Role Of Exim Bank Growth Of Foreign Trade Economics Essay

Role Of Exim coin cuss Growth Of foreign shift Economics EssayIntroduction of IndustryAs we know that the ministry of commerce and Industry is the just about consequenceant organ concerned with the promotion and regulation of foreign make out in India. The Ministry has an elabo value organizational garb up to look aft(prenominal) the unhomogeneous aspects of trade. Its two important offices concerned with trade are the Directorate General of abroad Trade (DGFT) and the Directorate General of Commercial Intelligence and Statistics (DGCIS). DGFT is responsible for implementing the Foreign Trade Policy/Exim Policy with the main objective of promoting Indian tradeings. It overly issues licenses to tradeers and monitors their corresponding obligations through a network of regional offices. DGCIS is entrusted with the work of collecting, compiling and produce/ disseminating trade statistics and various types of commercialised instruction required by the policy makers, rese archers, importers, exporters, traders as well as altogether oversea buyers.Directorate of Industries Commerce is charged with the responsibilities of facilitating industrial growth in the country by providing funding for Infrastructure in the make of industrial estates, incentives for capital enthronization and other subsidies. It provides the entrepreneur, power, land and water, besides bureau of fiscal incentives.Foreign trade has played a crucial role in Indias economy growth. The composition and direction of Indias foreign trade has undergone substantial changes, particularly, after the liberalization process which began in the early 1990s. Our major(ip) exports now includes manufacturing goods such(prenominal) as Engineering Goods, Petroleum Products, Chemicals Related Products, Gems Jewellery, Textiles, electronic Goods, etc. which constitute over 80 per cent of our export basket. On the other hand, major import items constitute capital goods and intermediates which non only support the manufacturing welkin but also supply raw-materials for the export oriented units. Over the years, Indias trade with countries of Asia ASEAN and Africa has gone up substantially. Apart from that, India is now a major player in global affair system and all the major sectors of Indian economy are linked to world outside either directly or indirectly through supranational trade.Introduction of TopicExim desire (India)Exim depository financial institution (full name The trade- bit Bank of India) is an Indian government-owned fiscal institution for the public sector created by an Act of the Parliament of India the exportation-Import Bank of India Act 1981. Exim Bank is managed by a Board of Directors, which has representatives from the political sympathies, Reserve Bank of India, Export Credit Guarantee Corporation of India (ECGC), a financial institution, public sector banks, and the business community. The Banks functions are segmented into several operati ng groups including Corporate Banking company which handles a variety of financing programmes for Export point Units (eous), Importers, and abroad coronation funds by Indian companies.Project pay / Trade Finance Group handles the entire range of export recognize function such as suppliers credit, pre-shipment credit, buyers credit, finance for export of projects consultancy services, guarantees, forfeiting, etc. Lines of Credit Group Lines of Credit (LOC) is a financing mechanism and export transactions in the agricultural sector for financing. Small and Medium Enterprises Group to the specific financing requirements of export oriented smes. The group handles credit proposals from smes under various lending programmes of the Bank. Export Services Group offers variety of advisory and value-added information services aimed at investment promotion Fee based Export Marketing Services Bank offers assistance to Corporate Affairs.Service CategoryGovernment to Business (G2B)Service TitleExport Import Data BankService State/MinistryMinistry of Commerce and IndustryService DescriptionOne pass on get the Trade statistics both import and export detailsService LanguageEnglishMinister of Commerce and IndustryShri Anand SharmaIt is set up by an act of parliament in September 1981Wholly owned by government of indiaCommenced operations in march 1982Apex financial institutionObjectives for providing financial assistance to exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the countrys international trade