Master Circular on Export Credit
Refinance (ECR) Facility
1. Introduction
1.1 In order to encourage banks
to extend more liberal export credit, the Reserve Bank of India provides export
credit refinance facility to banks under Section 17(3A) of the Reserve Bank
of India Act 1934. This facility is given on the basis of banks' eligible outstanding
rupee export credit both at the pre-shipment and post-shipment stages. The quantum
of refinance is fixed from time to time based on the stance of monetary and
credit policy of the Reserve Bank of India (RBI).
2. Participants
2.1 All scheduled banks (excluding
RRBs), which are authorised dealers in foreign exchange and have extended export
credit are eligible to avail of export credit refinance.
3. Export
Credit Refinance Facility
3.1 The definition of outstanding
export credit reckoned for the purpose of calculation of export credit refinance
limits of banks had been modified effective April 27, 2000. Outstanding export
credit for working out refinance limits, accordingly, includes export bills
rediscounted with EXIM Bank/other banks/Financial Institutions and export credit
against which refinance has been obtained from NABARD/EXIM Bank. However, it
will not include Pre-shipment Credit in Foreign Currency (PCFC), export bills
discounted/rediscounted under the scheme of 'Rediscounting of Export Bills Abroad'
(EBR), overdue rupee export credit and other export credit not eligible for
refinance. With the modified definition, the banks have the benefit of rediscounting
export bills with institutions like EXIM Bank, without sustaining reduction
in refinance limits from RBI.
4. Limit
4.1 At present, the scheduled banks
are provided export credit refinance to the extent of 15.0 per cent of the outstanding
export credit eligible for refinance as at the end of the second preceding fortnight.
5. Interest
Rate
5.1 Export credit refinance facility
is available at the Repo Rate (which is linked to Reverse Repo Rate under Liquidity
Adjustment Facility (LAF), as announced from time to time.
5.2 Interest shall be payable with
monthly rests and the amounts of such interest calculated on daily balances
would be debited to the account of such advances at the end of respective month
or earlier when the balance outstanding is wiped out.
6. Margin Requirement
6.1 No margin is required to be maintained.
7. Duration
7.1 Repayable on demand or on the expiry of fixed
periods not exceeding one hundred and eighty days.
8. Collateral
8.1 RBI extends the export credit
refinance against the Demand Promissory Note (DPN) of banks supported by a declaration
that they have been extended export credit and the outstanding amount eligible
for refinance is not less than the loan/advance from RBI.
9. Minimum
Amount of Availment
9.1 The minimum amount of availment
under this facility is Rupees one lakh and multiples thereof above the minimum.
10. Place
of Availment
10.1 This facility can be availed
of at centres wherever the Reserve Bank has a Banking Department.
11. Repayment
11.1 The refinance has to be repaid
on demand or within 180 days.
12. Penalties
12.1 In the event of a scheduled
bank having irregular availment of export credit refinance, a penal rate of
interest as decided by the Reserve Bank from time to time will be charged on
the outstanding loan or loans.
12.2 The instances on which penal
rate would be applicable for irregular availment of export credit refinance
are set out in Table 1.
13. Documentation
13.1 The banks have to execute
the following documents for availing of export credit refinance facility:
a. A stamped agreement in Form
No. DAD 297.
b. A Demand Promissory Note (DPN)
in Form No. DAD 295 A.
c. Board Resolution in Form No.
DAD 298 authorising the borrowing under the scheme and also the officials
who will execute loan documents on behalf of the bank.
d. For enhancement of limit,
a letter in Form No. DAD 299 extending the agreement to enhance limit together
with consolidated DPN for the fresh limit.
e. In terms of Para 7.30 of Banking
Department Manual, Agreements and letters of extension need not be renewed
so long as there is no change in the terms thereof. DPN should, however, be
renewed every three years of their dates of execution not withstanding their
validity for three years from the date of transaction.
13.2 The borrowing bank should
submit to Monetary Policy Department, Reserve Bank of India, a fortnightly declaration
in form No. DAD.389 together with a statement of Export Refinance Entitlement
in form No.DAD.390 to enable Reserve Bank of India to monitor the position of
the outstanding borrowings under the scheme in relation to its outstanding export
credit advances.
