the full invoice value of gods. Certain

amount is undrawn balance which is due for payment after adjustments due to

difference in rates, weight, quality etc. banks offer advance against such undrawn

balances subject to a maximum of 5% of the value of export and an undertaking is

obtained to surrender balance proceeds to the bank.

7. Advance against Deemed Export:

Specified sales or supplies in India are considered as exports and termed as

deemed exports.It includes sales to foreign tourists during their stay in India and

supplies made in India to IBRD/ IDA/ ADB aided projects. Credit is offered for a

maximum of 30 days.

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8. Advance against Retention Money:

In respect of certain export capital goods and project exports, the importer retains a

part of cost goods/ services towards guarantee of performance or completion of

project. Banks advance against retention money, which is payable within one year

from date of shipment.

9. Advance against Deferred payments:

In case of capital goods exports, the exporter receives the amount from the importer in

installments spread over a period of time. The commercial bank together with EXIM

bank do offer advances at concessional rate of interest for 180 days.

SOME SCHEMES UNDER OPERATION IN PRE-SHIPMENTFINANCE

1. DEFERRED CREDIT

Meaning:Consumer goods are normally sold on short term credit, normally for a period upto

180 days. However, there are cases, especially, in the case of export of capital goods

and technological services; the credit period may extend beyond 180 days. Suchexports were longer credit terms (beyond 180 days) is allowed by the exporter is

called as deferred credit or deferred payment terms.

How the payment is received?

The payment of goods sold on deferred payment terms is received partly by way of

advance or down payment, and the balance being payable in installments spread over

a period of time.

Period of financial credit support:

Financial institutions extend credit for goods sold on deferred payment terms

(subject to approval from RBI, if required). The credit extended for financing such

deferred payment exports is known as Medium Term and Long Term Credit. The

medium credit facilities are provided by the commercial banks together with EXIM

Bank for a period upto 5 years. The long term credit is offered normally between 5 yrs

to 12 yrs, and it is provided by EXIM Bank.

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Amount of credit support:

Any loan upto Rs.10crore for financing export of capital goods on deferred payment

terms is sanctioned by the commercial bank which can refinance itself from Exim

bank. In case of contracts above Rs.10 Lakhs but not more than Rs50crore, the EXIM

Bank has the authority to decide whether export finance could be provided. Contracts

above Rs.50crore need the clearance from the working group on Export Finance.

2. REDISCOUNTING OF EXPORT BILLS ABROAD (EBRD) SCHEME:

The exporter has the option of availing of export credit at the post-shipment stage

either in rupee or in foreign currency under the rediscounting of export bills abroad

(EBRD) scheme at LIBOR linked interest rates. This facility will be an additional

window available to exporter along with the exiting rupee financing schemes to an

exporter at post shipment stage. This facility will be available in all convertible

currencies. This scheme will cover export bills upto 180 days from the date of

shipment (inclusive of normal transit period and grace period) . The scheme

envisages ADs rediscounting the export bills in overseas markets by making

arrangements with an overseas agency/ bank by way of a line of credit or

bankers acceptance facility or any other similar facility at rates linked to

London Inter Bank Offered Rate (LIBOR) for six months. Prior permission of

RBI will not be required for arranging the rediscounting facility abroad so

long as the spread for rediscounting facility abroad does not exceed one percent

over the six months LIBOR in the case of rediscounting with recourse basis &

1.5% in the case of without recoursefacility. Spread, should be exclusive of

any withholding tax. In all other cases, the RBIs permission will be needed.

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IMPORT

The term "import" is derived from the conceptual meaning as to bring in the goods

and services into the port of a country. The buyer of such goods and services is

referred to an "importer" who is based in the country of import whereas the overseas

based seller is referred to as an "exporter". Thus an import is any good (e.g. a

commodity) orservice brought in from one country to another country in a legitimate

fashion, typically for use in trade. It is a good that is brought in from another country

for sale. Import goods or services are provided to domestic consumers by foreign

producers. An import in the receiving country is an export to the sending country.