shall act on business principles with due regard to public interestExim Policy FacilitiesThe existing export promotion schemes such as Export Promotion ceiling Goods Scheme, Duty Exemption and Remission Scheme, Scheme for Gems and Jewellery Exports, EHTP and SEZ Schemes have been further strengthened and simplified. The various relaxations provided under the in a higher place Schemes are given over belowExport Promotion Capital Goods Scheme (EPCG)Duty Exemption and Remission SchemeGems and Jewellery ExportsSpecial Economic ZonesElectronic Hardware Technology ParksOther FacilitiesChemicals and PharmaceuticalsProjectsStrategic Package for Status HoldersNeutralizing high fuel costsDiversification of marketsNorth easterlyern States, Sikkim and Jammu KashmirRe-location of industriesReduction in transaction time costBANKS FUNCTIONSThe Banks functions are segmented into several operating groups includingCorporate Banking Group which handles a variety of financing programmes for Export Oriented Units (EOUs), Importers, and overseas investment by Indian companies. Project Finance / Trade Finance Group handles the entire range of export credit services such as suppliers credit, pre-shipment credit, buyers credit, finance for export of projects consultancy services, guarantees, forfaiti ng etc.Lines of Credit Group Lines of Credit (LOC) is a financing mechanism that provides a safe mode of non-recourse financing option to Indian exporters, especially to SMEs, and serves as an effective market door counsel tool.Agriculture Business Group, to spearhead the initiative to promote and support Agri-exports. The Group handles projects and export transactions in the agricultural sector for financing.Small and Medium Enterprises Group to the specific financing requirements of export oriented SMEs. The group handles credit proposals from SMEs under various lending programmes of the Bank.Export Services Group offers variety of advisory and value-added information services aimed at investment promotion Fee based Export Marketing Services Bank offers assistance to Indian companies, to enable them establish their wares in overseas markets.Besides these, the Support Services groups, which include Research Planning, Corporate Finance, Loan Recovery, Internal Audit, counsel Inf ormation Services, Information Technology, Legal, Human Resources Management and Corporate affairs.RESEARCH METHODOLOGYGenerally research is considered as an endeavor to arrive at the answer to gifted and practical problem through the application of scientific method to the acknowledge universe. It is movement from known to unknown.My research based on the secondary resources. The data taken from the different websites (Indian govt.,Exim bank policy, Foreign trade).Review of LiteratureIndias export performance /April-august, 2004-05/ Nimmala Amharic- In this article that writer have a research on the government issue of Indias export performance. And he found in his research that Indians foreign trade are increasing year by year in both find of export and import. But total trade deficit is a big problem of Indian economy. And he also find in their research that well-nigh of the sector has grew in terms of export such as Automobiles, Gems Jewellery, and Textiles.OBJECTIVESTo kn ow the Role of EXIM Bank in the growth of Foreign Trade.To know the various services provided by the EXIM banks which support in foreign tradeData And FactsTotal Trade of Exports and Imports over the Years in Crore RupeesYearExportsImportsTotal TradeTrade Deficit1990-91325584319375751-106351991-92440424785191893-38091992-935368863375117063-96871993-946975173101142852-33501994-958267489971172645-72971995-96106353122678229031-163251996-97118817138920257737-201031997-98130101154176284277-240751998-99139753178332318085-385791999-2000159561215236374797-556752000-01209018230873434444-273022001-02255137245200454218-361822002-03293367297206552343-420692003-04375340359108652475-657412004-05375340501065876405-1257252005-064564836350131091496-1785302006-075717798405061412286-2687272007-0865586410123121668176-3564482008-09(P)76693513855032072338-538568External Trade with Other Countries during 2007-08 and 2008-09RegionExports (April-Feb)Imports (April-Feb)2007-082008-09(P)2007-08(P)2008-09(P)1. Europe1,33,1511,65,9251,75,3352,23,8131.1 EU countries 271,23,2191,55,2661,27,3151,61,5931.2 Other WE countries9,55310,12347,88162,1151.3 East Europe3795361381062. Africa38,06244,92251,51960,1512.1 Southern Africa13,05812,39317,86829,3772.2 West