Role of Banks in Export Financing-Post-Shipment Finance - Management Duniya

Role of Banks in Export Financing-Post-Shipment Finance

This is provided by the bank to the exporter of goods from India from the date of shipment of goods to the date of realization of export proceeds. The advance that is made against shipping documents is called Post-Shipment Finance. The following are the ways of availing Post-shipment finance:

• Advances against Bills discounted/purchased/ negotiated and bills for collection

Banks meet exchange control requirements of seeing that all documents relating to export of goods from India must be passed through the medium of a bank authorized to deal in foreign exchange.

When banks handle export bills on collection basis, they simply act as agents. When the bank decides to extend accommodation against bills for collection, a certain percentage of the bill amount would be granted as an advance depending on the bank’s assessment of the exporter and the drawee . The bank can also purchase export bills drawn in Indian Rupees or in foreign currencies (Post Shipment Foreign Loan – PSFL) after verifying the confirmed export order.

• Advance against claims for Export Incentives

Export incentives are provided by the Govt. of India and other government agencies in order to promote export trade as it helps to earn foreign exchange. The following are some of the incentives which the exporters can claim:

• Refund of Excise and Customs duty


• Cash Subsidy


• Reimbursement of the difference in prices of international and domestic commodities such as steel

Claims are to be registered after the goods are shipped.  As the claim verification process is time consuming, a considerable portion of working capital gets locked for the exporter concerned. Banks therefore advance post-shipment finance to these exporters against such claims and would secure these advances in the form of hypothecation of goods, receivables outstanding etc. These claims are, as is the general practice, routed through the financing bank for registering with the concerned authorities, so that payments are received directly by the bank.

Tags: Banks, Export, finance, Financing, Industry, Post, Postshipment, ROle, shipment
By: Management Duniya