EXPORT-IMPORT BANK OF INDIA

SALIENT FEATURES OF EXPORT BUYERS CREDIT UNDER NEIA

Introduction Exim Bank has, in conjunction with ECGC, introduced a new product/initiative viz. Buyers Credit under GOIs National Export Insurance Account (NEIA), under which the Bank finances and facilitates project exports from India by way of extending credit facility to overseas sovereign governments and government owned entities for import of goods and services from India on deferred credit terms. Indian exporters can obtain payment of eligible value from Exim Bank, without recourse to them, against negotiation of shipping documents. Buyers credit is a financing mechanism that provides a safe mode of nonrecourse financing option to Indian exporters and serves as an effective market entry tool. About National Export Insurance Account (NEIA) NEIA is a Trust, set up by Ministry of Commerce and Industry (MOCI), Government of India, for providing export credit insurance cover for promoting project exports from India, administered by ECGC. Buyers Credit under NEIA is a unique mechanism for promoting India's project exports to traditional as well as new markets in developing countries, which need deferred credit on medium or long term basis. Eligible buyers Sovereign governments and government owned entities overseas for finance of eligible import of goods and services from India on deferred payment terms. Eligible goods Project exports from India. Features Buyers credit (NEIA) is available for project exports requiring medium or long term deferred credit. Exim Bank extends the credit directly to overseas buyer of projects from India without recourse to Indian exporter. Exim Bank will obtain credit insurance cover under NEIA through ECGC

and the insurance premium will be borne by the project exporter. Interest differential on the credit, if interest rate is below market rate, will also need to be borne by Indian project exporter. Indian project exporter may suitably adjust its price. Amount of Loan Generally not more than 85% of the contract value. Rate of Interest Linked to Exim Banks cost of funds plus a spread. Repayment Credit period would normally be 5 to 8 years. Longer credit period could be considered in deserving cases. Security Sovereign guarantee where the borrower is other than the foreign government. Guarantee from Central Bank of borrower, as applicable. Any other security as may be stipulated on a case-to-case basis. Loan Appraisal Eligibility of the project for covering under Buyers credit, inter alia, will focus on country risk perception, track record of the Indian project exporter, sound financials of project exporter, conformity with RBIs Memorandum PEM. General Indian companies are advised to contact Project Finance Group of the Bank at Head office in India before finalizing the contract. A flow chart covering Approval and Disbursement processes under the Buyers Credit is Annexed.

Annexure Flow chart for Approval of Buyers credit

(8) Signing of commercial contract

Indian Exporter (1) Approaches for Buyers Credit & Terms

(7) BC Approval

Overseas Buyer

(2) Due Diligence

Exim Bank
(5)For proposals exceeding USD 20 mn approval is sought Working Group Exim Bank, RBI, ECGC, Sponsoring Bank (3) Seeks in-principle approval for cover and premium rates (6) Approval accorded

(4) Conveys In-principle approval and premium

ECGC -NEIA

(1) Indian exporter approaches Exim Bank to seek Buyers Credit & terms thereof. (2) Exim Bank undertakes due diligence on overseas buyer. (3) Exim Bank approaches ECGC for in principle approval for cover and premium rates. (4) ECGC, upon approval under National Insurance Export Account (NEIA), conveys in-principle approval and rate of premium. (5) For cases where credit requirement exceeds USD 20 mn, Exim Bank approaches Working Group to seek approval. (6) Upon due consideration, Working Group accords approval. (7) Exim Bank accords approval of Buyers credit to overseas buyer. (8) Indian exporter executes commercial contract with overseas buyer. (9) Exim Bank and ECGC sign Buyers Credit policy agreement. 2

Flow chart for Execution of contract and Disbursement under Buyers credit

(1) Supplies goods/ provides services Indian Exporter Overseas Buyer

(4) Funds Transfer

(2) Submits shipping documents and Claims disbursement

(3) Exim Bank will negotiate documents under Letter of Credit or payments will be made to exporter against payment authorisations

Exim Bank
(5) Advises buyer about disbursement and debit to his buyers credit a/c with Exim Bank

(1) Indian exporter ships the goods/ provides the services to overseas buyer as per the terms of the commercial contract. (2) Indian exporter submits original export documents and claims disbursements. (3) Exim Bank will negotiate documents under Letter of Credit or payments will be made to exporter against payment authorizations. (4) Exim Bank remits the eligible amount of disbursement to Indian exporter. (5) Exim Bank advises details of disbursement to overseas buyer.