Africa12,85113,20435,61448,5142.3 Central Africa9341,3721896322.4 East Africa15,12618,6871,1581,1583. America98,9001,14,96679,7801,21,3813.1 North America79,88089,47656,28180,8253.2 Latin America10,01945,49023,49840,5564. Asia and Asean2,96,2873,57,9825,43,5517,39,6224.1 East Asia5,0706,71930,78340,2304.2 ASEAN56,66375,35782,2891,06,4184.3 WANA1,08,9201,44,0392,58,6453,56,7164.4 NE Asia92,97496,8461,64,0302,28,7464.5 South Asia32,65935,0207,8057,5135. CIS Baltics6,1017,62314,23828,7935.1 cars Countries8261,0474191,1575.2 Other CIS Countries5,2756,57713,81827,6366. Unspecified Region1,4824,3462,6664,710Total5,77,8896,96,4988,70,39911,98,360EXPORT citationSEXIM LINES OF CREDIT (LOC)The main role of Exim bank in foreign trade is to give cred it facilities. Exim Bank extends Lines of Credit (LOC) to overseas financial institutions, regional development banks, milkweed butterfly governments and other entities overseas, to enable buyers in those countries, to import goods and services from India on deferred credit terms. The Indian exporters can obtain payment of worthy value from Exim Bank, without recourse to them, against talks of shipping documents. LOC is a financing mechanism that provides a safe mode of non-recourse financing option to Indian exporters, especially to SMEs, and serves as an effective market entry tool. Exim Bank extends LOC, on its own, as well as, at the behest of Government of India. Exim Bank offers the following Export Credit facilities, which can be availed of by Indian companies, commercial banks and overseas entitiesFor Indian Companies executing tightens overseasfor commercial BanksOther Facilities for Indian CompaniesFor Overseas EntitiesFor Indian Companies executing contracts overseasP re-shipment creditExim Banks Pre-shipment Credit facility, in Indian Rupees and foreign currency, provides access to finance at the manufacturing stage enabling exporters to purchase raw materials and other inputs.Suppliers CreditThis facility enables Indian exporters to extend term credit to importers (overseas) of eligible goods at the post-shipment stage.For Project ExportersIndian project exporters incur Rupee expenditure while executing overseas project export contracts i.e. Costs of mobilization/acquisition of materials, personnel and equipment etc. Exim Banks facility helps them meet these expenses.For Exporters of Consultancy and Technological ServicesExim Bank offers a special credit facility to Indian exporters of consultancy and technology services, so that they can, in turn, extend term credit to overseas importersGuarantee FacilitiesIndian companies can avail of these to furnish requisite guarantees to further execution of export contracts and import transactions.How does it work?Exim Bank signs LOC Agreement with overseas Borrower Institution (Borrower) and announces the availability of LOC for utilization, when the Agreement becomes effective.Exporter checks with Exim Bank, available amount under the LOC and quantum of service fee account payable to Exim Bank, if any, and negotiates contract with Importer.Importer approaches the Borrower for plaudit of the contract.Borrower appraises the proposal. If satisfied, approves the contract and refers to Exim Bank for concurrence for inclusion of contract for being financed under the LOC.Exim Bank accords grace to the contract, if in conformity with the terms of LOC. Exim Bank conveys contract approval to the exporter and the Borrower.The Importer arranges remittance of advance payment to the Exporter and also opening of a Letter of Credit, which states that the contract is covered under Exim Banks LOC to the Borrower and reimbursement allow be by Exim Bank for the bailable Value of Credit, upon compliance with stipulated conditions therein.Exporter executes the contract/ships the goods/provides services.Exim Bank/commercial bank in India, designated as the Negotiating Bank negotiates shipping documents and pays the exporter.Exim Bank reimburses the Negotiating Bank, on receipt of valid call for and service fee, as applicable, by debit to the LOC account of the Borrower.Borrower repays Exim Bank on due dates.Exim Bank signs agreement with Borrower and announces when effective.Exporter checks procedures and service fee payable, if any, with Exim Bank and negotiates contract with Importer.Importer consults Borrower and signs contract with exporter.Borrower approves contract.Exim Bank approves contract and advises Borrower and also exporter and his negotiating bank, in India.Importer