What is post shipment credit?.

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Yogesh Bansal (Querist)
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17 November 2011 Dear Experts,

i want to know that what is post shipment credit with regards to bank and On what items bank create charge regarding this credit. when we can avail this credit?.

Thanks,
Yogesh Bansal.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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17 November 2011 Bansal ji,

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.

Types of Post Shipment Finance

The post shipment finance can be classified as :

1. Export Bills purchased/discounted.
2. Export Bills negotiated
3. Advance against export bills sent on collection basis.
4. Advance against export on consignment basis
5. Advance against undrawn balance on exports
6. Advance against claims of Duty Drawback.

please also Noted :
The features of postshipment finance are:

* Purpose of Finance
Postshipment finance is meant to finance export sales receivable after the date of shipment of goods to the date of realization of exports proceeds. In cases of deemed exports, it is extended to finance receivable against supplies made to designated agencies.
* Basis of Finance
Postshipment finances is provided against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency.
* Types of Finance

Postshipment finance can be secured or unsecured. Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, the finance is normally self liquidating. In that case it involves advance against undrawn balance, and is usually unsecured in nature.
Further, the finance is mostly a funded advance. In few cases, such as financing of project exports, the issue of guarantee (retention money guarantees) is involved and the financing is not funded in nature.
* Quantum of Finance
As a quantum of finance, postshipment finance can be extended up to 100% of the invoice value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance for a price difference can also be extended and the price difference is covered by the government. This type of finance is not extended in case of preshipment stage.
Banks can also finance undrawn balance. In such cases banks are free to stipulate margin requirements as per their usual lending norm.
* Period of Finance
Postshipment finance can be off short terms or long term, depending on the payment terms offered by the exporter to the overseas importer. In case of cash exports, the maximum period allowed for realization of exports proceeds is six months from the date of shipment. Concessive rate of interest is available for a highest period of 180 days, opening from the date of surrender of documents. Usually, the documents need to be submitted within 21days from the date of shipment.

https://www.hdfcbank.com/wholesale/sme/funded_services/export_%20credit/Export_Credit.htm

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