Foreign Exchange

Foreign Exchange It is a mechanism by which currency of one country gets converted into the currency of another country.

Exchange Rate It is the price of a unit of one currency expressed in terms of another currency.

Spot Rate In this case settlement and delivery of currencies takes place within two business days from the transaction date of the deal.

Forward Rate All exchange rates quoted for the settlement to take place after the spot rate are termed as Forward Rates.

Cross Rate It is the price on one foreign currency in terms of another foreign currency. It excludes the currency of the country where the rate is offered.

GDR (Global Depository Receipts)

Depository receipts (DR) are negotiable securities issued outside India by Depository Bank, on behalf of Indian Company. The DR represent local rupee denominated equity shares of Indian company, held as deposit by a custodian bank in India. DR are traded in stock exchanges. The GDR holder, in fact, does not hold any shares in his name. Underlying shares/bonds issued by the company are in the name of overseas depository bank. In fact, the overseas depository bank

also does not physically hold the shares. The shares or bonds are in physical custody of domestic custodian bank in India as agent of the overseas depository bank. DR listed in US markets are known as ADR. DRs listed elsewhere are known as GDR GDR came into picture after India decided to open up for investment from abroad. These are traded in overseas market and are free from Indian Capital gains tax. Most of these issues have been listed in Luxembourg stock exchange. A holder of GDR has a option to convert it into number of shares or bonds after 45 days from allotment. Till it is converted, GDR holder does not have any voting right. Once GDRs are converted , the shares issued are listed on any stock exchange in India.

Foreign Currency Convertible Bonds (FCCB)

FCCB means a bond issued by Indian Company expressed in Foreign Currency, and principal and interest in respect of which is payable in foreign currency. FCCB are like convertible debentures. The bond has a fixed interest rate(coupon rate). It is convertible into shares at a pre fixed price. Till the conversion interest is payable in foreign currency. If the holder does not convert the bond, the redemption of bond has also to be done in foreign currency.
Derivatives. A derivative is a security whose value depends on the value of other more basic underlying variables. For example, it can be said that forward contract is a derivative of spot contract. Forward contract is derived from Spot Contract.

Swaps The underlying principle in foreign exchange trading is that purchases should be offset by corresponding sales and vice versa, if a bank decides not to run the exchange rate fluctuation or indulge in speculation. It is an ideal situation in which a customer purchase is offset by customer sale. In practice, such a situation may not exist. It is, therefore, essential for banks to go for cover operations

Nostro Account

Foreign Currency Accounts maintained by us with Bank at overseas centre is Nostro Accoount. For example USD Account maintained by us with Bank of Baroda New York is called Nostro Account. This is meant for settlement of foreign currency transactions in USD. All overseas centers remit their

remittances in USD into the nostro account. Payments will be made in India in home currency or in foreign currency by debiting the nostro account.

BITTA(Baroda Integrated Transaction Account):

As a part of business transformation project and with a view to consolidating its treasury automation programme, the bank has embarked on the Global Treasury Project(GTB) to take care Treasury functions of all territories. BITTA will be introduced as realization account in CBS Finacle in place of FEXTA. The FEXTA Schedules P, S, E, and L have been withdrawn from the date of implementation of GTP. For each BITTA entry passed in the books of branches, a corresponding Cr/Dr entry will flow from SITB, Mumbai to branch BITTA. With the zeroisation of BITTA in CBS Finacle, BITTA will be reconciled by the branches daily. BITTA account has to be Zero before CSOLOP.

SWIFT

Society for worldwide inter bank Financial Telecommunication is a co operative society created under Belgian law and having its corporate office at Brussels. It operates computer guided communication system to rationalize international payment transfers in a secured system driven environment. Only authorized officials can access and decode the data/information/message.

Hedging It means protection of a foreign exchange exposure either by forward exchange contract or by borrowing in local currency. The purpose of hedging is to make the net position at a given date equal to zero.

