‘Pre-shipment’ also referred as ‘Packing Credit’ means:

    • Any loan or advance granted, or any other credit provided by a bank to an exporter either for financing the purchase, processing, manufacturing or packing of goods prior to shipment or for working capital expenses towards rendering of services
    • On the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods / services from India or any other evidence of an order for export from India having been placed on the exporter or some other person, unless lodgement of export orders or letter of credit with the bank has been waived.

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  • forfaiting


    Forfaiting is a type of export financing in which a forfaitor (usually a bank or a finance company) purchases freely-negotiable instruments (such as unconditionally-guaranteed letters of credit and ‘to order’ bills of exchange) at a discount from an exporter. This arrangement is Without Recourse to the exporter who is relieved of all risks, but is liable for the payment’s legal validity and any defect resulting from the underlying transaction.

    Unlike factoring, forfaiting is available for 100 percent of the payment amount, but is normally for relatively larger sums and for longer maturity dates ranging from periods as short as 180 days and as long as 3-5 years. It is a type of ‘off balance sheet financing.’


    Did you know that – “The terms forfaiting originated from an old French word ‘forfait’, which means to surrender one’s right on something, to someone else. Here the right to the receivable is surrendered by the exporter to the forfaitor”!!!


    What is Export Credit / Finance?
    Export credit is the finance extended to the exporters, either in INR or in Foreign currency. It is bifurcated into
    (i) Pre-shipment finance and (ii) Post-shipment Finance.

    History of Export Credit
    The Reserve Bank of India first introduced the export credit scheme of Export Financing in 1967. The scheme is intended to make short-term working capital finance available to exporters at internationally comparable interest rates.

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