1. Credit sanction terms: Bank would deiscount only those bills whose buyers are guaranteed by ECGC via Exporters policy with ECGC and bank would also obtain Post shipment ECGC policy of its own.
2. Exporters covers his buyers by ECGC and bank obtains ECGC cover
3. One buyer defaults for 50% value of discounted bill. Exporter gives extention of due date letter to bank and also files claim with ECGC thru the bank. ECGC would take 8 / 12 months to settle / decline the exporters claim. ECGC pays claim upto 90% of default value.
4. RBI guidelines state that any advance guaranteed by Central govt, even if overdue, should not be classified as NPA till govt repudies the claim. ECGC is a Central Govt Undertaking and RBI circular states that guarantees given by ECGC should by treated as guarantees by a sovereign entity.
5. Bank has not debited the expoirters CC / Packing credit account for default value.
6. Exporter has several Machinery Term Loan, Packing credit and cash credit facilities.
Can the export bill discounting account be classifed as NPA till ECGC settles / declines the claim. Do other accounts also become NPA?? Bank wants to classfy all accounts as NPA. Please advise.
CAclubindia
