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INTRODUCTION

Exports play an important role in accelerating the economic


growth of developing countries like India. In view of the important
role played by exporters, several initiatives have been taken by
reserve bank of India and Government of India. These initiatives
have contributed to the impressive increase in export. Credit is a
very important factor which enables exporters in efficiently
executing their export orders.
The commercial bank provides short term export finance
mainly by way of pre and post shipment credit.
The importance of export credit in maintaining the pace of
export growth, RBI has initiated several measures in the recent
years to ensure timely and hassle free flow of credit to the export
sector. These measures include rationalization and liberalization of
export credit interest rates, flexibility in repayment/prepayment of
pre shipment special financial package for large value exporters
etc.

A traditional & nontraditional export


One of the ,major problems facing the developing countries
with regard to achieving export expansion is the commodity
composition of their external expansion is the commodity
composition of their external exports, which mainly
Consist of primary products. In the case of some developing
countries with long established manufacturing capacities,
however, the traditional exports also cover various items of
manufactured goods such as cotton textiles.
There are inherent limitations to the growth potential of
traditional export products, which may be summarized as follows:
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Inelasticity of international demand for many of the products.


Continuously rising domestic demand resulting in limited
availability of products for export.
Higher domestic prices in respect of several commodities
compared with international prices which weakens the effort
to export.
Growing competition in world markets as well as emerging
substitutes.
Quantitative and other restrictions imposed by the developed
countries.

While efforts to improve exports of traditional items are


continued, it is the export of non traditional items like light
engineering products, chemicals, garments and also agro based
industrial products, which could more quickly contribute to an
appreciable rise in the foreign exchange earnings of developing
countries. The more industrialized of such countries have already
been achieving a higher export growth rate in this way, and from
the export of capital goods as well in some cases.

REVIEW OF LITERATURE

EXPORT SERVICES
Export finance is a working capital facility provided to the
exporter at concession rates of interest determined by the Reserve
Bank of India. This finance which is strictly purpose oriented and
need based is available both at pre-shipment and post-shipment
stages for the following categories.

Manufacturing exports
Merchant exports
Sub-supplier to the main exports
Exports of various services, including consultancy
Deemed export.

EXPORT
Export is a provision of goods and services across the
national and international boundaries.
TYPES OF EXPORT
Export are divided into main types
Direct export.
Indirect export.
DIRECT EXPORT
Direct exports are transactions where exporters enter into
direct relationships with importers overseas and negotiate a
contract for the sale of goods and services.
INDIRECT EXPORT

Indirect exports are transaction arranged through local


merchants and agent for exports.
EXPORT FINANCE
Export finance is a short term working capital finance
allowed to an Exporter for Execution of an export order from the
date of the receipt of such order till the date of realization of the
export proceeds.
Export finance is broadly classified in to two categories
depending upon the finance is extended namely:
Pre-shipment finance.
Post-shipment finance.
PRE-SHIPMENT FINANCE

The exporter needs pre-shipment finance for securing the


raw materials and other inputs required for the execution of an
export order and also to arrange for the shipment of these goods to
the foreign market. It provides timely financial assistance to
exporters against their export orders or contract at reasonable
cost.
Pre-shipment credit in rupees.
Pre-shipment credit in foreign currency.
Pre-shipment credit in rupees
Purpose and nature of facilities
Packing credit in rupees is one of the main source of
providing export finance extend packing credit to an exporter to
procure
raw materials , process, manufacture ,transport,
warehouse, pack and goods meant for exports, against confirmed
order or against letter of credit issued by international bank.
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Packing credit facilities to an exporter who


Has properly introduced account with the bank.
The exporter has at least 2/3years experience and good track
record in the activity.
In case he is new to the export business, he has experience in
domestic market, dealing with relative export commodity /or
has other requisite capabilities/ background.
Regulatory guidelines of Pre-shipment credit in rupees