LIBOR

It is the interest rate at which the prime bank offers to lend foreign currency to other prime bank in London as on a given date. This rate is fixed at 10.00 a.m. every day

UCPDC In its efforts to standardize the rules governing operation of documentary credits, ICC has modified a standard set of rules known as The Uniform Customs and Practice for Documentary Credits(UCPDC). These are universally recognized set of rules governing Letter of Credits. The rules are published in the form of Brochure. The latest publication is known as ICC600 and adopted with effect July 1, 2007. UCPDC gives the maximum possible guidance and assistance to all parties. It guides the Buyer as responsible for stipulating clearly and precisely the documents required and conditions to be complied with. It stipulates the liabilities of Opening Bank, Advising Bank, Confirming Bank, Negotiating Bank, etc.

Letter of Credit (L/C)

It is an undertaking issued by a bank, on behalf of the buyer (importer) to the seller (exporter), to pay for goods and/or services, provided that the seller presents documents which comply fully with terms and conditions of the documentary credit. Art. 2 UCPDC defines L/C as:Any arrangement, however named or described that is (a) Irrevocable, (b) Definite undertaking of issuing bank and (c) to honor a complying presentation.

Irrevocable letter of credit

Once issued the terms and conditions cannot be amended without the agreement of all the parties to the credit

Confirmed letter of credit

The advising bank may be requested to add its confirmation to the credit. The confirmation constitutes the undertaking of that bank, in addition to that of the issuing bank, to effect payment, upon presentation at its counters, of conforming documents.

Stand by letter of credit.(International Standby Practices (ISP) 98, ICC Publication) It performs similar function to a bank guarantee but is issued in a format corresponding to that of a documentary credit. Its prime function is to provide a financial remedy to the seller in the event of

non/performance by the buyer. These credits are generally used as substitutes for performance guarantee or for securing repayments of loans. The document generally called for under such credits is simple statement of claim or proof of delivery of goods or certificate of non performance. This type of LC is opened mostly by banks in countries where, by law they are precluded from issuing guarantees and in such cases of credit is issued as a substitute for performance and other financial guarantees.

Stand by Letter of Credit is governed by International Stand by Practices (ISP 98), ICC Publication No.98

Transferable letter of credit Transferable credits are required when the seller is acting as an agent in the export order. Part or all the rights and obligations of seller under credit are transferred to the actual supplier of the goods. The credit must be specifically designated a 'Transferable' for any transfer to take place

Back to Back Letter of Credit:Back to Back Letter of Credit is one which is issued on the backing of or on the basis of another Letter of Credit. If the beneficiary of a Letter of Credit needs to procure raw material or finished goods, etc. before effecting dispatch under the LC, he may approach a bank for issuance of L/C in favour of vendors/suppliers of such raw material/finished goods. The Letter of Credit thus issued by the Bank in favour of the suppliers as stated is called Back to Back Letter of Credit. Capital Account Convertibility Freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange (S S Tarapore 28.02.1997) Capital Account Transactions Which alters the assets or liabilities including contingent liability outside India of persons of resident in India OR assets or liabilities in India of persons resident outside India Examples are:Investment Foreign Currency Loans Transfer of immovable property Guarantees Export/Import of currency notes Loan or OD from Non Resident Loan or OD to Non Resident Current Account Transactions Other than capital account transactions Examples are: Foreign Trade

Services Short term banking facilities Credit facilities in ordinary course of business Interest on loans Net income from investment Living expenses Foreign Travel Medical care

EEFC Account Recipients can retain 50% of inward remittance in Foreign Currency account with AD Foreign currency Loan against EEFC Balance - No No credit facility against the balance Debits to EEFC Account Current account transaction Custom duty Trade related loans by exporter. . Loan transaction to be reported to RBI Factoring
An arrangement between a factor and his client, which includes at least two of the following Finance Maintenance of account Collection of Debt Protection against credit risk

Receivables arising out of sale of goods/services are sold by a firm (client) to the factor (financial institution) as a result of which the title of goods/services represented by the said receivable pass on to the factor.

