IB0018 – Export-Import Finance

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DRIVE-Fall 2014

PROGRAM-MBADS (SEM 4/SEM 6) MBAFLEX/ MBAN2 (SEM 4) PGDIB (SEM 2)

SUBJECT CODE & NAME-IB0018 – Export-Import Finance

BK ID-B1910

CREDIT & MARKS-4 CREDITS, 60 MARKS

Q1. Discuss the importance of exports for India. How do commercial banks assist in exports?

(Importance of exports, Assistance by commercial banks)5,5         

Answer.

Importance of exports

Exports of a country play an important role in the economy. A healthy balance, a sustainable development with trade and foreign exchange reserves to maintain the country's export growth should be a constant and high rate. Exports as a whole affect the industrial environment. To compete internationally, the industry standard for quality products, competitive price, good packaging, etc, which is important for overall industry.

Q2. What is the need for export finance in India? Write a short note on export financing facilities in India.

(Need for export finance, Financing facilities) 5, 5

Answer.

Need for export finance

Export finance refers to financial assistance extended by banks and other financial institutions to businesses for the shipping of products outside a country or region. Export financing enables MSMEs to expand its reach to a global audience. Export financing is a major component of successful export transactions. Exporters need finance for purchasing, processing, packaging and for their day to activities. Banks in every country provide export finance facilities on liberal terms. In India too, all the AD banks provide export finance to exporters under the guidelines provided by RBI. An exporter needs finance at two stages, i.e., before shipment (pre-shipment) and after shipment (post shipment).

Q3. As an exporter, what benefits you can get from Post shipment finance scheme? Discuss the types of post shipment credits.

(Post shipment finance, types) 7, 3

Answer.

Post shipment finance scheme

Post shipment finance may be defined as a loan or advance granted by banks to their exporter clients after the shipment of goods till the date of receipt of payment from overseas buyer or credit opening bank. It is a short term credit provided by banks to exporters to meet their working capital requirements after the shipment of goods. When an exporter has made the shipment and submits his documents to the bank, the bank adjusts the packing credit granted earlier and extends the remaining amount of export bill to exporter. The amount of packing credit given earlier is also converted into post shipment finance.

Q4. Write short notes on:

a) Letter of credit

b Types of foreign exchange risk exposure

Answer.

a) Letter of credit

A letter of credit is an obligation of the bank that opens the letter of credit (the issuing bank) to pay the agreed amount to the seller on behalf of the buyer, upon receipt of the documents specified in the letter of credit. A written commitment to pay, by a buyer's or importer's bank (called the issuing bank) to the seller's or exporter's bank (called the accepting bank, negotiating bank, or paying bank).

Q5. What is forex market? Explain the unique features of forex market.

(Meaning features)

Answer.

The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. In terms of volume of trading, it is by far the largest market in the world. The main participants in this market are the larger international banks. Financial centres around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.

Q6. What is custom duty? Discuss its types.

(Meaning, types) 4, 6

Answer.

Custom duty

A tax levied on imports (and, sometimes, on exports) by the customs authorities of a country to raise state revenue, and/or to protect domestic industries from more efficient or predatory competitors from abroad.

Customs duty is based generally on the value of goods or upon the weight, dimensions, or some oth

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