INDEX Serial No. Topic Page No. 1 INTRODUCTION 1 2 OBJECTIVES OF EXIM BANK 2 3 EXIM BANK ACT 3 4 OFFICES 4 5 GENERAL GUIDELINES ON EXIM LINES OF CREDIT (LOCS) 6 6 DIFFERENT LENDING PROGRAMMES 9 7 FINANCE 13 8 SMALL AND MEDIUM ENTERPRISES FINANCE 16 9 PERFORMANCE 20 10 BIBLIOGRAPHY 28 INTRODUCTION 1. The Export-Import Bank of India (Exim Bank) is a public sector financial institution created by an Act of Parliament, the Export-import Bank of India Act, 1981. 2. The business of Exim Bank is to finance Indian exports that lead to continuity of foreign exchange for India. 3. The Bank's primary objective is to develop commercially viable relationships with a target set of externally oriented companies by offering them a comprehensive range of products and services, aimed at enhancing their internationalization efforts. 4. There are apex institutions in the country, which deal with major economic activities, viz. industry, agriculture and foreign trade. 5. The Industrial Development Bank of India extends term industrial loans; the National Bank for Agricultural loans; and the Exim Bank extends term loans for foreign trade. 6. All these institutions are wholesale banks. They, therefore work closely with commercial banks and other state level financial institutions that operate the retail banking system in the country. OBJECTIVES OF EXIM BANK The Export-Import Bank of India was established “for providing financial assistance to exporters and importers for functioning as the principle institution for co-ordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade……” :The Export-Import Bank of India Act, 1981 EXIM BANK ACT • Completed 23 years of operations in March 2005 • Set up by an Act of Parliament in September 1981 • Commenced operations in March 1982 • Wholly owned by the Government of India • Export-Import Bank of India was set up for the purpose of financing, facilitating and promoting foreign trade in India • Exim is the principal financial institution in the country for co-ordinating working of institutions engaged in financing exports and imports OFFICES • Head office -Mumbai • Domestic Offices : Ahmedabad, Bangalore, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai, New Delhi, Pune. Overseas Offices: Budapest, Johannesburg, London, Singapore, Washington DC. GENERAL GUIDELINES ON EXIM LINES OF CREDIT (LOCS) Introduction : Exim Bank extends Lines of Credit (LOCs) to overseas financial institutions, regional development banks, sovereign 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 eligible value from Exim Bank, without recourse to them, against negotiation 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. How does it work? 1. Exim Bank signs LOC Agreement with overseas Borrower Institutions (Borrower) and announces the availability of LOC for utilization, when the Agreement becomes effective. 2. Exporter checks with Exim Bank, available amount under the LOC and quantum of service fee payable to Exim Bank and negotiates contract with Importer. 3. Importer approaches the Borrower for approval of the contract. 4. 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. 5. Exim Bank accords approval to the contract, if in conformity with the terms of LOC. Exim Bank conveys contract approval to the exporter and the Borrower. 6. 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 Bank's LOC to the Borrower and reimbursement will be by Exim Bank for the Eligible Value of Credit. 7. Exporter executes the contract/ships the goods/provides services. 8. Commercial bank in India, designated as the Negotiating Bank, negotiates shipping documents and pays the exporter. 9. Exim Bank reimburses the Negotiating Bank, on receipt of valid claim and service fee, by debit to the LOC account of the Borrower. 10. Borrower repays Exim Bank on due dates. Eligible Goods Capital goods, plant and machinery, industrial manufactures, consumer durables and any other items eligible for being exported under the 'Exim Policy' of the Government of India. General • Exporters are advised to check with Exim Bank before finalizing the contracts with the buyers, details of service fee and other charges, if any, payable by the exporters on the contracts to be covered under the relative LOC. General Verification : Exporters are advised to check with Exim Bank before finalizing the contracts with the buyers, details of service fee and other charges, if any, payable by the exporters on the contracts to be covered under the relative LOC. DIFFERENT LENDING PROGRAMMES (i) Lending Programme For Export Oriented Units : Motto of this programme is to Create and enhance export capabilities of Indian companies. (ii) Production Equipment Finance Programme (PEFP) : Under this program Exim Bank seeks to finance non-project related capital expenditure of export oriented units. PEFP is structured as an umbrella arrangement under which various equipment, imported and indigenous, can be financed, thus obviating the need to arrange finance for every such procurement. It is not necessary to identify specific equipment sought to be financed at the time of application; this could be done at the time of disbursement. (iii) Overseas Investment Finance (OIF) : Under this program finance equity loan to Indian companies for setting up of overseas joint ventures/ wholly owned subsidiaries. (iv) Equity Investment In Indian Ventures Abroad : This program develops overseas investment by Indian companies to enhance visibility of Indian overseas ventures. (v) Asian Countries Investment Partners Programme (ACIP) : This program promotes 