Forfeiting
It is a form of financing of receivables pertaining to international trade. It denotes the purchase of trade bills/promissory notes by a financial institution without recourse to the seller

Forfeiting Entire value of bill is discounted

Factoring Only partial ranging between 75% to 85% Also includes ledger administration, collection and so on Short term financing deal A factor does not guard against exchange risk

A pure financing arrangement

Spread over 3 to 5 years Charges premium for exchange risk

Bilateral Loans: These loans are given by a single bank to the borrowers. i.e. there are only two parties involved Bank and borrower, hence the name bilateral. These type of loans are normally granted to banks existing customers and are for a smaller amounts to the extent that bank is comfortable to take exposure singly on that borrower. The amount of the loan depends on the individual corporates, their size, standing, performance and financial position etc. Normally the amount of such loans is upto US$ 20-30 million. However, it may be larger also in case Banks are willing to take higher exposure.

Club Deal Loans: In Club deal loans, normally a small group of banks (three/ four) depending on the size of the loan) take the exposure on the borrower. Formally, there is no official arranger in the club deal and the status of all the participating banks is equal, yet, de facto, such deals are usually originated by one bank, who assumes role of senior arranger and may negotiate an extra fee for bridging the information between the borrower and other lenders in the deal. The amount may range from, say, US$ 30 mn to even as high as , say, US$ 500 mn, depending on the appetite/ risk taking capacity on the Individual corporate and also as per the market behaviour to the particular corporate. .

Syndicated Loans:In which minimum four to five banks participate, each funding a certain portion of loan. A syndicate of banks may be formed either before or after loan agreement is signed and identities of the participants may be changed during the life time of the loan subject to transfer assignment and participation provisions in loan agreement.

Floating Rate Notes (FRNs) and Fixed Rate Bond (FRB) Securitized instruments which are aimed at raising resources from Euro markets or US markets by tapping the investor base. These are market traded instruments and hence provide easy liquidity. Rating by internal agencies usually determines pricing level. Foreign Currency Convertible Bonds(FCCB): Bonds issued by an Indian Company expressed in foreign currency, and interest in respect of which is payable in foreign currency. These Bonds can be converted in equity. External Commercial Borrowing(ECB): ECB refers to commercial loans, bank loan, buyers credit, suppliers credit, securitized instruments (Floating Rate Note, Fixed Rate Bond) availed from Non Resident Lender with minimum average maturity 3 years. Buyer's credit Financing of importer by a bank situated outside India.. As FEMA buyers credit period should be less than 3 years.(If it is for period of average maturity of 3 years or more, it will be called ECB(External Commercial Borrowing). For import by Infrastructure Projects, Buyers is allowed up to 5 years. As per RBI directives interest rate on Buyers credit is 6 Months LIBOR +350bps. Supplier's credit A financing arrangement under which the supplier agrees to accept deferred payment terms from the buyer and funds itself by discounting or selling the bills of exchange or promissory notes so created with a bank in its own country. Merchanting trade Indian party purchases goods from one country for ultimate sale to party in another country. The movement of goods takes place from original seller's country directly to final buyer's country without being routed through India Project export Export of engineering gods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are referred as project export Forward Rate Agreement It is contract between the buyer and seller where the buyer commits to pay the seller the contract interest rate on notional sum over the stipulated period. The nature of sum neither borrower nor lent Lock borrowing rate Lock lending rate Speculation on future level of interest rate

Interest rate swap A hedge instrument Helps hedging interest rate B contracted LIBOR based floating rate . He is concerned about rise in interest rate with prospect of high LIBOR rate. Wants to go out of risk. Interested in converting into fixed rate liability. A swap dealer agrees the borrower LIBOR where the borrower can pass on to its banker and expects borrower to pay him in return a fixed rate on the amount of loan liability. Thus the borrower has converted his floating rate liability into fixed rate liability.
FEMA 1999 (w.e.f. 1.06.2000) The friendly FEMA came into effect from 01.06.2000 replacing the stringent and draconian FERA of 1973. The object of FERA was to conserve the foreign exchange resources. The objective of enactment of FEMA, on the other hand, is to facilitate external trade payments for promoting the orderly development and maintenance of foreign exchange market in India.