The pre shipment advance granted to exporters should not


exceed the FOB value of goods or the domestic market value of
goods whichever is lower, thus the loan amount is to be
disbursed net of insurance, freight and profit margins.
Pre shipment finance can be granted on a running account
basis to exporters with good track record. the statement of
outstanding export orders submitted to the exporter are on
quarterly basis should be line with the packing credit .in other
cases Pre-shipment finance is disbursed on order to order
basis.
In case of delay in shipment, the exporter should immediately
inform the bank the reasons for delay and apply for extension of
the loan prior to the due date together with LC extension/ order
extension from the overseas buyers. The loan may be extended
further at the discretion of the bank and at applicable interest
rate.
Substitution of frustrated export order with a new export order
is allowed only for physical exports.
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The loan , taken against an export order which is subsequently


cancelled, can be adjusted with the proceeds of an export bill of
any commodity provided no advance has been availed against
this new order this facility of substitution of orders is not
available for substitution of orders is not available for deemed
exports.
The Pre-shipment loan availed should be liquidated by
purchase/discount /negotiation of export documents in Indian
rupees/foreign currency or proceeds of a post-shipment loan
granted against an export bill. It can also be liquidated by
proceeds of payments receivable from the government of India
e.g., duty draws back. Pre-shipment loan should not remain
outstanding once the relative goods are exported and
documents are tendered to the bank.
Pre-shipment credit can also be repaid from the balances in the
EEFC/Indian rupees accounts to the extent that the exports
have take place.
Incase multiple packing credits are availed under the same
order; the due date of any of the subsequent loans cannot
exceed 360days from the date of disbursal of the first loan
under that particular order.
Interest will be recovered monthly.
Pre-shipment credit in foreign currency (PCFC)

Pre-shipment credit in foreign currency (PCFC) is an


additional method to the exporters along with the other method of
export packing credit. It provide to the exporter in foreign currency
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at internationally competitive rates for financing of all pre


shipment activities.

Regulatory guidelines of pre shipment credit in foreign


currency

PCFC can be made availed of in USD, GBP, and JPY &EUR


currencies.
Available only for exports up to 180 days tenor on cash basis.
(i.e., not consignment /deferred payment term)
Cost of funding is LIBOR + margin not exceeding 75 basis
points per annum.
PCFC can be availed for a maximum period of 180 days for
amounts not exceeding the FOB value of goods.
Forward contracts may be booked up to the date of drawdown
of PCFC.
PCFC can be liquidated by availing of post shipment financing
in foreign currency only and not in Indian rupees.
PCFC may also be repaid from the balances in the EEFC or
Indian rupees account of the exporter to the extent that the
exports have actually taken place.
Cross currency liquidation of PCFC is also permitted and
forward contracts may also be book for the same, but only up
to the date of presentation of documents.
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This facility is also available for deemed exports i.e., for


suppliers to projects financed by multilateral /bilateral
agencies /funds for a maximum period of 30days or up to the
date of payment by the project authorities whichever is earlier.
Other regulatory and procedural aspects are similar to those of
rupees pre-shipment finance.
Banks requirements
Application for the pre shipment loan to be submitted in the
banks standard format.
Original purchase order/ original indent from overseas buyer or
buyers agent accepted by the Indian exporter.
The submission of the original order when received.
(Or)
Original Export letter of credit.
(Or)
Performa Invoice duly accepted by the overseas buyer.
(Or)
Statement of outstanding export orders at periodic intervals.

POST-SHIPMENT FINANCE

Financial assistance is granted to an exporter, after


shipment of goods till the receipt of the proceeds, by way of post
shipment finance.
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Post shipment finance is a loan or advance granted or any


other credit provided by an institution to an exporter of goods from
India from the date of extending the credit after shipment of the
goods to the date of realization of export proceeds and includes
any loan or advance granted to an exporter in consideration of or
on the security of any duty drawback or any receivable from the
government of India.

Post-shipment credit in rupees

Exports are provided with upfront payment for the goods


exported.
Regulated interest rates lower than cash credit interest.
Exporter can avail of forward premium on the post shipment
leg of the transaction.
Sharing of the export credit between the merchant exporters
and manufacturers is allowed.
It can be used for deemed exports.
Regulatory guidelines of post shipment credit in rupees

Exporter should have an importer exporter code number.


Exporter should submit export documents with 21 days from
the date of shipment.

In case of nuisance bill, due date is calculated as per term of


the LC or contract and in case of sight bills, the notional due
date is computed as per FEDAI guidelines. The advance will be
given up to the due date/ notional due date subject to a
maximum of 80 days from shipment date.
Advance can be provided up to 100% of the invoice value at
interest rates as per RBI.
In case of export bill negotiation/discount /purchase , the
rupees amount of the bill will be determined at the bill buying
rate plus forward premium , if applicable prevailing on the date
of financing or at the forward contract rate already booked by
the customer.
If a negotiated/ purchased bill is not paid up to the 30 date
from the due date, the bill is crystallized into Indian rupees by
applicable TT selling rate on that day.
All negotiations are subject to the uniform customs and
practices for documentary credit (ucp500) 1993 revision and all
purchases and discounting is subject to uniform rules for
collection (ucp500).
Post shipment credit in foreign currency (PSFC)
Export bills maybe negotiated/purchased/discounted at
internationally competitive rates i.e. linked to the prevailing LIBOR
of the currency of the bill.