establishes L/C in favor of Exporter.Exporter ships goods.Exim Bank/commercial bank negotiates shipping documents and pays exporter.EXIM Bank reimburses commercial bank on receipt of claim and de bits LOC account of the Borrower.Borrower repays EXIM Bank on due dates.Lending create by mental act for Export Oriented UnitsTo create and enhance export capabilities of Indian companies.it provide them Term loans in Indian rupees/ foreign currency, Deferred Payment Guarantee for import of capital goods. And in place of that they charged negligible Banks lending rate and 1% of loan amount payable upfront as service charged they provide this facility to following eligible companyUnits set up/proposed to be set up in Export Processing ZonesUnits under the deoxycytidine monophosphate% Export Oriented Units SchemeUnits importing capital goods under Export Promotion Capital Goods SchemeUnits undertaking expansion /modernization /up gradation /diversification programs of existing export oriented units with export orientation of minimum 10% or sales of Rs.5 crores per annum whichever is lowerLending Programme for Overseas Joint Ventures/Wholly Owned Subsidiaries by Indian Companies-To finance by way of impartiality loan to Indian companies for setting up of overseas joint ventures/ wholly owned subsidiariesEligible CompaniesAny Indian promoter making equity investment in an existing company or a new project overseas with the requisite approval for such investment from the Reserve Bank of India (RBI)/Government of India as also from the government and other concerned authorities in the host countryThe total value of the investment by the Indian company does not fall US $ 15 million in respect of Indian investment in SAARC countries and Myanmar total value of investment does not exceed US $ 30 million and in respect of Indian Rupee investment in Nepal and Bhutan, total value of investment does not exceed Rs.120 croresThe amount of investment is up to 25% of annual average export earnings of the company in the preceding three yearsThe amount of investment is repatriated in fully by way of dividends, royalty, technological service fees, etc. Within a period of fiv e years.Refinance to Commercial BanksExim Bank provides 100% refinance to commercial banks in respect of rupee term loans extended by them to Indian Promoter Company for equity contribution in overseas JV/WOS. As per prevailing RBI guidelines, commercial banks can consider loan for equity investment only under Exim Banks Refinance scheme.Equity Investment in Indian Ventures AbroadTo catalyze overseas investment by Indian companies to enhance visibility of Indian overseas ventures.Quantum of Exim Banks equity participationUpton 25% of equity capital of the jvs involving Indian foreign companiesUpton 50% of equity capital in case of wholly owned subsidiaries of Indian companiesSubject to a roof of US $ 5 MN per proposal and remove subject to RBIInvestment CriteriaWhile considering equity investment with Indian companies business in India, weightage will be giving to the followingBackground and track record of Indian and foreign promotersSynergy of overseas operations with business i n IndiaFinancial viability and technical feasibilityReturn on Exims investmentBenefits to India in terms of trade enhancement, technology transfer, and foreign exchange earnings etc.Spin off benefits such as brand marketing and penetration of new markets will also be consideredAsian Countries Investment Partners Programme (ACIP)To promote joint ventures in India between Indian companies companies from Asian countries through four facilities that address different stages of the project cycle. ACIP seeks to catalyze investment flows into India by creation of Joint Ventures in India between Indian companies and companies from East Asian countries. ACIP is proposed to be a funding instrument providing finance at various stages of a Joint Venture project cycle that is to say Sector study, project identification, feasibility study, prototype development, setting up project and technical, managerial assistance.Export Marketing Finance ProgrammeTo create and enhance export capabilities an d international competitiveness of Indian companies. Under the lending programme for Export Marketing Finance, the Bank addresses the term finance requirements for a structural and strategic export marketing and development effort of Indian companiesEligible CompaniesCompany who have a strategic international marketing visualise.Company should have established