FEMA 1999 (w.e.f.1.07.2000 replacing the stringent & draconian FERA 1973 To facilitate external trade payment development and maintenance of Forex market in India Provisions are part of FEMA No arrest only civil consequences Maximum penalty 3 times 'Mens rea' culpable mental state dropped
Options

FERA To conserve Forex

Through notifications The power to arrest Max penalty 5 times 'Mens rea'

'Option contract' is a contract under which the buyer has a right but not an obligation to buy or sell a specific quantity of a given asset at a specified price at or before a particular date in future. To acquire this right buyer pays premium to seller (option writer). The potential loss to option seller is unlimited and to the buyer it is limited t premium paid.

Call option Call option provides the buyer of the option with the right to acquire the underlying currency at the strike price on the expiry date. For example when a corporate buys a USD call option at a strike of Rs.51.00, he acquires the right to buy at Rs. 51.00 at the expiry and is protected at Rs.51.00 to buy his USD payables even if INR depreciates above Rs. 51.00. For Option buyer: If Spot USD/INR>51, the option will be exercised. If Spot USD/INR<51, the option will not be exercised as USD can be acquired at a better price from the cash/spot market.

Put option This option gives right but not obligation to sell the underlying assets A put option provides the buyer with the right to deliver the underlying currency at a strike price on the expiry date. For example when a corporate buys a USD option at a strike price of 52.00 against INR, he acquires a right to sell USD at 52.00 against INR on expiry even if INR appreciates above 52.00 For option buyer: If spot USD/INR>52.00 the option will not be exercised as the USD can be sold to acquire INR at a better price in the Cash/Spot market.
If spot USD/INR<52.00, the option will be exercised.

CRM Country risk management (CRM) is meant to ensure that we do not take undue exposure on any country and run the risk of their inability to meet the international payment obligations. Based on the politicoeconomic features, each country is rated by an international rating agency taking into various other factors of convertibility of currency, economic growth, forex reserves and so on. The Central bank of every country fixes the prudential exposure limit on different countries. Banks will fix their own internal exposure limit within their own central bank limits and fixes the limits of exposure. There is possibility that a country will default on its obligations to foreigners and/or on foreign liabilities of its banking system for lack of foreign exchange reserves.Under CRM we fix:(i) Counter party limit for any type of inter bank exposure (ii) Exposure on other counter parties (borrowers) which will be reckoned for country exposure. (iii) Country exposure Before taking any exposure under CRM we get the limits earmarked with SITB.

Special Economic Zone (SEZ)In order to enable hassle free manufacturing and trading activities for export purpose, Special Economic Zones have been set up. The main advantages which accrue to the Units in this Zone are that they are not subjected to any predetermined value additions, Export Obligations, input-output/wastage norms. The Government of India has declared the SEZs as foreign territory for the purpose of duties and taxes. Goods supplied to the SEZs from the domestic tariff area (DTA) will be treated as deemed export and goods bought from SEZ to DTA will be treated as import goods. Certain tax incentives are also given to the units in SEZ area

Export Credit Guarantee Corporation (ECGC)

It is an organization, which assures the banks that, in the event of an exporter failing to discharge his liabilities to the bank, and thereby making the bank incur a loss, it would make good the major portion of the bank's loss. The bank is required to be co-insurer to the extent of remaining loss

Pre-shipment Credit

It means any loan or advance granted or any other credit provided by bank to an exporter for financing the purchase, processing, manufacturing or packing of the goods prior to shipment. Generally a letter of credit opened in favour of the exporter by an overseas buyer or a confirmed and irrevocable order for the export of goods from India or any other evidence form basis of granting packing credit.