Regulatory guidelines of post shipment credit in foreign


currency (PSFC)
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PSFC can be availed of in all eligible currencies via USD, GBP,


JPY and EUR.
PSFC can be availed of at LIBOR +margin (the maximum
margin over LIBOR is stipulated by RBI from time to time
150BPS at present)
PSFC can be availed up to 100% of the invoice value up to a
maximum of 180days from date of shipment.

Banks requirements
A sanctioned credit limit.

Application for negotiation/purchases/ discount


made in the banks standard application form.

to

Submission of a complete set of export documents drawn


per letter of credit /contract terms together
GR/PP/Softer/SDF form.

Export packing credit


currency

be

as
with

in rupees and in foreign

While demand for export credit in rupees is low, there is


persistence demand for more export credit in foreign currency in
view of the cost advantage over the export credit in rupees and
arbitrage opportunity.
The group observed that even though there has been a
substantial increase in the volume of export credit in foreign
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currency during the last three years, there still was unsatisfied
demand.
In view of the limited foreign exchange resources of banks
(FCRN-B,EEFC,RFC) RBI has permitted banks to avail lines of
credit from abroad without any limit exclusively for the purpose of
extending export credit in foreign currency. Most of the banks have
availed of this facility.
It was observed that while few banks were meeting the same
fully out of overseas borrowings. Many banks had a mix of the
different sources of funds viz .deposit funds, borrowings from
abroad and swap funds. Substantial portion of the export credit in
foreign currency was met by borrowing s. from abroad and swap
funds. Substantial portion of the export credit in foreign
currency .most of the banks have availed of this facility. It was
observed that while few banks were extending export credit in
foreign currency entirely out their deposits funds, some banks
were meeting the same fully out of overseas borrowings. Many
banks had a mix of the different sources of funds via deposits
funds, borrowings from abroad and swap funds. Substantial
portion of the export credit in foreign currency was met by
borrowings from abroad .from a prudential point of view it was felt
that there was a need to have a regulatory limit up to which banks
may be allowed to borrow from abroad for this purposes.
It was brought to the notice of the group that some banks
are stated to be levying service charges up to 2% of the amount of
export credit in foreign Currency lent in addition to the interest
rate ceiling prescribed by RBI.

Review of the existing procedure for export credit


The group reviewed the existing procedures for export
credit. After reviewing the procedures, members were of the
opinion that exciting procedure in place were adequate to take
care of the interest of the exporters. The export promotion
organizations represented that they have been receiving
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complaints that the time frame prescribed by RBI for disposal of


the applications for the export credit is not complied with by
many banks, especially in the case of small and medium
exporters and exporters smaller centers. Piece meals queries
were rose which resulted in the delay in sanctioning / rejecting
the loan application from the exporters non adherence to the set
procedure and system was more pronounces in the case of small
and medium exporters who are expected to play vigor role in the
promotion of exports in coming years.
The representatives of bank appraised that there have
been improvement in the customer service to exporters specially
the small and medium exporters. The incidence of delays in
sanctioning the credit limits has been reduced. The group was of
the opinion that the procedures laid down were not adhered to by
branch officials in disposing of the applications of the credit
limits in several cases. The group felt there should be attitudinal
changes among the officials of the banks in dealing with small
and medium exporters by strictly adhering to the procedures so
as to ensure smooth flow of export credit to small and medium
exporters. While interaction between banks and exporter by the
ways of seminars /meetings/ workshops occurs in major centers,
it is not so in smaller centers. There was a suggestion by the
export promotion organizations to arrange for such meetings with
banks and small and medium exporters to sort out the
differences and also educate the exporter about various
formalities of banks. It was pointed out the RBI that the task of
coordination for export promotion was given to SLBC which
constituted sub-committees with view to bringing in better
coordination among banks and exporters. It was suggested that
the export promotion organizations may interact at state level
with the sub-committees and arrange for meetings/seminars etc
to suitably educate and provide adequate and appropriate
guidance to small and medium exporters to obviate the
difficulties faced by them.