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 catalyse investment flows into India by creating 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 viz. sector study, project identification, feasibility study, prototype development, setting up project and technical, managerial assistance. (vi) Export Marketing Finance Programme (EMFP) : This program create and enhance export capabilities and 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 companies. (vii) Export Product Development Programme (EPDP) : This program is to support systematic export product development plans with focus on industrialized markets and Eligible Companies. (viii) Programme For Financing Export Vendor Development (EVD) : This program there is to finance export strategic vendor development plans for export companies with a view to enhancing exports through creation, strengthening of backward linkages with vendors. (ix) Programme For Export Facilitation (PEF) : Under this Exim Bank offers term finance and non-funded facilities to Indian corporates to create infrastructure facilities to facilitate India's international trade & thereby enhance their export capability (a) Financing Port Development : This programme is there to finance development of minor ports with related infrastructural activities which would facilitate India's international trade. (b) Lending Programme for Software Training Institutes : The programme seeks to address the perceived constraint in availability of trained high-end software professionals to support the fast growing software exports. The programme aims at financing the establishment / expansion of software training institutes. (x) 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 another 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 supplier's 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 Ratio, Statutory Liquidity Ratio and Incremental Credit-Deposit Ratio requirements. (xi) Working Capital Term Loan Programme For Export Oriented Units (WCTL) : WCTL programme seeks to create, enhance export capabilities of Indian companies. (xii) Bulk Import Finance Programme (BIF) : To provide short term working capital finance to manufacturing companies to excess consumable inputs (xiii) Programme For Financing Research & Development : To provide integrated financing for Research & Development activities by export oriented companies (xiv) Long Term Working Capital Programme For Export Oriented Units : To provide finance for long term working capital (xv) Import Finance : • To provide finance for import of capital goods/plant and machinery, technology/know-how • Exim Bank's finance available to Indian manufacturing companies • Term loans in Indian rupees / foreign currency AND MANY MORE PROGRAMMES…. FINANCE Guidelines on Project & Services Exports : • Issued by RBI under Sec. 47 of Foreign Exchange Management Act, 1999 • Types of Exports covered : • Export of Goods on Deferred Payment Terms (e.g. Export of machinery, equipment, manufactured products) • Turnkey Projects (e.g. Setting up of Sugar Plant, Cement Plant) • Construction Projects (e.g. Construction of Roads, Dams, Bridges) • Consultancy & Technical Services (e.g. Operation & Maintenance Contracts) collectively referred to as 'PROJECT & SERVICES EXPORTS' On Deferred Payment Terms : For any amount : Working Group In-principle commitment at Bid Stage : While dispensing with the requirement of pre-bid clearance of project export proposals vide it's A.D (M.A. Series) Circular No. 9 dated May 5, 2000, RBI has advised exporters to ensure, in their own interest, that conditions as laid down in Memorandum PEM for submission of bids are compiled with. Project exporters, at the time of submission of bids/offers for execution of project/export contracts overseas, seek in-principle commitment from Exim Bank and other banks for post-award facilities at to ensure proper tie-up of facilities. Exim Bank issues guarantees required for execution of project export contracts trough overseas banks or directly favoring overseas clients. • Exporter submits application in prescribed from along with copies of contract through his commercial bank for Post Award Clearance. • Exporter can directly approach Exim Bank for proposals of value limits upto Rs.200 crores. • On receipt of application and contract copies from the commercial bank, EXIM Bank approves the proposal if the same falls within its delegated powers or convenes Working Group meeting. • In approved cases, Exim Bank/Working Group accords clearance to the final terms and conditions of the contract including various fund based and non- fund based facilities and requisite exchange control approvals. • On the basis of package post award clearance granted by Exim Bank/Working Group, final approvals for fund based and non-fund based facilities and requisite exchange control approvals are issued by the concerned institutions and export's bank(s). Small and Medium Enterprises Finance Handmade Paper Bags The importance of SME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. India has a vibrant SME sector that plays an important role in sustaining economic growth, increasing trade, generating employment and creating new entrepreneurship in India. Dried Flowers Indian SMEs require business advisory services to enhance their international competitiveness in a highly competitive globalising world. The SMEs find the services of reputed national and international consultants as not cost effective and often, not adequately focused. Recognizing this knowledge gap, Exim Bank of India