14. Reporting Requirement
14.1 The availing banks are required
to report their outstanding export credit eligible for refinance within five
days from the relevant date in the format provided in Annex I.
15. Condition
15.1 It is essential that the
outstanding borrowings at all times are fully covered by the borrowing bank’s
holding of export bills/amount of eligible pre-shipment advances as reported
in their latest declaration. If at any time it is found that the total amount
of bills held by banks/amount of eligible pre-shipment advances covered by the
declaration falls below the amount borrowed, the bank should forthwith adjust
or repay excess refinance from Reserve Bank of India.
Annex I
Reporting
Formats
Form DAD 389
Annex II
Definitions
In these guidelines, unless the
context otherwise requires:
i. 'Fortnight' shall mean the period
from Saturday to the second following Friday, both days inclusive;
ii. 'Bank" or "banking
company' means a banking company as defined in clause (c) of Section 5 of the
Banking Regulation Act, 1949 (10 of 1949) or a 'corresponding new bank', 'State
Bank of India' or 'subsidiary bank' as defined in clause (da), clause (nc) and
clause (nd) respectively thereof and includes a 'co-operative bank' as defined
in clause (cci) of Section 5 read with Section 56 of that Act.
iii. "Scheduled bank"
means a bank included in the Second Schedule of the Reserve Bank of India Act,
1934.
iv. 'Export Bills' means all export
bills having a usance not exceeding 180 days purchased/negotiated/discounted
by the borrowing bank under letters of credit or otherwise which are drawn in
India or any country outside India which is a member of the International Monetary
Fund or any other country notified in this behalf by the Bank in the Gazette
of India would be eligible for inclusion in the declaration to be furnished
by it.
v. 'Pre-shipment Credit' means
the credit granted by banks to bonafide exporters on the strength of letters
of credit established by banks of good standing abroad in favour of the local
exporter or on the strength of firm export order and the borrowing bank should
ensure that the relevant documents are lodged with it.
vi. 'Export credit eligible for
refinance' means the aggregate outstanding export credit as on the last Friday
of the second preceding reporting fortnight minus Pre-shipment Credit in Foreign
Currency (PCFC), Export bills discounted/rediscounted under the scheme of 'Rediscounting
of Export Bills Abroad' (EBR), overdue rupee export credit and other export
credit not eligible for refinance, export bills rediscounted with other banks/Exim
Bank/Financial Institutions and export credit against which refinance has been
obtained from NABARD/EXIM Bank.
Annex III
Form of Agreement
DAD 297
Para 7.50
Form of agreement to be obtained
from the Principal Office of the scheduled bank for borrowings in respect of
bank finance for exports of goods (to be stamped as an agreement
in accordance with the law in force in each state)
The Reserve Bank of India
Dear Sirs,
In consideration of your agreeing
to make from time to time, under section 17(3A) of the Reserve Bank of India
Act, and on the terms and conditions contained in the Memorandum attached to
the circular DBOD.No.BM.78/C.297(M)-69 dated the 20th January 1969 advance in
your discretion but not in any event exceeding the sum (exclusive of interest)
of Rs………….. for which amount we have delivered to you a demand promissory note
in your favour carrying interest at the rate hereinafter mentioned, which advances
shall be repayable on demand and shall be made upon declaration in such forms
as may be prescribed by you. We agree as follows:
(1) The balance of the said
advances at any time outstanding shall be repayable by us to you on demand.
(2) Each drawal of advances
under this agreement shall have a maturity period not exceeding 180 days and
shall be repayable by us within the said period.
(3) Interest shall be payable
by us to you at such rate as may be notified by you from time to time, with
monthly rests and the amounts of such interest calculated on the daily balances
may be debited to the account of the said advances at the end of each respective
month or earlier when the balance outstanding is wiped out. It shall be open
to you to reimburse yourself with the amount of interest so debited by charging
the same to our current account with you.
(4) We agree that in default
of payment by us under the terms of clauses (1) and (2) hereof, you may, but
without any obligation on your so to do, debit our current account with you
for the amount due by us on account of the loan of advance granted in terms
of Section 17(3A) of the said Act.