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Review of current interest rate regulation in export


credit
A. Export credit in rupees.
Exporters organization held the view that wherever
interest rates have been freed; the small exporters have been at
disadvantage while large corporate exporters get the benefits. It is
practically very difficult for exporters to shift from one bank to
another bank which charges lower rates of interest. As a result
they are unable to take advantage of the competition among
banks in lowering the interest rates. Therefore, the present
interest rate prescribing by RBI for the first slabs of the rupee
export credit (both pre and post shipment) should continue.
B. Export credit in foreign currency
The working group recommends that the present interest
rate prescribing by RBI may continue for the time being in the
interest of the small and medium exporters.
Analysis of the export credit statistics revealed that there
has been a substantial increase in the export credit in foreign
currency during the last three years. Since june2002 while the
quarterly disbursement of export credit in rupees has declined,
the disbursement of export credit in foreign currencies has
register sharp increases by more than ten times.

LETTER OF CREDIT
A letter of credit adds a bank's promise to pay the exporter
to that of the foreign buyer provided that the exporter has
complied with all the terms and conditions of the letter of credit.
The foreign buyer applies for issuance of a letter of credit from the
buyer's bank to the exporter's bank and therefore is called the
applicant; the exporter is called the beneficiary.
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Payment under a documentary letter of credit is based on


documents, not on the terms of sale or the physical condition of
the goods. The letter of credit specifies the documents that are
required to be presented by the exporter, such as an ocean bill of
lading (original and several copies), consular invoice, draft, and
an insurance policy. The letter of credit also contains an
expiration date. Before payment, the bank responsible for making
payment, verifies that all document conform to the letter of credit
requirements. If not, the discrepancy must be resolved before
payment can be made and before the expiration date.
There are different types of letter of credit they are:

1. Revocable letter of credit


2. Irrevocable letter of credit
3. Transferable letter of credit
4. Confirmed letter of credit
5. Unconfirmed letter of credit
6. Back to back letter of credit
7. Standby letter of credit

The following is a step-by-step description of a typical Letter


of Credit transaction

An Importer (Buyer) and Exporter (Seller) agree on a


purchase and sale of goods where payment is made by Letter
of Credit.

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The Importer completes an application requesting its bank


(Issuing Bank) to issue a Letter of Credit in favor of the
Exporter. Note that the Importer must have a line of credit
with the Issuing Bank in order to Request that a Letter of
Credit be issued.

The Issuing Bank issues the Letter of Credit and sends it to


the advising Bank by telecommunication or registered mail in
Accordance with the Importers instructions. A request may
be included for the Advising Bank to add its confirmation.
The advising Bank is typically located in the country where
the exporter carries on business and may be the Exporters
bank but it does not have been.

The Advising Bank will verify the Letter of Credit for


authenticity and send the original credit to the Exporter.

The Exporter examines the Letter of Credit to ensure:


It corresponds to the terms and conditions in the purchase
and Sale agreement;
Documents stipulated in the Letter of Credit can be
produced;
The terms and conditions of the Letter of Credit may be
fulfilled.

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If the Exporter is unable to comply with any term or


condition of the Letter of Credit or if the Letter of Credit
differs from the purchase and sale agreement, the Exporter
should immediately notify the Importer and request an
amendment to the Letter of Credit

When all parties agree to the amendments, they are


incorporated into the terms of the Letter of Credit and
advised to the Exporter through the Advising Bank. It is
recommended that the Exporter does not make any
shipments against the Letter of Credit until the required
amendments have been received.

The Exporter arranges for shipment of the goods, prepares


and/or obtains the documents specified in the Letter of
Credit and makes demand under the Letter of Credit by
presenting the documents within
the stated period and
before the expiry date to the available with Bank. This may
be the Advising/Confirming Bank. That bank checks the
documents against the Letter of Credit and forwards them to
the Issuing bank. The drawing is negotiated, paid or
accepted as the case may be.

The Issuing Bank examines the documents to ensure they


comply with the Letter of Credit terms and conditions. The
Issuing Bank obtains payment from the Importer for payment
already made to the Available
With or the Confirming
Bank.
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Documents are delivered to the Importer to allow them to
take possession of the goods from the transport company.
The trade cycle is complete as the Importer has received its
goods and the Exporter has obtained payment.

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OBJECTIVES
To find the different export financing facilities available,
preference and problems faced by the exporter.

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To analyze the different export financing facilities available,


preference and problems faced by the exporters.

To suggest suitable export financing for exporter.

SCOPE

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Trade finance brings in foreign currency reserve to a country.


