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POST-SHIPMENT FINANCE CREDIT FACILITY EXTENDED TO AN EXPORTER FROM THE DATE OF SHIPMENT OF GOODS TILL THE REALIZATION OF EXPORT PROCEEDS IS KNOWN AS POST-SHIPMENT CREDIT.
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POST-SHIPMENT FINANCE
POST SHIPMENT FINANCE CAN BE CLASSIFIED AS:
- EXPORT BILLS PURCHASED / DISCOUNTED /
NEGOTIATED.
- ADVANCES AGAINST EXPORT BILLS SENT ON
COLLECTION BASIS.
- ADVANCES AGAINST EXPORTS ON CONSIGNMENT BASIS.
- ADVANCES AGAINST DUTY DRAWBACK RECEIVABLES
FROM GOVT.
- ADVANCES AGAINST APPROVED DEEMED EXPORTS.
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POST-SHIPMENT FINANCE
IS A WORKING CAPITAL FINANCE.
IS AN INVENTORY-BASED FINANCE.
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PERIOD POST SHIPMENT OF FINANCE
- IT WILL DEPEND ON THE TERMS OF CONTRACT.
- EXCHANGE CONTROL REGULATIONS :FOR CASH
EXPORTS IT CAN BE FOR A MAXIMUM PERIOD OF 180 DAYS FROM THE DATE OF SHIPMENT.
- DEMAND BILLS: IT CAN BE GRANTED FOR THE NORMAL
TRANSIT PERIOD (NTP) AS SPECIFIED BY FEDAI.
- USANCE BILLS: MAXIMUM DURATION OF 180 DAYS FROM
THE DATE OF SHIPMENT INCLUSIVE OF NTP AND GRACE PERIOD IF ANY.
- NTP : AT PRESENT IT IS 25 DAYS FOR ALL FOREIGN CURRENCY
BILLS, FOR IRAQ IT IS 120 DAYS FROM THE DATE OF SHIPMENT.
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DISCREPANCIES OBSERVED WHILE NEGOTIATING BILLS
- L/C EXPIRED BEFORE SHIPMENT OR NEGOTIATION.
- BILL OF EXCHANGE NOT DRAWN AS PER THE TERMS OF L/C.
- DRAWING IN EXCESS OF L/C AMOUNT.
- INVOICE IS EITHER INCOMPLETE OR INCORRECT.
- DESCRIPTION OF GOODS IN ALL DOCUMENTS IS NOT
CONSISTENT.
- BILL OF LADING OR AIRWAY BILL IS NOT SIGNED IN TERMS
OF UCPD.
CONT….
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DISCREPANCIES OBSERVED WHILE NEGOTIATING BILLS
- PRESENTATION OF CLAUSED BILL OF LADING, WHEN L /C IS
FOR CLEAN BILL.
- FULL SET OF DOCUMENTS NOT SUBMITTED.
- INSURANCE DOCUMENTS INCOMPLETE.
- CERTIFICATE OF ORIGIN NOT SUBMITTED OR NOT SIGNED
BY OFFICIAL.
- FEW DOCUMENTS / COPIES PRESENTED UNSIGNED.
- GR FORM NOT PROPERLY FILLED UP.
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ADVANCE AGAINST EXPORT BILLS SENT FOR COLLECTION
- POST-SHIPMENT ADVANCE CAN BE AVAILED AT THE TIME
OF /AFTER THE TIME OF SENDING THE BILLS FOR COLLECTION.
- PRE-SHIPMENT ADVANCE AVAILED, IF ANY SHOULD BE
IMMEDIATELY LIQUIDATED AS SOON AS THE DOCUMENTS HAVE BEEN TENDERED TO THE BANK, TO COMPLY WITH ECGC GUIDELINES.
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CONSIGNMENT EXPORTS
- GOODS MAY BE EXPORTED ON CONSIGNMENT BASIS AT
THE RISK OF EXPORTER FOR SALE.
- REMITTANCE OF SALE PROCEEDS IS MADE BY THE
AGENT /CONSIGNEE.
- CONSIGNMENT BASIS EXPORT LENDS SCOPE FOR A LOT
OF MISUSE OF REPATRIATION OF PROCEEDS.
- ADVANCES GRANTED ARE REQUIRED TO BE
LIQUIDATED FROM THE REMITTANCE OF SALES PROCEEDS WITHIN 180 DAYS FROM THE DATE OF SHIPMENT.
- THE RATE OF INTEREST ARE AT PAR WITH EXPORT ON
OUTRIGHT SALES BASIS.