has been endeavoring to provide a suite of services to its SME clients. These include providing business leads, handholding during the process of winning an export contract and thus assisting the generation of export business on success fee basis, countries/ sector information dissemination etc. and financial advisory services such as loan syndication, etc. EXIM Bank’s Services: Gift Articles made with Handmade Paper • The SME sector can avail of a comprehensive range of products and services that Exim Bank offers. Broadly, these can be classified into three categories: Export Credit: Exim Bank provides pre shipment and post shipment credit in Indian rupees and foreign currency. Finance is extended for short term i.e. upto 6 months as also for medium/long term i.e. beyond 6 months for eligible products and projects. Certain RBI guidelines apply for such medium/long term export credit. Hammocks made out of cork and cotton ropes Finance for Export Oriented Companies Exim Bank offers loans for financing Export Oriented Companies which may be categorized as under: • Project Finance • Finance for new projects, expansion, modernization projects. • Finance for purchase of equipment both imported as well as indigenous. • Working Capital both short term as well as medium term. • Overseas Investment Finance Export Marketing Finance (Finance for developing strategic forward linkages) : Term loans are extended to important strategic marketing plan covering inter-alia, overseas market research, participating in international trade fairs, promotion of product, brand positioning, international quality certification, mirror product adaptation, pre-operative expenses for overseas offices, prospective buyers visits to India, etc. Export Product Development: Term Loan for product adaptation, pilot plants, product/process development, etc. Finance for Research & Development: Exim Bank also provides lending for Research & Development activities for facilitating exports. Advisory Services: Exim Bank offers advisory services to Indian exporters for facilitating forward linkage for agri exports. Exim Bank's international network comprising overseas office, co-operation partners, correspondent banks and financial institutions is leveraged to provide export information on: • Overseas markets/market segments. • Direct marketing of product. • Overseas business opportunities. • Information on export/import regulations, finance, etc. PERFORMANCE Business Performance • Export Contracts supported by Exim Bank amounted to Rs. 7945 crores, highest ever in value terms. • Loan Sanction : Rs. 15853 crores, an increase of 71%. • Disbursements : Rs. 11435 crores, an increase of 64%. • Loans Assets : Rs. 13410 crores, an increase of 24%. • Total Assets of the Bank exceed Rs. 18000 crores. • Guarantee Sanctions : Rs. 1589 crores. • Guarantees Issued : Rs. 1660 crores. • Lines of Credit amount to US$ 423 million . Financial Performance • Net profit at Rs. 258 crores, an increase of 13%. • Net worth of the Bank increased to Rs. 2512 crores from Rs. 2143 crores. • Dividend to Government of Rs. 65.44 crores as compared to Rs. 47 crores in the previous year. • Capital to Risk Assets Ratio (CRAR) STOOD AT 21.58%. • Net NPAs to net loan assets decreased to 0.85% as on March 31, 2005 from 1.26% as on March 31, 2004. 3. New initiatives Financing of Service Sector • Services sectors financed during the year included entertainment, health care, hospitality and shipping. • During the year, loans were extended to there companies in the entertainment industry, engaged in film production . Of the seven films financed by the bank during the year. Exim Bank Rural initiatives With the advent of globalisation, the barriers to trade are getting dismantled and the dividing line between national and global markets is slowly disappearing. While this phenomenon has resulted in expansion of market opportunities for products and services, it has also made certain sections in developing countries more vulnerable to market vagaries. Thus, the objectives of Exim Bank's rural initiatives are two fold: 1. Poverty reduction through export linkages. 2. Benefit of globalization to grassroots’ rural enterprises. With the above objectives in mind, Exim Bank has now made its rural initiatives programme as the core to its operations, as depicted in this diagram. While the other financing programmes will give Exim Bank the volume and the return (topline and bottomline), the rural initiatives will enable the Bank to break new ground in the operations of export credit agencies and leverage its expertise in international market to the benefit of rural poor through creation of export capability in rural enterprises. It is also recognised that these initiatives would require disproportionate amount of resources in terms of time and manpower. But, if these initiatives prove successful and give desired results, it has the potential to enhance the purchasing power of the 'bottom of the pyramid' and will have beneficial spin off effects in all sectors of the economy. Small and Medium Enterprise Group • The Bank has been focusing on Small and Medium Enterprise (SME) exporters as a significant target group of clients. • During the year, Bank sanctioned credit facilities amounting to Rs. 133.50 crores to export oriented SMEs under the new initiative. Equity and other Structured Finance Products • Finance for international operations of a consumer durables company. • Finance for exploration, drilling and production of oil and gas. • Finance against securitization of