It also improves the economics of a country. Through smooth
processing of trade finance exporter will have wide openings in
international marketing for their brand the absence of adequate
trade finance infrastructure in equivalent to a barrier to trail? This
study will identify problem and issues involved in financing trade
from the exporter point of view taking commercial banks as a
major sources of financing and suggest way to the bank to improve
trade financing.
Twenty years ago, the prevailing wisdom from most
investment managers was to diversify ones investments as one
part of the world was likely to do well when another part was in a
slump. In the last 35 years, that represents an increase from about
4% of GDP to about 10%. Last year, US exports again grew by
4.6%.
Export credit agencies as consistently have played a critical
role in filling financing gaps to keep trade flowing to emerging
markets. This is because commercial banks simply do not have a
large appetite for placing emerging-market risk on their books.

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RESEARCH METHODOLOGY

Research means a scientific and systematic search for


pertinent information on a specific topic. Research is careful
investigation or equity especially through search for new facts in
any branch of knowledge. Research comprises defining and
redefining problems, formulating hypothesis or suggested
solutions, collecting, organizing and evaluating data making
deductions, and reaching conclusions, an at last carefully testing
the conclusions to determine whether they fit the formulating
hypothesis.

RESEARCH DESIGN

A research design is the arrangement of conditions for


collection analysis of data in a manner that aims to combine
relevance to the research purpose with economy in procedure.

PRIMARY DATA

Primary data is collected through journals to find the


problems faced by exporters and also know the preferences of
exporters towards export finance.

SECONDARY DATA

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Secondary data is collected through various web sites, study


materials, books and some of the data taken as guideline from
design classics exports Private limited as source.

LIMITATIONS

The survey for this study is limited to Design Classics Export


private ltd only.

It is not easy to get responses from the exporters.

Unwillingness and inability of exporter to answer the queries


was also seen as a major problem.

As size of the sample is limited, so what the preference of


exporters is in worldwide cannot be identified.

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COMPANY PROFILE

Design Classics Export Private Limited

Design classics has evolved into a highly trusted


manufacturing exporter of knitted and woven garments with a
production capacity of 2, 00,000 pieces per month for children,
men, and women with 300 machines and 600 workforce.
With rich experience of over two decades, Design classics
continue to offer unique and high fashioned garments using most
of advanced machines coupled with in-built quality systems. In
Design classics, customers acquire utmost importance and they
continue to remain the source of inspiration and motivation.
A renowned garment manufacturer and exporter, Design
Classics has relentlessly pursued its philosophy of Growth with
Excellence.
Ever since its birth in 1989, the company has risen in
stature and earned an international reputation for class and
quality. Its sales turn over for 2005 - 2006 is $ 6.5 million.

Vision

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As a proactive customer-oriented garment company, our


business vision is to achieve profitability through productivity
Employment to Many
Ultimate Goal - To Have Everything from yarn to garment less than
one roof

Mission
To be a proactive organization that sets global standards
through timely delivery of defect-free garments, continuous
modernization and innovation
We recognize quality, Professionalism and the pursuit of
Excellence as the trinity that would spearhead Design Classics in
the industry

Strength

Motto

Professionalism

Attitude

Excellence with Modesty

Quality

Quick Facts

Production Capacity

2, 00,000 Pcs per month

Employees

Around 1000

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Factories
- Over 450 Machines

- 3 Units (Chennai, Tiruttani, Maddur)

- Fabric Sourcing at Tirupur

Main Products Lines

Mens Wear

Womens Wear

Childrens Wear

T Shirts

T Shirts

Fashion Garment

Polo Shirts

Casual Blouses

T Shirts

Jackets

Jackets

Shorts

Trousers

Shorts and Trouser

Jackets
Pants

Departments

Accounts
Exports / Imports
HRD
Merchandising
Cutting
Printing
Embroidery
Sewing
Finishing
Stores
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Research & Development

Freedom from conventional thought made design classics to


shape on unprecedented ideas into innovative ones. Each one of
these ideas and systems further combine to form its foundation for
future potential.
The well-established training centre imparts required skill of
garmenting to the dedicated womenfolk continuously. The working
environment has totally given a new lease of life by way of
introducing transcendental meditation program at the premises.
Design classics have sincere and dedicated workers who take
oath solemnly, twice a day with personal involvement to the
assigned job for betterment.

Production planning
Garment testing
Cutting
-block cutting
-shaping the half folded cut parts
-production line
-final checking at final operation with an aim to achieve
100% defect free garments and 0% re-work

Finishing
-cleaning the garments with air
-thorough checking of important measurement
-thorough checking to make the garments defect free and to
fulfill all quality parameters
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ANALYSIS AND INTERPRETATION

The analysis is done by way of primary and secondary


data. And it gives overall picture.

