Pre-Shipment Finance

A pre requisite to avail of pre-shipment financing is that the Exporter should have a credit facility in place with a bank. Each bank has a credit process that determines the amount of funding the bank can give the company. 1. Who is eligible for pre-shipment credit? An exporter who holds an export order or Letter of Credit (LC) in his own name to perform an export contract can avail of pre-shipment credit. Banks may also grant pre-shipment advances without insisting on prior lodgment of LCs or purchase orders. This is known as the "Running Account Facility". 2. What is the purpose of this finance? Pre-shipment finance can be availed of only for the specific purpose of procuring raw materials / purchasing / manufacturing / processing / transporting / warehousing / packing and shipping the goods meant for export. 3. How much financing can I as an exporter get? This is need based financing, - which means that banks will lend an amount to you after factoring in a particular margin (this margin is calculated as a percentage of the value of the order). The margin differs from bank to bank. Margins are stipulated for the following reasons :

to ensure that the exporter has some stake in the transaction to cover any erosion in the value of goods, and to ensure that there is no lending against the exporter's profit margin.

The banking practice is that the exporter can obtain 90% of the FOB value of the order or 75% of the CIF value of the order. 1. What is the tenor of this funding? The RBI has allowed banks to grant this funding at a concession for a maximum period of 180 days. This period can be extended by the bank without referring to RBI for a further period of 90 days. Banks grant this extension in cases where the exporter faces genuine hardships in completing his order. If an extension is required beyond 270 days (i.e. 180+90 days), the RBI has the discretion to grant another (maximum) extension of 90 days. However, if the exports do not take place at the end of this period, the bank will charge interest from day one, at a rate left to the banks discretion.

2. In what currency's can the exporter obtain pre-shipment credit? Most often the pre-shipment borrowal is in the domestic currency, in the case of an exporter based in India, the Indian Rupee. However in some cases, the exporter may want to borrow in foreign currency because his product has a large import component or he finds the cost of borrowing in foreign currency lower than borrowing in the local currency. Borrowing in foreign currency is feasible when the cost of Rupee borrowing (less the currency premium) is greater than the cost of borrowing in the foreign currency. This is discussed in greater detail in " when does foreign currency risk arise?" This will be easier to understand with the help of an example. Let us assume that an exporters exports and imports are both payable in US Dollars. Let us also assume that the import component is significant at, say, 70%. In this case, the exporter is open to the effects of currency movements both at the time of import, and then at the time of export. Borrowing in USD can hence partially hedge his currency risk on the export side, since his exports are also going to be in the same currency. The above facility, allowed to exporters to avail of pre-shipment credit in foreign currency, is termed as Pre-Shipment Credit in Foreign Currency or PCFC. 3. What is the cost of pre-shipment finance ? Pre-shipment credit : Upto 180 days - 10% Between 180 270 days - 13% Over 270 days - Commercial rates which are likely to be higher than the rate applicable upto 270 days. USD Lending (PCFC) - Maximum of Libor + 1.5 pct 4. What are the ways in which I can liquidate the pre-shipment finance ? The pre-shipment facility can be liquidated by proceeds of export bills negotiated, purchased or discounted. As far as possible, banks don't encourage liquidation by debit to cash credit account.

Another interesting thing is that, once the goods are shipped out and documents tendered to the bank, the pre-shipment advance is converted to post-shipment advance. In the case of PCFC credit, pre-shipment finance is liquidated by discounting bills under the Rediscounting of Export Bills Abroad scheme. PCFC can be liquidated by discounting of export bills, or by grant of foreign currency loans by a bank. Once the exporter avails of PCFC, he will not be eligible for post-shipment credit in rupees; he will have to avail of post-shipment funding in the same currency in which he availed of the pre-shipment funding.

Post Shipment Finance

Post-shipment finance is a loan or advance granted by a bank to an exporter of goods from India. This facility is available to an exporter subsequent to the date of shipment of goods upto the date of realisation of export proceeds. Some key features of post-shipment finance are as follows:

Finance is extended to either the exporter (seller's credit) or the overseas buyer of the goods (buyer's credit). Finance is extended against evidence of shipping documents. Concessive rate of interest is available for a maximum period of 180 days, starting from the date of submission of documents. Normally, the documents are to be submitted within 21days from the date of shipment.

