Pre-shipment means any loan or advance that is granted or any other credit that is provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment, 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 order for the export of goods 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 specifically been waived by RBI.

The exporters have an option:

i) To avail export finance at pre shipment stage in rupees and then post shipment credit either in rupees or in foreign currency.

ii) To avail pre-shipment credit in foreign currency and discount the export bills in foreign currency at post shipment stage. With a view to making credit available to exporters at internationally competitive rates, authorised dealers have been permitted to extend Pre-shipment Credit in Foreign Currency (PCFC) to exporters for domestic and imported inputs of exported goods at LIBOR/EURO LIBOR/EURIBOR related interest rate.

Currency of Credit: RBI has permitted granting of the pre-shipment credit in any of the convertible currencies. However, for the present PCFC is being granted in US Dollars, GBP & EURO, subject to availability of funds. PCFC can be extended in one convertible currency in respect of an export order invoiced in another convertible currency at the risk and cost of cross currency transaction to the exporter. For example, an exporter can avail PCFC in US Dollar against an export order invoiced in Euro. The risk and cost of cross currency transaction will be to the account of the exporter. PCFC can also be extended for exports to ACU countries.

Period of Credit: PCFC, in the case of 'INR' pre-shipment credit is initially available for a specified period decided by sanctioning authority after taking into account relevant factors with a maximum 7 period of 180 days and branches should monitor the end use of credit as in the case of Rupee credit. It must also be ensured that advances granted under the PCFC Scheme are not diverted for domestic purposes.

Amount of Credit: For operational convenience, amounts advanced under PCFC are restricted to a specified amount and the minimum amount presently is US$ 10,000/.

While considering requests for PCFC, authorized branches should keep in view the following aspects:-

1. PCFC should be extended to Standard Accounts.
2. Exporters should have a satisfactory track record in the export business.
3. Instances of liquidation of pre-shipment credit by other than approved manner should be rare and for genuine reasons.
4. Track Record with regard to realisation of export bills on the due dates should be satisfactory and bills should not have remained overdue, except for genuine reasons.
5. PCFC can be granted for deemed exports for supplies to projects, financed by multilateral/bilateral agencies/funds, subject to usual terms and conditions governing rupee credit for deemed exports. At the post-shipment stage, the credit is restricted to 30 days or upto the date of payment by the project authorities, whichever is earlier.

NOTE: Withdrawal of PCFC is subject to availability of forex funds. Confirmation from Treasury Branch on giving 2 days prior notice is needed.