PRIMARY DATA

Primary data is collected through journals to find the


problems faced by exporters and also know the preferences of
exporters towards export finance.

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SECONDARY DATA

Secondary data is collected through various web sites,


study materials, books and some of the data taken as guideline
from design classics exports (p) limited as source.
This analysis is done in descriptive research method and
tools which is used in it like bar charts. It will reveal the clear
picture of it.
A structured questionnaire was prepared to find out the
preferences of the exporters in export financing and also identify
the problem faced by the exporters.
This chapter will analyze the data collected in this regard.

TABLE No 1

PRODUCTS EXPORTING FROM INDIA

PARTICULARS

PERCENTAGE

Leather goods

37.14

Pharmaceuticals

11.43
28

Agricultural

25.72

Engineering

11.43

Textiles

8.57

Others

5.71

TABLE SHOWING PRODUCTS EXPORTING FROM INDIA

Source: primary data

INFERENCE
Above table shows that first priority goes to leather goods
by 37.14% and next goes to agricultural by 25.72%, next goes to
pharmaceuticals and engineering by 11.43%,11.43% respectively
and next goes to textiles by 8.57% and other goods by 5.71%.

FIGURE NO 1

PRODUCTS EXPORTING FROM INDIA

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TABLE NO 2

EXPORTER PREFERENCES IN EXPORT FINANCE

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This question is asked to know what kind of export


financing facility has more preference, i.e. pre-shipment finance
or post-shipment finance.

PARTICULARS

PERCENTAGE

Pre-shipment

74.29

Post-shipment

25.71

TABLE SHOWING EXPORTER PREFERENCES

Source: Primary data

INFERENCE
From the above table 74.29% is showing more preference
to pre-shipment finance and 25.71% is showing low preference to
post-shipment finance. It clearly shows that mostly the exporter
obtaining pre-shipment finance. In some cases exporter prefers
post-shipment finance because of huge export orders.

FIGURE NO 2

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EXPORTER PREFERENCES

TABLE NO 3

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PRODUCT PREFERENCE IN PRE-SHIPMENT FINANCE

The question put forth to the exporter in order to identify


in pre-shipment would he prefers, whether in rupees or in foreign
currency.

PARTICULARS

PERCENTAGE

In Rupees

30.77

In Foreign currency

69.23

TABLE SHOWING PRODUCT PREFERENCE IN PRESHIPMENT


FINANCE

Source: primary data

INFERENCE
From the above table it is very clear that the pre-shipment
finance in foreign currency is 69.23% and in rupees only 30.77%.
So it clearly shows that mostly the exporter prefers pre-shipment
in foreign currency.

FIGURE NO 3
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PRODUCT PREFERENCE IN PRE-SHIPMENT FINANCE

PRODUCT PREFERENCES

80
60
PERCENTAGE
40
20
0
PERCENTAGE

IN RUPEES

IN FOREIGN

30.77

69.23
PRODUCT

TABLE NO 4
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PRODUCT
FINANCE

PREFERENCE

IN

POST-SHIPMENT

The question put forth to the exporter in order to identify


in post-shipment would he prefers, whether in rupees or in
foreign currency.

PARTICULARS

PERCENTAGE

In Rupees

11.11

In Foreign currency

88.89

TABLE SHOWING PRODUCT


SHIPMENT FINANCE

PREFERENCE

IN

POST-

Source: primary data

INFERENCE
From the above table, it clearly shows that the exporter
availed mostly post shipment finance in foreign currency of
88.89% and 11.11% in Indian rupees only.

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FIGURE NO 4

PRODUCT PREFERENCE IN POST-SHIPMENT

PRODUCT PREFERENCE
100
80
PERCENTAGE

60
40
20
0

PERCENTAGE

IN RUPEES
11.11

IN FOREIGN
88.89

PRODUCT

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TABLE NO 5

LEVEL OF SATISFICATION OF THE EXPORTER ON


VARIOUS SERVICES OFFERED BY THE BANK
WORKING CAPITAL FINANCE FROM BANK
Working capital finance that is often required by exporter
The question is asked to know what is the problem of
the exporter while getting limits from the bank.

PARTICULARS

PERCENTAGE

Difficult to get limit from the bank

62.85

Easy to get limit from the bank

22.86

Limits obtained by providing huge


Collateral security

14.29

TABLE SHOWING THE LEVEL OF SATISFACTION

Sources: primary data


INFERENCE
Above table shows that mostly the exporter has facing
more difficulties while getting limit from the bank and the
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62.85% shows here the exporter has more problems. It is clearly


shows that working capital finance is difficult to get limit from
bank

TABLE NO 6

MODE OF PAYMENT

This question is asked to know the method of payment


obtain by the exporter while export orders.