RBI guidelines for granting packing credit: Period for granting Packing Credit will depend upon the circumstances of individual case, such as the time required for procuring, manufacturing or processing and shipping the relative goods/rendering of services. As per RBI guidelines banks should charge interest on packing credit upto 270 days at the rate to be decided by the bank within ceiling rate arrived on the basis on BPLR relevant for the entire tenor of the export credit under the category(not exceeding Base Rate + 1.50% pa ) In case where exports do not take place within 360 days from the date of pre shipment advance, such credits will be treated as ECNOS(Export Credit Not Otherwise Specified) and banks may charge interest rate prescribed for ECNOS pre-shipment from the very first day of the advance. In case where packing credit is not extended beyond the original period of sanction and exports take place after the expiry of sanction period but within a period of 360 days from the date of advance, exporter would be eligible for concessional credit only upto the sanctioned period. For the balance period, interest rate prescribed for ECNOS (Base Rate +7%)at pre shipment stage will apply. If exports do not materialize at all, banks should charge on relative packing credit domestic lending rate plus penal rate of interest, if any, to be decided by the banks on the basis of a transparent policy approved by the Board. Packing credit may be liquidated out of proceeds bills drawn for the exported commodities on its purchase, discount, etc, thereby converting pre-shipment credit into post shipment credit Subject to mutual agreement between the exporter and the banker it can also be repaid/prepaid out of balances in EEFC A/c as also from rupee resources of exporters to the extent exports have actually taken place

Running Account Facility(in case of Packing Credit) Packing credit is normally provided on lodgment of LCs or firm export orders. In many cases, the exporters have to procure raw material, manufacture the export product and keep the same ready for

shipment in anticipation of receipt of letters of credit/firm export orders from overseas buyers. Having regard to difficulties being faced by the exporters in availing of adequate pre-shipment credit in such cases, banks have been authorized to extend Pre shipment-Credit Running Account facility in respect of any commodity without insisting on prior lodgment of letters of credit/firm export orders subject to following conditions: To be granted only to those exporters whose track record has been good as also to EOUs/units in EPZs, SEZs Letter of credit/firm export orders should be produced within a reasonable period of time to be decided by the banks. Banks should mark off individual export bills, as when they are received for negotiation/collection against earliest outstanding pre-shipment credit on First in First Out (FIFO) basis. Concessive credit available in respect of individual pre-shipment credit does not go beyond the period of sanction or 360 days from the date of advance, whichever is earlier. Packing credit can also be marked-off with proceeds of export documents against which no packing credit has been drawn by the exporter. If exporter is found to be abusing the facility, the facility should be withdrawn forthwith. In cases where exporters have not complied with the terms and conditions, the advance will attract commercial lending rate ab initio. This facility should not be granted to sub-suppliers.

Post-shipment export credit

Post shipment credit means any loan or advance granted or any other credit provided by bank to an exporter of goods/services from India from the date of extending credit after shipment of goods/rendering services to the date of realization of export proceeds. It can be in the form of (a)Export bills purchase/discounted/negotiated (FBP/FBD)(b)Advance against bills for collection(PSDL)(c)Advance against duty draw back receivable from Government.