Imports, along with exports, form the basis of international trade. Import of goods

normally requires involvement of the customs authorities in both the country of

import and the country of export and are often subject to import quotas, tariffs and

trade agreements. When the "imports" are the set of goods and services imported,

"Imports" also means the economic value of all goods and services that are imported.

The macroeconomic variable I usually stands for the value of these imports over a

given period of time, usually one year.

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DEFINITION

"Imports" consist of transactions in goods and services (sales, barter, gifts or grants)

from non-residents residents to residents. The exact definition of imports in national

accounts includes and excludes specific "borderline" cases. A general delimitation of

imports in national accounts is given below:

An import of a good occurs when there is a change of ownership from a non-

resident to a resident; this does not necessarily imply that the good in question

physically crosses the frontier. However, in specific cases national accounts

impute changes of ownership even though in legal terms no change of

ownership takes place (e.g. cross border financial leasing, cross border

deliveries between affiliates of the same enterprise,goods crossing the border

for significant processing to order or repair). Also smuggled goods must be

included in the import measurement.

Imports of services consist of all services rendered by non-residents to

residents. In national accounts any direct purchases by residents outside the

economic territory of a country are recorded as imports of services; therefore

all expenditure by tourists in the economic territory of another country are

considered as part of the imports of services. Also international flows of

illegal services must be included.

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SERVICES UNDER IMPORT

Issuance of Letter Of Credit

We will issue the Letter of Credit on your behalf against your sanctioned limits with

us. Margin or other collateral, will be as per the terms of sanction.

Upon receipt of documents drawn in compliance with the terms and conditions of the

Letter of Credit, payment will be effected by us to the debit of your account.

Import Documentary Collection

These are import collection documents sent by the Exporter's bank to us with a

request to collect payment / present for acceptance, from you. Acting as a Collecting

Bank we will present and collect payment from you and remit the proceeds to the

Exporter's bank promptly.

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You are welcome to arrange with your exporter to present the documents through our

Bank for onward presentation to you as an importer.

Trust Receipts

Trust Receipt facility enables you to take delivery of the goods prior to payment. As

security, the goods covered under the Trust Receipt is hypothecated with us, and you

undertake to hold the documents / goods and/or the sale proceeds in trust for the bank.

The facility is extended by way of loan repayable after a specific period.

Shipping Guarantee

Shipping Guarantee enables you to take delivery of the goods before the receipt of the

bill of lading. It is an indemnity that the bank executes jointly and severally with you

in favour of the shipping company.

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LETTER OF CREDITINTRODUCTION:

This is one of the most popular and more secured of method of payment in recent

times as compared to other methods of payment. A L/C refers to the documents

representing the goods and not the goods themselves. Banks are not in the business of

examining the goods on behalf of the customers. Typical documents, which are

required includes commercial invoice, transport document such as Bill of lading or

Airway bill, an insurance documents etc. L/C deals in documents and not goods.

DEFINITION:

A Letter of Credit can be defined as an undertaking by importers bank stating

that payment will be made to the exporter if the required documents are presented to

the bank within the validity of the L/C.

PARTIES INVOLVED IN LETTER OF CREDIT:

Applicant: The buyer or importer of goods

Issuing bank: Importers bank, who issues the L/C

Beneficiary: The party to whom the L/C is addressed. The Seller or supplier of

goods.

Advising bank: Issuing banks branch or correspondent bank in the exporters country

to whom the L/C is send for Onward transmission to the beneficiary.

Confirming bank: The bank in beneficiary country , which Guarantees the credit on

the request of the issuing Bank.

Negotiating bank:The bank to whom the beneficiary presents his Documents for

payment under L/C

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A Letter of Credit contains these elements:

A payment undertaking given by the bank (issuing bank) on behalf of the

buyer (applicant)

pay a seller (beneficiary) a given amount of money on presentation of

specified documents representing the supply of goods within specific time

limits

These documents conforming to terms and conditions set out in the letter of

credit

Documents to be presented at a specified place.