PARTICULARS

PERCENTAGE

Payments in advance

20

Open account

8.57

Letter of credit

57.14

Documentary
collection(draft)

14.29

TABLE SHOWING MODE OF PAYMENT

Source: primary data


INFERENCE

38

From the above table 57.14% shows that mostly the letter
of credit is used for the financing mechanism. And it is clearly
shows the exporter used letter of credit as a payments mode for
his exports.

FIGURE NO 5

MODE OF PAYMENT

39

TABLE NO 7
PREFERENCE
TRANSCACTION

OF

EXPORTER

ON

L/C

This question is asked to identify the preference towards


L/C transaction.

PARTICULARS

PERCENTAGE

Convenient handling

34.29

Assurance of payment

45.71

Protection of goods

2.86

Avoid risk

17.14

TABLE SHOWING PREFERENCE OF EXPORTER ON L/C


TRANSACTION

Source: primary data


INFERENCE
40

From the above table 34.29% shows that L/C which is


prefer by exporter makes convenient handling and 45.71% shows
that it assures the payment and2.86% shows that protection of
goods and 17.14% shows that avoid risk in L/C transaction. In
this it clearly shows that L/C assures the payment to the
exporter.

FIGURE NO 6

PREFERENCE OF EXPORTER ON L/C TRANSACTION

41

TABLE NO 8

LEVEL OF SATISFATION ON PAYMENT METHOD


42

Payment method is the important aspect for the exporter


, because it involved to face certain delay in sanctioning of credit,
non-availability of PCFC, service charge for PCFC, insistence on
collateral security in all cases etc. and as such it cannot be said
that the exporters offered by the banks under the various
parameters chosen for conducting satisfaction survey.

PARTICULARS

PERCENTAGE

Yes

34.29

No

65.71

TABLE SHOWING
METHOD

SATISFACTORY

LEVEL

ON

PAYMENT

Source: Primary data


INFERENCE
Form the above table mostly the exporter is not satisfied
with payment method. And he is satisfying in rare cases. Because
it is a clear evident that bank procedures are too complicated and
constraints.

FIGURE NO 7

43

LEVEL OF SATISFACTION ON PAYMENT METHOD

TABLE NO 9

44

PROBLEMS FACED BY EXPORTER

This is asked in order to find out the difficulties faced by


the exporter on the payment method.

PARTICULARS

PERCENTAGE

Payment procedures are too


complicated & lengthy

30.43

Complicated due to operators

8.69

Banking services are unreliable

4.35

Banking fees too high

8.69

High volume of supportive


document for agreements

47.84

TABLE SHOWING PROBLEMS FACED BY THE EXPORTER

Source: Primary data


INFERENCE
From the table it is clearly that the exporter facing
problems on payment method mostly because of these reasons
A) Payment procedures are too complicated and lengthy
B) High volume of document for banking agreements.

TABLE NO 10
45

INFORMATION ON CREDIT WORTHINESS OF THE


BUYER
Bank has to inform about the credit worthiness of the
buyer. Because it involves more cost. The exporter was asked to
mention whether the credit worthiness of the buyer is easily
available.

PARTICULARS

PERCENTAGE

Yes

25.71

No

62.86

Available through
external Agencies

11.43

TABLE SHOWING INFORMATION ON CREDIT WORTHINESS


OF THE BUYER

Source: Primary data


INFERENCE
From the above table 25.71%said that they are receiving
the creditworthiness of the buyer regularly, 62.86% said that
they are not receiving information regularly. 11.43%said that it
available through external agencies. So it is a clear evident that
credit worthiness of the buyer is difficult to get for the export
process.
46

FIGURE NO 8

INFORMATION ON CREDIT WORTHINESS OF THE


BUYER

INFORMATION ON CREDIT WORTHINESS OF THE BYER


70

62.86

60
50

TAG
CEN

40
25.71

PERCENTAGE

PER

30
20

11.43

10

0
Yes

No

Through
External
Agencies

47

TABLE NO - 11
LEVEL OF AGREEMENT
STATEMENTS

TO

THE

FOLLOWING

The question is asked to know whether exporter will have


sufficient knowledge in export finance.