Post-shipment finance can be further classified as under : a. Negotiation of export documents under Letter of Credit (LC). b. Purchase / Discount of export document under confirmed orders / export contracts, etc. c. Advances against export bills sent on collection basis. 1. Who is eligible for post-shipment finance? Post-shipment finance is extended to the actual exporter who has exported the goods or to an exporter in whose name the export documents are transferred. 2. On what basis is post-shipment finance extended? It is extended against evidence of shipment of export goods. 3. What is the purpose of post-shipment finance? Post shipment finance is meant to finance export receivables. 4. What is the quantum of this finance?

Post shipment finance can be extended upto 100% of the invoice value of goods. 5. 6. What is the period for which this funding is available? In the case of routine exports, the maximum period allowed for realisation of export proceeds is 6 months from the date of shipment. Banks can extend post shipment finance at a lower interest rate upto the normal transit period or the notional due dates (this is calculated as the sum of the Normal Transit Period + Usance Period, subject to a maximum of 180 days). Beyond that period, banks lend at non-concessive rates or the normal commercial rates. 7. What are the applicable rates of Interest? Post-shipment credit Sight Bills - Not more than 10% Upto 90 days - Not more than 10% 91 days upto 6 months - 12% Overdue (applicable only on the overdue portion) - Left to the discretion of the bank, though it is most likely to be the unarranged overdraft rate. Post-Shipment foreign currency loan - Maximum of Libor + 1.5 pct

International Exports

Features and Benifits 1. Tailor-made solutions to suit all your export needs 2. Experienced trade finance team that focuses on client requirements 3. Leverage our global network of correspondent banks

Bills and Collection

We have a strong, experienced trade finance team that focuses on client trade-related requirements, whether domestic or international. This team advises and guides clients on documentation and transactions ensuring: 1. Quick turnaround times through smooth document processing 2. Faster payments through constant follow-ups with correspondent banks for timely recovery of funds 3. Cost effectiveness 4. Better reach 5. Excellent trade support 6. Arrangement of credit reports of overseas parties

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Specialised advice on international trade related issues as well as technical issues such as ECM requirements, RBI reporting, new circulars and international developments

We have developed a global network of correspondent banks that enables us to handle large volume collection portfolios. We offer world-class facilities for handling collections related to international trade. We also handle documents where proceeds have been received by the exporter on an advance payment basis and the actual shipment takes place later. In such cases, the documents need to be accompanied with a Foreign Inward Remittance Certificate (FIRC) as proof of receipt of the advance payment.

Pre and Post shipment credit

Pre-Shipment Credit
We offer pre-shipment credit to exporters by way of packing credit, enabling them to finance operations like purchase/import of raw materials or processing and packing of export goods. Exporters can avail of this pre-shipment credit either in rupees or foreign currency.

Post-Shipment Credit
We offer post-shipment credit to exporters, helping them finance export sales receivable for the time lag between shipment of goods and date of realization of export proceeds. Exporters can avail of the following services: 1. Negotiation/ payment/ acceptance of export documents under letter of credit 2. Purchase/ discount of export documents under confirmed orders/export contracts etc. 3. Advances against export bills sent on collection basis 4. Advances against exports on consignment basis 5. Advances against undrawn balance on exports 6. Advances against approved deemed exports 7. Exporters can avail of this post-shipment credit either in rupees or foreign currency

Inward remittances
We facilitate Foreign Inward Remittance (foreign exchange received by a person in India through banking channels) and offer convenient modes of operations for quick and easy disbursement. The facility is extended through arrangements with reputed, correspondent banks located in most countries around the world.

We facilitate Foreign Inward Remittance (foreign exchange received by a person in India through banking channels) and offer convenient modes of operations for quick and easy disbursement. The facility is extended through arrangements with reputed, correspondent banks located in most countries around the world.

International Imports
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Kotak Mahindra Bank provides a comprehensive range of import related services, helping you cover your trading risks Features and Benefits

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Tailor-made solutions to suit all your import needs Experienced trade finance team that focuses on client requirements Leverage our global network of correspondent banks

Letter of Credit 1. We offer our customers import financing services through Letters of Credit (L/C) which are well accepted globally and supported by a strong trade finance setup. 2. We have correspondent banking arrangements with a large number of banks worldwide for this service. Our trade team is equipped to structure solutions for a variety of purchase requirements, ranging from simple L/Cs to revolving L/Cs, bid bonds, Standby L/Cs and other performance guarantees. Bills and collection We have a strong, experienced trade finance team that focuses on client trade-related requirements, whether domestic or international. This team advises and guides clients on documentation and transactions ensuring: Quick turnaround times through smooth document processing Faster payments through constant follow-ups with correspondent banks for timely recovery of funds Cost effectiveness Better reach Excellent trade support Arrangement of credit reports of overseas parties Specialised advice on international trade related issues as well as technical issues such as ECM requirements, RBI reporting, new circulars and international developments We have developed a global network of correspondent banks that enables us to handle large volume collection portfolios. We offer world-class facilities for handling collections related to international trade. Outward Remittances Our services in this area include: 1. Payment of direct Import Bills: Processing and remittances for Import Bills directly received by importers in India. 2. Advance payment towards imports: Processing and remittances towards advance payment for imports. 3. Other outward remittances like dividend payouts, ECB payments, royalty, shipping, etc.