In simple words, the Issuing Bank's role is twofold:

To guarantee to the seller that if complete documents are presented, the bank

will pay the seller the amount due. This offers security to the seller the bank

says in effect "We will pay you if you present documents (XYZ)"

To examine the documents and only pay if these comply with the terms and

conditions set out in the letter of credit. This protects the buyer's interests - the

bank says "We will only pay your supplier on your behalf if they present

documents (XYZ) that you have asked for"

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ADVANTAGES OF LETTER OF CREDIT

ADVANTAGES TO THE EXPORTER:

No blocking of funds.

Clearance of import regulations.

Free from liability.

Pre- shipment finance.

Non-refusal by importer.

Reduction in bad-debts.

ADVANTAGES TO THE IMPORTER:

Better terms of trade.

Assurance of shipment of goods.

Overdraft facility.

Delivery on time.

Better relations.

DISADVANTAGES OF LETTER OF CREDIT:

Lacks flexibility.

Complex method

Expensive for importer

Problem of revocable L/C

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Sample Document: Letter of Credit (Documentary Credit)

THE MOON BANKINTERNATIONAL OPERATIONS5 MOONLIGHT BLVD.,EXPORT-CITY AND POSTAL CODEEXPORT-COUNTRY

OUR ADVICE NO.MB-5432ISSUING BANK REF. NO. & DATESBRE-777

January 26, 2005

To,UVW Exports88 Prosperity Street East, Suite 707Export-City and Postal CodeDear Sirs:

We have been requested by The Sun Bank, Sunlight City, Import-Country to advisethat they have opened with us their irrevocable documentary credit numberSB-87654For account of DEF Imports, 7 Sunshine Street, Sunlight City, Import-Country inyour favor for the amount of not exceeding Twenty Five Thousand U.S. Dollars(US$25,000.00) available by your draft(s) drawn on usat sight for full invoice valueAccompanied by the following documents:

1.Signed commercial invoice in five (5) copies indicating the buyer'sPurchase Order No. DEF-101 dated January 10, 2005

2.Packinglist in five (5) copies.

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3.Full set 3/3 clean on board ocean bill of lading, plus two (2) non-negotiable copies,issued to order of The Sun Bank, Sunlight City, Import-Country, notify the aboveaccountee, marked "freight Prepaid", dated latest March 19, 2005, and showingdocumentary credit number.

4.Insurance policy in duplicate for 110% CIF value covering Institute Cargo Clauses(A), Institute War and Strike Clauses, evidencing that claims are payable in Import-Country.Covering:

100 Sets 'ABC' Brand Pneumatic Tools, 1/2" drive,complete with hose and quickcouplings, CIF Sunny PortShipment from:Moonbeam Port, Export-Country to Sunny Port, Import-CountryPartial shipmentProhibitedTran-shipmentPermitted

Special conditions:

1.All documents indicating the Import License No. IP/123456 dated January 18, 2005.2.All charges outside the Import-Country are on beneficiary's accountDocuments must be presented for payment within 15 days after the date of shipment.

Draft(s) drawn under this credit must bemarkedDrawn under documentary credit No. SB-87654 of The Sun Bank,Sunlight City,Import-Country, dated January 26, 2005We confirm this credit and hereby undertake that all drafts drawn under andinconformity with the terms of this credit will be duly honored upon delivery ofdocuments as specified, if presented at this office on or before March 26, 2005Very truly yours,

__________________________Authorized SignatureUnless otherwise expressly stated, this Credit is subject to the Uniform Customs and

Practice for Documentary Credits, 1993 Revision, International Chamber ofCommerce Publication No. 500.

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.

DOCUMENT USED IN IMPORT

The documents used in import business with us are important. There are three basicdocuments you must understand and use correctly: air waybill or bill of lading,

commercial invoice and packing list.

Air waybill

The air waybill is used for the air shipment which serves as:

documentary evidence of the conclusion of a contract of carriage

proof of receipt of the goods for shipment

an invoice for the freight

a certificate of insurance

guide to airline staff for the handling, dispatch and delivery of the

consignment.

The air waybill is usually completed by our freight forwarder. The document consistsof three originals and nine copies. The first original is intended for the carrier and issigned by our state-owned export agent; the second original, the consignee's copy, issigned by our export agent and accompanies the goods; the third original is signed bythe carrier and is handed to our export agent as a receipt for the goods after they have

been accepted for carriage.