LEVEL OF AGREEMENT

PERCENTAGE

Strong knowledge in export finance

1.971

Updated about the change in the


Market
Advice on the legal recourse against
Default

2.57

2.42

The bank followed smooth process

2.34

Time delay in internal approval

1.88

TABLE SHOWING
FOLLOWING

LEVEL

OF

STATEMENTS

48

AGREEMENT

TO

THE

From the above table shows that the exporter have strong
knowledge in export finance.

FIGURE NO 9

LEVEL OF AGREEMENT

LEVEL OF AGREEMENT

Strong knowledge
in export finance
Updated about the
change in the market

1.88

1.971

2.34

2.57
2.42

49

Recourse against
advice on the legal
default
The bank followed
smooth process
Time delay in
Internal approval

FINDINGS

1. It is found that mostly the exporter was satisfied with the


services availed in bank and he feel that still more to be
improved.
2. Bank should never be in a position to say no to find and
L/C services sought by the exporter when the exporter has
strong credit worthiness. In this circumstances the
preference of exporter relating to L/C services availed in
bank indent has strict compliances and high cost and
lengthy administrative constraints.
3. If the exporter are in weak credit worthiness it was found
that bank will not provide financial assistance to the
exporter.
4. It is clear mostly the exporter obtaining pre-shipment
finance. In some cases exporter prefers post-shipment
finance because of huge export orders.
5. The exporter was preferring credit in foreign currency as a
product preference in both the pre-shipment and postshipment finance.

50

6. In export finance working capital finance is often required


by exporter. But it is very difficult to get limit from bank.
7. The exporter was using L/C as a financial mechanism to
make the payments.
8. While making the payment the procedures are too
complicated and lengthy and also high volume of documents
for agreements.

SUGGESTIONS

1. I may be that the services offered by the financial


institutions they are pre-shipment and post-shipment
finance should be improve and should be customer oriented.
2. The payment procedures should be easy to handle and also
reduce the volume of documents for agreements.
3. In case, the small exporter has a weak credit position the
bank as to assist them in certain extend. In order to
facilitate their export.
4. An important aspect of L/C that it deals with only
documents and only not in protection with goods some
important should be given to his goods. Where by its help to
expand his business.

5. As L/C does not provide guarantee to protection against


frauds. RBI should concentrate more on it. And the exporter
feels that through online communication and through
different networks.
51

CONCLUSION

It is about that now I have got some knowledge about


export finance. Before doing this project I know only theoretical
knowledge. But this project is helpful to know practically and
also it is very useful to know about the detail analysis and
facilities of export finance of Design Classics Export private
limited.
Here by, I greet to say that the project I had done about the
export finance will be useful and helpful to the future generations
who are going to learn about the export financing facilities.

52

BIBLIOGRAPHY

1. General guide lines as per FEDAI.


(Foreign exchange dealer association)

2. Journal of Export Management.


3. Export finance and banking procedures in India.
4. Report on Trade Finance The Economics Time.
5. Letters of credit - as per rule and regulation of FEDAI.
www.rbi.org
www.highbeam.com

53

www.google.com
www.nikepedia.com

QUESTIONNAIRE

This survey is designed to understand preferences of exporters in


export finance.

Name

Age

Marital status

Occupation

Sex

Phone no

1. What kind of export has more preference to export?


54

a) Direct export

b) Indirect export

c) Merchandise export

d) Deemed export

2. What kind of export finance assistances obtain from the bank?


a) Pre-shipment finance

b) Post-shipment finance

3. Which product has more pre finance in export finance to make


the payment?
a) Rupees

b) Foreign currency

4. Do you have any problem in payment of foreign currency?


a) Yes

b) No

5. Are you satisfied with the services given by bank?


a) Yes

b) No

6. If the exporter has the weak credit position, will bank provide
the credit facilities to the exporters?
a) Yes

b) No

c) Depends on case

7. Are you using L/C as a payment mode?


a) Yes

b) No

8. Why do prefer the L/C as payment mode?


a) Convenient handling b) Assurance of payment
55

c) Protection for goods d) Avoid risk

9. How long you were handling the L/C process?


a) Below 5yrs

b) 5-10 yrs

c) 10-20 yrs

d) Above 20 yrs

10. What do you think when the payment delays from bank?
a) Shortage of hard currency
b) Delay of approval process
c) Too late in present the document
d) Bank insolvent

If any please specify..

11. Do you experience any discrepancy found in your documents


which you have sent? I.e. which may reject?
a) Yes

b) No

12. If yes, what happens to your export transaction?


a) Delay in process
b) No problem in delivery of goods
c) Stoppage of transaction
d) Contract becomes end

56

If any please specify..

13. What is your opinion about export finance assistances or any


suggestion about it.......

57

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