RBI norms in granting Post Shipment Credit: Post shipment credit is to be liquidated by the proceeds of export bills received from abroad in respect of goods exported/services rendered. In case of demand bills, the period advance shall be Normal Transit Period(NTP) as specified by FEDAI (Normal Transit Period means the average period normally involved from the date of negotiation/purchase/discount till the receipt of bill proceeds in the Nostro Account of the Bank concerned, as prescribed by FEDAI from time to time) In case of usance bills, credit can be granted for a maximum duration of 365 days from the date of shipment inclusive of NTP and grace period, if any. A ceiling rate of interest has been prescribed by RBI for rupee export credit linked to Base Rate of individual banks available to their domestic borrowers. On demand bills for transit period and

Usance bill for period up to 180 days(upto 365 days in case of Exporters under Gold Card Scheme) interest rate should not exceed Base Rate + 1.50%

PCFC(Packing Credit in Foreign Currency) With a view to making credit available to exporters at internationally competitive rates, banks have been permitted to extend pre-shipment credit in Foreign Currency to exporters for domestic and imported inputs of exported goods at LIBOR related rates of interest. The facility may be extended in one of the convertible currencies viz. USD, GBP, JPY, EURO, etc. Interest is collected at monthly intervals against sale of foreign currency Maximum period of credit is 360 days. If no export takes place within 360 days, the PCFC will be adjusted at TT Selling rate of the currency concerned. Can be liquidated out of proceeds of export documents on their submission for discounting/purchase. . Up to 180 days rate of interest should not exceed 350 basis points over six months LIBOR. Beyond 180 days to 360 days Rate of initial period of 180 days prevailing at the time of extension plus 200 basis points.

Post-shipment in Foreign Currency(PSFC) PCFC is a pre-shipment credit. Once the shipment is ready the exporter will give the documents to the Bank and the bill will be purchased by the bank by giving advance in Foreign Currency. With this amount outstanding PCFC will be adjusted. In case no PCFC has been given the rupee equivalent will be credited to account of Exporter. Interest in PSFC will be charged as under: On demand bill for transit period Not exceeding 350 basis points over six months LIBOR On usance bills upto 6 months from the date of shipment Not exceeding 350 basis points over six months LIBOR(The interest will be for total period comprising usance period of export bills, transit period as specified by FEDAI and grace period where ever applicable) Export bills realized after due date but upto date of crystallization Rate above plus 200 basis points Interest for period other than mentioned above is deregulated and banks are free to decide interest, keeping in view the BPLR and spread guidelines..

Crystallization of Foreign Currency Export Bill

As per FEDAI guidelines any Foreign Currency overdue purchased bill which is outstanding beyond 30 days after expiry of Normal Transit Period in case of demand bills and 30 days after notional due date in case of Usance bill should be converted into Rupee Liability. Guidelines formulated by our bank are as under:-

1. To crystallize the overdue export bill on 30th day after expiry of the normal transit period in case of unpaid demand bills and on 30th day after the notional due date in case of unpaid usance bills. 2. To crystallize on any day between due date to 30th day if specific request is received from the exporter. 3. To recover or pass on the exchange difference arising out of crystallization of export bills from/to the customer as the case may be. 4. Exchange benefit arising out of crystallization should not be credited to the account of the exporter. Instead it should be adjusted against the respective outstanding overdue export bills.

Gold Card Scheme for Exporters

The Gold Card Schemed envisages certain additional benefits based on the performance record of exporters. The Gold Card Holder enjoys simpler and more efficient credit delivery mechanism in recognition of his good track record. The Gold Card is issued to creditworthy exporters with good track record. The features are:-

1. All exporters having good track record and credit worthiness with minimum credit rating of CR1 to CR 6 2. The account should be Standard continuously for three years and should not be in the caution list of ECGC or RBI. 3. Export firms making losses for the past three years or having overdue export bills in excess of 10% of the current years turnover are not eligible. 4. Based on usual appraisal of the credit needs for export appropriate limits will be sanctioned for a period of three years subject to annual review of the account. 5. A stand by limit of not less than 20% of the assessed limit may be additionally granted for facilitating urgent credit needs for executing sudden orders. 6. Norms for inventory may be relaxed in case of unanticipated orders taking into account the size and nature of the export order. 7. Rate of interest - Base Rate plus 0.75% ( for account with credit rating CR 1 to CR 3) and Base Rate plus 1% (for account with credit rating CR 4 to CR 6) in case of Rupee Export Credit (In case of Pre Shipment Credit upto 270 days and in case of Post Shipment upto 365days). . 8. 10% concession is given to card holders in commission and exchange. 9. The card is issued for 3 years and is renewed for a further period of 3 years unless any adverse/irregularities are noticed, subject to annual review of the account. 10. Preference will be given for grant of PCFC