Since it is sent with the air shipment by the same plane, the air waybill is usually

associated with wire transfer advance payment. With air waybill number given, youcan track the shipment online. We usually sent you Air Waybill 2 originals.

Bill of lading

A bill of lading is used for the sea shipment. It is:

A certificate of ownership to the goods.

As such, it must be produced at the port of final destination by the importer (you) inorder to claim the goods. As a document of title, the bill of lading is also a negotiable

document and you may sell the goods by endorsing or handing over the bill of ladingto another authorized party, even while the goods are still at sea. Although negotiable

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bills of lading are in common use, some countries do not allow them or make itdifficult to be used. So, you have to be sure that negotiable B/L is accepted in yourcountry. Otherwise, non-negotiable B/L is issued.

A contractbetween the shipper (our export agent and us) and the shipping line which

defines in detail the terms for the carriage of goods from the sea port (Guangzhou) toyour destination sea port.

Clean bill of lading is usually associated with letter of credit transaction. With theB/L number or container number given, you can track the shipment online. Click hereto see an example. Clean B/L in 2 originals are sent to you.

Commercial invoice

The commercial invoice indicates the quantity and description of the goods, theloading port and destination port, the mode of transportation, the country of origin, the

price per unit and total cost of the goods. The commercial invoice is provided by ourexport agent. Click here to see an example. Commercial invoice 3 originals are sentto you.

Packing list

The packing list indicates the number of packs involved, the contents of each packand the individual weights and dimensions. This list enables you to check that the

correct number of units has been received. Customs authorities can also easilyidentify a specific pack they wish to inspect. The commercial invoice is provided byour export agent. Packing list 3 originals are sent to you.

Apart from these three documents, to some countries, there are several otherdocuments that are often used:

Proforma Invoice

After receiving a quotation from us, the importer (you) may request a proformainvoice which is a preliminary invoice and is prepared prior to shipment or even

before a firm order has been received. The purpose is to enable you to obtain animport license (if required) or a letter of credit. In some countries, proforma invoice isa required document for customs clearance. The proforma invoice is provided by ourexport agent.

Certificate of Origin, GSP certificate or Origin (Form A)

In some countries, optical instruments claiming preferential treatment in respect of

tariffs require proof of origin. Certificate of origin is provided by CCIB or CCPIT,GSP certificate of origin is provided by CCIB.

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REMITTANCE

Inward Remittance

1. Demand Draft2. Incoming Payment Advice

3. Purchase of Foreign Currency Cheques

1. Demand Draft

A cheque payable to particular beneficiary drawn on our Bank An inexpensive and simple method of funds transfer

2. Incoming Payment Advice

Money is remitted from overseas countries to Hong Kong by Mail

Transfer or Telegraphic Transfer with details for payment

A secure and convenient way to collect funds from abroad

3. Purchase of Foreign Currency Cheques

Travellers cheques, bank drafts or money orders may be purchased and

credited into account at branch manager's discretion

Usually the funds will be available only after a certain period (upon

clearance of cheque

To facilitate customers to draw against their own foreign currency

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account abroad

4. FIRC

FIRC is considered a very important document as it serves a lot of purposes. If sharesare issued on the name of a person or company which exists outside a country thenFIRC acts as the proof of money received in lieu of share application. In those caseswhere a resident Indian sells or transfers his shares to some nonresident Indian or

foreign identity then FIRC testifies that the resident seller has got the share purchaseconsideration. FIRC is a very crucial document which is submitted to DGFC in caseof EPCG and Advance License.

When services are exported then no service tax is levied according to the rules ofexport of services. In such cases, FIRC acts as an important proof of export ofservices and remittances which are received in lieu of them. There are various detailswhich are included in FIRC. FIRC carries the beneficiarys name, mode of paymenti.e. whether the money has been deposited to the account of beneficiary or cash has

been given to him, address and name of remitter, Cheque/DD/TT no. , exact amountof foreign currency, amount of money when changed in to the currency of the countryof beneficiary, name of the person in whose favor the amount has been sent, purposefor the receipt of remittance and rate of exchange which is prevalent.

