IB0018 – Export-Import Finance

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ASSIGNMENT

DRIVE	WINTER 2013
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	IB0018 – Export-Import Finance
SEMESTER	4
BK ID	B1618
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q.1 What is the meaning of documentary Letter of credit? Explain in brief the types of L/Cs?

Ans :  Documentary Letter of credit:

A letter of credit is a document issued by a financial institution, or a similar party, assuring payment to a seller of goods and/or services provided certain documents have been presented to the bank. These are documents that prove that the seller has performed the duties under an underlying contract (e.g., sale of goods contract) and the goods (or services) have been supplied as agreed. In return for these documents, the beneficiary receives payment from the financial institution that issued the letter of credit. The letter of credit serves as a guarantee to the seller that it will be paid regardless of whether the buyer ultimately fails to pay. In this way, the risk that the buyer will fail to pay is transferred from the seller to the letter of credit's issuer. The letter of credit can also be used to ensure that all the agreed upon standards and quality of goods are met by the supplier, provided that these requirements are reflected in the documents described in the letter of credit.

Types:

1. Import/export Letter of Credit:

The same credit can be termed as import and export LC depending on whose perspective it is being looked upon. For the importer it is termed as Import LC and for the Exporter of goods, Export LC.

2. Revocable Letter of Credit:

Q. 2 What is the importance of export documentation? Discuss the various regulatory documents in brief.

Ans : Importance of export documentation:

Export documentation plays a vital role in international marketing as it facilitates the smooth flow of goods and payments thereof across national frontiers. A number of documents accompany every shipment. These documents must be properly and correctly filled. Export documentation is, however, complex as the number of

Q.3 Discuss the FEDAI rules regarding negotiation of documents under credit.

Ans : FEDAI rules:

A. Letter of credit restricted to a particular bank but forward contract for the relative export fixed through another bank . A commission of 0.35% shall be charged by the negotiating bank for negotiating bills/documents under letters of credit restricted to themselves against issue of foreign currency drafts/TTs in favour of the bank with whom the forward exchange is fixed in payment of such negotiations.

Q.4 Write short notes on:

a) Packing credit in foreign currency

b)Post shipment finance in foreign currency

Ans :  a) Packing credit in foreign currency:

Packing credit is any loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment, on the basis of letter of credit opened in his favor or in

b) Post shipment finance in foreign currency:

Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters don’t wait for the importer to deposit the funds.

Q.5 Discuss any two finance programs by EXIM bank of India.

Ans:  Export-Import Bank of India was set up in 1982 by an Act of Parliament for the purpose of financing, facilitating and promoting India’s foreign trade. It is the principal financial institution in the country for coordinating the working of institutions engaged in financing exports and imports. Exim Bank is fully owned by the Government of India

Q.6 What is ECGC? Explain Commercial and Political Risks covered under ECGC Policies.

Ans : Meaning of ECGC :

The Export Credit Guarantee Corporation of India Limited (ECGC) is a company wholly owned by the Government of India based in Mumbai, Maharashtra. It provides export credit insurance support to Indian exporters and is controlled by the Ministry 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 and to Export Credit Guarantee Corporation of India in 1983.

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