receivables for import and supply of telecom equipment. • Performance guarantee on behalf of a company in the steel sector, to enable it to access international finance. Overseas Investment Finance Programme • During the year, eleven corporates were sanctioned funded and non- funded assistance aggregating Rs. 548 crores for part financing their overseas investment in seven countries. • Exim bank has provided finance to 122 ventures set up by over 100 companies in 43 countries so far. • Aggregate assistance extended for overseas investment amounts to Rs. 1888 crores. • Overseas investments financed by Exim Bank during the year include: o acquisition of a stainless steel plant in Indonesia. o acquisition of a BPO services company in USA. o acquisition of a pharmaceutical company in Denmark. o Finance for setting up a consumer dealer network in UK. o acquisition of an auto ancillaries unit in the USA, with both and equity support. Agri Business Group • Exim bank has identified agri-exports as a focus area and has established an “Agri Business Group” which aims to facilities, promote and finance agri business having export potential. • Sanctions and disbursements of the Agri Business Group during the year 2004-05 aggregated Rs.582 crores and Rs.495 crores respectively. • Bank’s finance to the agri sector during the year included term finance for food producing, floriculture, fruits and vegetables and contract farming sectors. • Export finance for a wide range of agro-based products including basmati rice, wheat, sugar, coffee, maize, cattle feed, groundnut kernels, herbal extracts, cashew, sesame seeds, mushrooms. • Export markets for above mentioned products included USA, Japan, Korea, Singapore, South Africa and UAE. • Exim bank has strengthen its linkages with relevant organisation in the sector such as NABARD, APEDA, Agriculture Finance Corporation Ltd., Central Food Technological Research Institute, National Horticultural Board and Small Farmer’s Agri Business Consortium which help to leverage their respective strengths with a view to future augmenting exports of agricultural products from India. 4. AWARDS • The bank has been conferred with the 2005 ‘trade development award’. The award is in the recognition of the banks export marketing services programme that proactively creates the enabling environment for Indian firms to explore newer geographies leveraging upon banks extensive institutional and trade linkages, its reach, access and credibility to serve as the marketing arm of select Indian companies effectively utilizing the banks overseas offices. The bank had been conferred with this award in the years 2002 and 2004 also. • The ADFIAP Awards Board this year has also bestowed upon the Chairman and Managing Director of Exim bank, a special “Plaque of Merit” in recognition of his leadership role in moulding the bank into a dynamic and innovative organisation, contributing to india’s trade with the world. 5. Business for the year Contracts secured • During the year,570 export contracts aggregating Rs7945 crores’ covering 64 countries were secured by 198 Indian exporters with Exim banks support as against 164 contracts valued at Rs7543 crores covering 48 countries secured by 96 Indian Exporters during the previous year. • Export contracts secured during the year consisted of 11construction contracts valued at Rs1490 crores, 11service contracts valued at Rs 263crores,526 supply contracts valued at Rs 3852crores and 22 turnkey contracts valued at Rs 2340crores. • Construction contracts included water transmission system in Oman, rehabilitation of roads in Afghanistan; laying of sewerage line in Saudi Arabia; construction of coffer dams in Qatar; contract for gas transmission pipeline project in Bangladesh and construction of fabricated LNG vessels in Equatorial Guinea. • During the year, the Bank extended sixteen LOCs, aggregating US$ 423 million to support export of projects, goods and services from India. • Forty four LOCs covering sixty eight countries, with credit commitments aggregating US$ 953 million are currently available for utilization. Funded / Non-funded facilities • Loan sanctions aggregated Rs. 15853 crores under various ;landing programme. • Disbursement aggregated Rs. 11435 crores during the year 2004-05. • Loans Assets increased 24% moving upwards to Rs. 13410 crores as on March 31, 2005. • Bank sanctioned and issue guarantees aggregating Rs. 1589 crores and Rs. 1660 crores respectively. Profit • Profit before Tax stood at Rs. 314 crores as compared to Rs. 304 crores during the previous year. • The profit after Tax amounted to Rs. 258 crores as compared to Rs. 229 crores during previous year. • Bank has made a provision of Rs. 56 crores towards income tax. • Net wroth of the Bank increased to Rs. 2512 crores from Rs. 2143 crores. Dividend • Rs. 65.44 crores will be paid to the Central Government as dividend for 2004-05, as compared to Rs.47 crores for 2003-04. Bibliography • http://www.eximbankindia.com/business.html • http://www.eximbankindia.com/smefin.html • http://www.eximbankindia.com/services.html • http://www.eximbankindia.com/loc.html • http://www.eximbankindia.com/services.html • http://www.eximbankindia.com/faq.html • http://www.eximbankindia.com/about.html • http://www.eximbankindia.com/career.html Name: - Shraddha k. Khandhadia Roll no: - 4 Sub: - Management of Banks and Financial Services (Management of Banks) Project on: - EXIM BANK Class: - IIIrd Year Specialization: - Finance (MFM) College: - Vasantdada patil pratishthan’s institute of management studies