front in the house servant marketCompany should have satisfactory financials.Interest RatesRupee Term Loans Linked to Exim Banks Minimum Lending RateForeign Currency Term Loans At floating or fixed interest ratesAdditionally interest tax is applicable will be payableService Fee1% of loan amount sanctioned, payable upfront non-refundableExport Product Development ProgrammeTo support systematic export product development plans with focus on industrialized marketsEligible CompaniesEstablished exporting enterprises with product development programme dedicated to exportThe company must also have an established track record and satisfactory financialsProgramme for backing Export Vendor Development (EVD)ObjectiveTo finance export strategic marketer development plans for export companies with a view to enhancing exports through creation, strengthening of backward linkages with vendors.Eligible CompaniesExport companies and Trading HousesManufacturer-exporters with satisfactory track record and financials ,li Companies with strategic plan for vendor development for exports are eligible to seek finance under this programmeCompanies purchasing from vendors finished, semi-finished or intermediate products with the exporter adding value to the product in the form of further processing or marketing themInterest RateInterest Rate linked to Banks Minimum Lending RateSoft loan at 7.5% p.a. (subject to change) subject to maximum of Rs.50 lakhsRepayment PeriodUpton 7 yearsProgramme for Export FacilitationExim Bank offers term finance and non-funded facilities to Indian corporates to create infrastructure facilities to facilitate Indias international trade thereby enhance their export capability.Foreign Currency Pre-Shipment Credit (FCPC)Under this programme, short-term foreign currency finance is available to eligible exporters for financing inputs for export production such as raw materials, components and consumables. The finance is repayable in foreign currency from proceeds of the relative exports.FCPC programme represents other funding source to the exporter for expanding export volumes, particularly of manufactured and value added goods. It eliminates two-way exchange conversion costs and exchange risk, thus enhancing export competitiveness. FCPC can be a cost effective funding source as compared to rupee export credit as well as overseas suppliers credit depending on market conditions for loans under FCPC. As far as commercial banks are concerned, loans availed of from Exim Bank are exempt from Cash Reserve symmetry, Statutory Liquidity Ratio and Incremental Credit-Deposit Ratio requ irements.Eligible BorrowersExporting companiesCommercial Banks for on lending to exporting customersWorking Capital Term Loan Programme for Export Oriented Units (WCTL)WCTL programme seeks to create, enhance export capabilities of Indian companies. Under the Programme, the Bank addresses the working capital (loan component) requirements of export oriented units.Eligible CompaniesUnits set up/proposed to be set up in Export Processing ZonesUnits under the 100% Export Oriented Units SchemeUnits importing capital goods under Export Promotion Capital Goods SchemeUnits undertaking expansion /modernization /up gradation/diversification programs of existing export oriented units with export orientation of 10% of sales or export sales of Rs.5 crores per annum whichever is lower.Bulk Import Finance Programme (BIF)In this service they provide short term working capital finance to manufacturing companies to exorbitance consumable inputs. Under the programme, BIF is offered for import of eligi ble items with a minimum order size of Rs.1 crores .And they provided the Short term loans in Indian Rupees and/or Foreign currency.Programme for Financing Research DevelopmentTo provide integrated financing for Research Development activities by export oriented companiesExim Banks finance available toFinancially good companies with a minimum export orientation of 20% of their net sales for the following eligible activities and eligible expenditure.Eligible RD Activities Eligible RD ExpenditureDevelopment and commercialization of new product / process / application.Significant improvements in existing product / process / application/ design.Development of technology or design to satisfy domestic or international environment, technical requirements/ standards, specifications.Setting up, expansion of pilot plants.FINANCE FOR EXPORT ORIENTED UNITSTerm FinanceProject FinanceEquipment FinanceImport of