Exporters Working Capital Credit Facilities


Exporters Working Capital Facility


The loans and advances provided to an exporter till the stage of packing of finished goods ready for export is called the packing credit or pre-shipment credit. These are sanctioned against letter of credit or confirmed /irrevocable order or any other evidence of an export order. This working capital finance can be availed in Rupee or Foreign currency loan : PCFC or EPC

Pre shipment credit in foreign currency (PCFC) has LIBOR linked interest rates and these cannot be outstanding for more than 180 days. Thus if the shipment is not done after 360 days of PCFC, the loan is converted to Rupee liability at the prevailing exchange rate. The PCFC is quoted as Libor + Spread. Libor depends on the trade cycle. Since the loan is in foreign currency, there is no need for the exporter to hedge the PCFC.

Export Packing Credit (EPC), exporter is exposed to forex fluctuations as the loan is given in Indian Rupee. This type of credit is priced against the MCLR rates of the banks. The central bank permits banks to offer pre-shipment credit in any of the convertible currencies like USD, Euro, GBP provided funds are available.