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Current Account for every kind of Business

Kotak Ace: Enjoy maximum benefits and discount with the top-end variants of our Current Account, for large businesses and enterprises Kotak Elite: As your business grows, it is essential to diversify yet control your finances. Now enjoy several banking benefits and discounts at a comfortable balance requirement to go along with the growth of your business/enterprise. Kotak Pro: Enjoy a range of privileged banking services with a reasonable balance requirement. This account is ideal for a mid size or emerging business/enterprise. Kotak Edge: An efficient package of banking services that delivers much more than you expect of a Current Account, with a low balance requirement, suitable for a small business/enterprise. Kotak Neo*: Maintain the lowest balance yet enjoy all the banking benefits required for a new set-up or a growing small business.

Feature and Benefits on Current Account *#

Free DD/BC, NEFT, RTGS & At-par cheque book Free Out-station Cheque collection Free Cash Deposits & Withdrawal limits Free Home Banking Free Debit card & Any VISA ATM Usage Free Outward Cheque Returns Earn higher returns on the idle funds in current account through ActivMoney feature Unsecured OD upto 15 Lakhs SMS Requests & Alerts Dedicated Relationship Manager

Single View Access across Multiple accounts. E-Tax Service for hassle-free returns filing. Bill Pay and Auto Pay for a smarter way to automate regular bill payments online

Convenience Banking
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Net Banking Apart from 24X7 banking online, you can use our Net Banking services to transfer funds using NEFT and RTGS, Check for latest Term Deposit and Forex rate, invest in Mutual Funds, initiate standing instructions, request for Cheque book, print account statements or pay utility bills! SMS Requests & Alerts You can use your mobile phone to track account transactions, receive alerts and place requests anytime, anywhere! Phone Banking We have 24X7 toll-free Contact Centre to assist you with every need! Mobile Banking** - Access your Accounts and pay our bills anytime, anywhere using this service. Business Debit Card This card comes with higher daily withdrawal/transaction limit. You can also avail free* access to all ATM in India & abroad. Our Network Strength*** Number of Branches & locations 430+ branches across 250+ locations Number of Kotak ATMs 960+ No. of VISA ATMs - 30000+ in India & 1 Million worldwide

*** The data is updated as on 26th July,2013

Liquidity Management Solutions

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ActivMoney :- Earn higher returns on the funds lying idle in your Current Account. Through this facility, balance above a specified threshold are swept into a Term Deposit, thus earning attractive returns. The funds are easily available for utilization, whenever there is a shortfall in the account. Cash Management Services Receivables management Payables management Merchant Solutions^ Internet Payment Gateway^

Trade & Forex Solutions

Handling of Export & Import Bills (Advance / Collection / Direct) Issuance of Letters of Credit and Bank Guarantees Pre-Shipment & Post-Shipment credit both in INR and FCY Dedicated Relationship Manager Treasury Advisory Services Supply Chain Management solutions Bill Discounting LC Advising and Confirmation E-Trade : facilitates the clients to monitor the outstanding position of all facilities on net banking Buyers Credit / Suppliers Credit FX Live$ - FX Live is an online transparent forex rate booking platform, which offers the convenience and flexibility of booking the deals at an expected level of conversion rate. Also, it provides the log of all past deals for ready reference.

Lending Solutions
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Kotak Credit Access# - Avail Instant Unsecured Overdraft & Term Loan up to Rs. 15 lakhs based on the minimum average quarterly balance (AQB) maintained in your Current Account with us. Working Capital Finance: Fund Based and Non-Fund Based Cash Credit overdraft against hypothecation of stock / receivables and immovable property as collateral Import Finance like Buyer Credit, Letter of Credit

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Export Finance through pre and post shipment credits Term Loan for meeting capital expenditures Other Financing Facilities Loan against Property (LAP) Lease Rental Discounting Loan against Securities (LAS) Facility against Credit Card Receivabless Unsecured Overdrafts Overdraft against Term Deposits