Technology Related ServicesDomestic Acquisitions of businesses/companies/brandsExpo rt Product Development/ Research DevelopmentGeneral Corporate FinanceWorking Capital Finance (For Exporting Companies)FundedWorking Capital Term Loans Long Term Working Capital up to 5 yearsExport Bills DiscountingExport Packing CreditCash full stop financingNon-FundedLetter of Credit LimitsGuarantee LimitsExport FinancePre-shipment CreditPost Shipment CreditBuyers CreditSuppliers Credit including deferred payment creditBills DiscountingExport Receivables FinancingWarehousing FinanceExport Lines of Credit (Non-recourse finance)Data analysisAs we know that Indias total external trade (exports plus imports including re-exports) in the year 1990-91 stood at Rs. 91,893 crore. Since then, this has witnessed continuous increase with occasional downturns. During 2008-09 the value of Indias external trade reached Rs. 20, 72,438 crore. A statement indicating Indias total export, import, total value of foreign trade and balance of trade from the year 1991-92 to 2008-09, in rupee terms, is g iven in table above.Indias exports during 2008-09 reached a take of Rs. 7, 66,935 crore registering a growth of 16.9 per cent. In US $ terms, exports reached a level of US$168.7 billion, registering a growth of 3.5 per cent as compared to a growth of 29.1 per cent during the previous year. The growth of exports during the year has exhibited a significant slow-down from September 2008 onwards. While, during the first fractional of the year 2008-09, April-September, exports change magnitude by 31.3 per cent with almost all the major commodity groups, except increased by 31.3 per cent with almost all the major commodity groups, except marine products, handicrafts and carpets, recording significant growth. In the second half of the year 2008-09, October-March, exports recorded a decline of (-) 19.2 per cent with almost all the commodity groups recording significant negative growth.During 2008-09 imports increased to Rs. 13,05,503 from the level of Rs. 10,12,312 crore in 2007-08 regis tering growth of 29.0 per cent in rupee terms. In US $ terms, imports reached a level of US $ 287.8 billion in 2008-09 registering a growth of 14.4 per cent. Oil imports were valued at US $ 93.2 billion, which was higher by 16.9 per cent over the previous year. Non-Oil imports increased to US $ 194.6 billion, which was higher by 13.2 per cent. Items which registered significant growth are Pearl, Precious Semi-Precious Stones, Crude Manufactured Fertilizer, Coal, Inorganic Chemicals, Project Goods, etc. Import of Gold and hold Equipment registered significant decline.The Trade deficit during 2008-09 increased to Rs. (-) 538568 crore as against Rs. (-) 356449 crore during 2007-08. In US $ terms, trade deficit increased to US 119.1 billion from a level of US 88.5 billion during 2007-08.India has trading relations with all the major trading blocks and geographical regions of the world. Region and sub region-wide spread of Indias during 2007-08 and 2008-09 as per data available up t o 2008-09 (April-February) is given in table 7.2. During the period 2008-09 (April-February), the share of Asia and ASEAN region comprising South Asia, East Asia, and Mid-Eastern and Gulf countries accounted for 51.4 per cent of Indias total exports. The share of Europe and America in Indias exports stood at 23.8 per cent and 16.5 per cent respectively of which EU countries (27) comprises 22.3 per cent. During the period, USA (12.0 per cent), has been the most important country of export destination following by United Arab Emirates (10.8 per cent), China (5.1 per cent), capital of Singapore (4.7 per cent), Netherlands (3.7 per cent), Hong Kong (3.7 per cent), U.K. (3.6 per cent), Germany (3.4 per cent), Saudi Arabia (3.0 per cent), Belgium (2.6 per cent) and Italy (2.2 per cent).Asia and ASEAN accounted for 61.7 per cent of Indias total imports during the period followed by Europe (18.7 per cent) and America (10.1 per cent). Among individual countries the share of China stood highe st at (10.7 per cent) followed by Saudi Arabia (7.1 per cent), UAE (6.4 per cent) and USA (6.0 per cent), Iran (4.3 percent), Switzerland (4.2 per cent), Germany (3.6 per cent), capital of Kuwait (3.4 per cent), Nigeria (3.2 per cent), and Iraq (2.8 per cent)ConclusionAs we describe above the various functions and role of the Exim Bank. Than we can say that it handles a variety of financing programs for Export Oriented Units (EOUs), Importers, and overseas investment