After knowing all this, you have got the knowledge that how important is thedocument of FIRC. The person who is about to receive a remittance from outsideIndia, should mention the purpose of remittance honestly. This is because at the timeof receipt of the money, the bank asks for the proof of the purpose mentioned by youfor getting remittance from outside India

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Outward Remittance

1. Demand Draft

2. Telegraphic Transfer

3. Payment Order (Local)

1. Demand Draft

A cheque payable to particular beneficiary drawn on our correspondent

bank

In any major currency for any amount

Payment guaranteed by the issuing bank

An inexpensive and simple methods of funds transfer

A secure form of payment as the demand draft is payable to the specified

payee

Re-purchasable and refundable if lost

To facilitate payments on a regular basis by means of a standing

instruction

2. Telegraphic Transfer

The most efficient means with the payment instruction transmitted by

telex/SWIFT

In any major currency for any amount

A fast and accurate way to transfer funds abroad

A secure way of remitting funds of substantial amounts payable to a

specific beneficiary

To facilitate payments on a regular basis by means of a standing

instruction

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3. Payment Order (Local)

The issuance of a local payment order to the recipient Bank either by

SWIFT or by mail

A fast way to expedite the receipt of funds

To facilitate payments on a regular basis by means of a standing

instruction

Money Exchange

Sales and purchases of 6 major foreign currency notes including Australian

Dollar, Canadian Dollar, Pound Sterling, U.S. Dollar, Chinese Yuan andJapanese Yen

More types probably available at some branches and subject to availability

of the currency notes (e.g. Cash Department has 25 types of foreigncurrency note)

Travellers Cheques

Travellers cheques issued by famous financial institutions such as American

Express, Citicorp, Thomas Cook and VISA available with AUD, CAD,GBP, JPY, and USD, etc. (Probably not at all branches)

Convenient : used as a medium of exchange readily acceptable worldwide

Secure : avoid the risk of carrying too much cash and it is full amount

refundable for loss

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LIMITATIONS

The Authenticity of the secondary data is doubtful.

Lack of time to undergo the vast concepts of International trade so an

overview of certain concepts is only gained.

Due to clerical staffs duty in the senses survey there is a lot of pressure on the

mentor so less support was provided from their side.

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CONCLUSION

Trade Finance is a very important branch to study & understand the overall gamut of

the international finance market.

Availability of favorable trade finance schemes directly impacts the local trade,

encourages exporters, enlarges markets abroad, improves quality of domestic goods

and overall helps the nation boost its exchange earnings.

The Government of any nation plays a very vital role in boosting export turnover. The

credit policy of the Indian Government is also changed depending upon the needs of

the exporters, global trade environment etc. The credit policy of Oct 2001 is a pointer

in this direction.

ECGC and EXIM Bank take a lot of efforts for Export promotion. The strategies of

these 2 agencies in India should be flexible & their finance schemes should be

constantly synchronized with the changing scene of world trade. This alone can help

Indian exporters to stand competition in world markets effectively and more gain-

fully.

Finally, a very essential question needs to be answered by the International Trade

gurus with reference to Relevance of EXIM Policy in the current times

Exim policies had emerged when the state decided to limit imports and encourage

exports in order to maintain currency reserves. However, such ideas backfired:

consumers were hurt and producers turned lazy.

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SUMMARY

WELL BEGUN IS HALF DONE

The success mantra which I follow while entering as a trainee in one of the

prestigious bank of our country BANK OF BARODA.

My area of study was FOREX DEPARTMENT where I got to learn the manual

entries related to the inward and outward remittances message recordings, its round

off when payment is made, exchange of confirmation, bills of entry, etc

Being a 30 days trainee in BANK OF BARODA I could summarize my experience as

a learning, motivational and informative one.

Though initially the support from heads was not up to my expectations as much work

load was there because of the clerical staffs duty in the senses survey. But later on

everything went off well as it is rightly said-

ALL WELLS THAT ENDS WELL

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BIBLIOGRAPHY

Books Referred:

Export Finance - FEDAI

Newspapers and Magazines Referred:

Business India

Economic Times

Internet Websites:

www.google.com

www.economictimes.com

www.rbi.org.com

www.bankofbaroda.com