11. The loan application will be processed within 25 days (fresh application), 15 days (renewal of limit) and 7 days(sanction of ad hoc) 12. Security norms may be relaxed based on credit worthiness and track record of the exporter eligible for Gold Card. 13. The premium under Export Credit Insurance Cover for Banks(WT-PC) is to be borne by Bank

Export Credit Guarantee Corporation (ECGC)

It is an organization, which assures the banks that, in the event of an exporter failing to discharge his liabilities to the bank, and thereby making the bank incur a loss, it would make good the major portion of the bank's loss. The bank is required to be co-insurer to the extent of remaining loss

To support and strengthen export promotion drive by providing range of credit risk insurance

Risk covered by ECGC -Commercial risk Insolvency Failure to make payment with in 4 months from due date Buyer's failure to accept goods Political risk Restriction by Govt. War, civil war, civil disturbances New import restrictions Diversion of voyage - payment of additional charges Loss accruing outside India - payment not covered by General Insurance Risks not covered: Commercial dispute Causes inherent in the nature of goods Buyer's failure to obtain exchange authorization Insolvency/default of collecting bank or any agent of exporter Exchange rate fluctuation Failure of exporter to fulfill terms of export contract or negligence on his part.

Export Credit Insurance Cover for Banks(Packing Credit- Whole Turnover & Post Shipment Whole Turnover) Our Bank has taken Customised Whole Turnover Packing Credit Guarantee and Whole Turnover Post Shipment Guarantee of Export Credit Guarantee Corporation of India Ltd. Different rate of premium is to be paid based on credit rating of the exporter customer. The premium is payable in advance

The premium is absorbed by Bank for Gold Card Exporters under ECIB(WT-PC) Maximum Liability Packing Credit Rs.600 crore, Post Shipment Rs.500 crore per year. Percentage of cover Packing Credit- Losses up to Rs.1599.78 lacs -75%, Beyond Rs.1599.78 lacs 65%.Post shipment For Policy Holder -90%, Non Policy Holder 60% In case of Packing Credit granted to Small Scale Exporters (Annual Export Turnover not exceeding Rs.50 lacs) the cover available will be 90% Limits to be advised to ECGC within 30 days from the date of sanction A/c already in default not covered
Specific Approval List Requires prior approval of ECGC Restricted cover countries (RCC) prior approval of ECGC Accounts which are classified as new are covered to the extent of Discretionary limit of Rs. 100 lacs. Up to this amount prior approval of ECGC is not required. For any amount in excess of this limit prior approval of ECGC is required. Accounts classified as substandard, Bad and doubtful require prior approval of ECGC is required. The Branch has to seek the approval of ECGC when the account has slipped from Standard status to Sub standard status or other inferior status Limit sanctioned to be reported to ECGC within 30 days from sanction date default report - within one month from the date of recalling advance or within 4 months from due date/extended due date whichever is earlier. Payment of premium to be stopped on reporting default. Claim to be lodged within 6 months from the date of reporting of default.

Liberalized Remittance Scheme The Reserve Bank of India had announced a Liberalized Remittance Scheme (the Scheme) in February 2004 as a step towards further simplification and liberalization of the foreign exchange facilities available to resident individuals. As per the Scheme, resident individuals may remit up to USD 200,000 per financial year for any permitted capital and current account transactions. The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment, etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can be also be used for these purposes. However, gift and donation remittances cannot be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 200,000 per financial year under the Scheme.