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.