(5) We agree and undertake that
the loan or advance granted by us to exporters or other persons eligible for
refinance in order to enable them to export goods from India and drawn and outstanding
at any time shall not be less than the outstanding amount of the loan or advance
obtained by us from you. We further agree to maintain in your favour such margin
as you may from time to time prescribe so that the shortfall in the margin stipulated
therein, we shall forthwith on demand by you reduce the balance due to you by
a cash payment so as to make good the amount of margin required to be maintained.
(6) We further agree that we
will from time to time, while these advances continue and whenever required
by you to do so furnish you with such information regarding the outstanding
in the advances made by us in respect of export of goods eligible for refinance
and true reports in such as you may prescribe regarding the solvency of the
borrowers and agree to advise you promptly of any change in the position of
any such borrower which can be reasonably be considered to affect our security.
(7) We hereby agree to execute
on demand such documents as may be required by you to create in your favour
an overall charge on our book debts represented by the advances made by us in
respect of export of goods eligible for refinance or to vest in you such security
as are specified by you so as to render the same readily saleable or transferable
by you at any time.
(8) We agree and undertake to
pay interest at such higher rate as you may decide, in the following cases;
where
a. Export Credit Refinance utilisation
is in excess of the limit allowed,
b. Refinance limits are calculated
or reported wrongly,
c. Drawals remain outstanding
beyond 180 days on account of insufficient fund in our account
d. There is long delay in reporting
about the excess or irregular utilisation by us for the period of delay.
(9) We also agree that this
agreement and said demand promissory note for Rs………… shall operate as a continuing
security for the said advance notwithstanding the existence of a credit balance
at any time or any partial payment or fluctuations of accounts or withdrawal
of any part of the security.
Yours faithfully
For and on behalf of … … … … …
…
(Name of the schedule Bank)
(Signature of authorized official)
(Designation).
DAD 295A
(On the letter head)
DEMAND PROMISSORY NOTE
(Export Credit Refinance Facility)
On demand, we, (Bank's Name), promise
to pay to the Reserve Bank of India or order the sum of Rs…………….. (Rupees …………………………………………………………)
with Interest at reverse repo rates as announced by Reserve Bank of India for
export credit refinance facility at the time of full repayment or at monthly
rests whichever is earlier for value received.
Place: For and on behalf of……
Date:
(2 Signatories & revenue stamp)
Names & Designation of both
signatories
DAD-298
Para 7.71
Specimen of Board Resolution
A copy of the Board Resolution
No. … … … …………………….. Passed at the meeting of the board held on ……………………………..
'Resolved -
i. that the bank to borrow from
the Reserve Bank of India in terms of Pre-shipment Credit Scheme and/or Export
Bills Credit Scheme under Section 17(3A) or the Reserve Bank of India Act
1934 upto the limit that may be approved and upon such terms and conditions
as may be imposed by the Reserve Bank of India from time to time;
ii. that the following officers
of the bank be and are hereby severally empowered to execute and furnish the
necessary agreements, loan documents, declarations, statements and certificates
on behalf of the bank for the purpose of availing of the above mentioned facilities
from the Reserve Bank of India and such other instruments and documents as
may be required by the Reserve Bank of India in this behalf.
FORM 'D'
DAD-299
Date:
The Reserve Bank of India
Deposit Accounts Department
Mumbai-400 001
Dear Sir
With reference to the Agreement
dated …………………….. we agree that in consideration of your agreeing to increase
the limit of Rs………………….(………………………………………………………………………………………………) specified therein
to a fresh limit of Rs…………. ( Rupees ………………………………………………………………………) for which
amount we have delivered to you a consolidated demand promissory note, carrying
interest at ……. p.a. with monthly rests, all the terms of the said agreement
shall apply to and in relation to the fresh limit of and the consolidated demand
promissory note for Rs…………….. (Rupees ……………………………………………………………….) and the advances
thereunder, as they apply to and in relation to the limit of and demand promissory
note for Rs………….. (Rupees ……………………………………. ) and the advances thereunder.
Yours faithfully,
For and on behalf of
(Name of the scheduled Bank)
Appendix