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ADVANCES AGAINST RECEIVABLES FROM GOVT. DUTY DRAWBACK ENTITLEMENTS
- WHERE THE DOMESTIC COST OF PRODUCTION OF
CERTAIN GOODS IS HIGH IN RELATION TO INTERNATIONAL PRICES, THE EXPORTER MAY GET SUPPORT FROM THE GOVT. UNDER EXPORT PROMOTION SCHEMES IN THE FORM OF REFUND OF EXCISE AND CUSTOM DUTY KNOWN AS DUTY DRAWBACK.
- BANKS MAY GRANT POST-SHIPMENT ADVANCES TO
EXPORTERS AGAINST THEIR DUTY DRAWBACK
- ENTITLEMENTS. THESE ADVANCES ATTRACT
CONCESSIONAL RATE OF INTEREST UP TO A MAXIMUM PERIOD OF 90 DAYS FROM THE DATE OF ADVANCE.
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GUARANTEE COVER FOR POST- SHIPMENT EXPORT FINANCE IN INDIA, GUARANTEE COVER FOR POST- SHIPMENT EXPORT FINANCE IS AVAILABLE BY POST- SHIPMENT GUARANTEE SCHEME OF THE EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD, WHICH PROVIDES PROTECTION TO THE BANKS AGAINST NON- PAYMENT OF POST- SHIPMENT CREDIT BY EXPORTER.
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THE BILL OF LADING
- IT IS A CLEAN, SHIPPED, OCEAN, CLEAN BILL IN FULL
SET AND HAS BEEN ISSUED BY A STEAMSHIP COMPANY OR ITS ACCREDITED AGENT, AND IS MANUALLY SIGNED AND DULY STAMPED.
- IT IS SELF CONSIGNED AND ENDORSED IN BLANK OR IN
FAVOUR OF THE BANK.
- IT BEARS A DATE NOT LATER THAN THE DATE OF EXPIRY
OF L / C OR OF THE ORDER.
CONT….
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THE BILL OF LADING IT DOES NOT INDICATE PART SHIPMENT OR TRANS- SHIPMENT. IT IS A FREIGHT PRE PAID BILL OF LADING OR AIRWAY BILL WHERE THE CONTRACT OF SALE IS ON c.i.f. OR c & f TERMS. IT SHOWS THAT THE GOODS SHIPPED ARE IDENTIFIABLE AS THOSE SPECIFIED IN THE L C OR THE EXPORT ORDER. IT INDICATES THAT THE STOWAGE OF THE GOODS IS IN ACCORDANCE WITH THE STIPULATION UNDER L C.
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MARINE INSURANCE POLICY IT IS THE USUAL ONE IN A NEGOTIABLE FORM, WHERE THE SHIPMENT IS COVERED BY AN OPEN POLICY. IF MADE OUT IN THE NAME, OF THE EXPORTER, CONTAINS THE USUAL BANK CLAUSE, AND IS ENDORSED IN BLANK OR IN FAVOUR OF THE BANK. BEAR A DATE NOT LATER THAN THE DATE OF THE BILL OF LADING. RELATES SOLELY TO THE GOODS MENTIONED IN THE BILL OF LADING AND THE INVOICE.
CONT….
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MARINE INSURANCE POLICY COVERS THE WHOLE OF THE CONTRACTUAL VOYAGE, AND MENTIONS THE NAME OF THE PORT OF SHIPMENT, PORT OF DESTINATION AND THE VESSEL CARRYING THE GOODS. INSURES FOR THE FULL VALUE OF THE CARGO, GENERALLY 10% TO 20% OVER THE VALUE OF c.i.f. VALUE. COVERS ALL RISKS UNLESS THE L/C OR THE ORDER SPECIFIES THE RISKS TO BE COVERED. STATES THE PERIOD OF INSURANCE.
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MARINE INSURANCE POLICY COVERS THE WHOLE OF THE CONTRACTUAL VOYAGE, AND MENTIONS THE NAME OF THE PORT OF SHIPMENT, PORT OF DESTINATION AND THE VESSEL CARRYING THE GOODS. INSURES FOR THE FULL VALUE OF THE CARGO, GENERALLY 10% TO 20% OVER THE VALUE OF c.i.f. VALUE. COVERS ALL RISKS UNLESS THE L/C OR THE ORDER SPECIFIES THE RISKS TO BE COVERED. STATES THE PERIOD OF INSURANCE.
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PERMISSIBLE DEDUCTIONS TRADE DISCOUNT AND LEGITIMATE TRADE CHARGES EG. REBATE FOR LATE SHIPMENT, QUALITY ALLOWANCE. COMMISSION PAYABLE TO A SELLING AGENT. AMOUNT PAYABLE DUE TO DIFFERENCE IN WEIGHT, QUALITY etc. ADVANCE PAYMENT AGAINST THE EXPORT RECEIVED BY THE BANKER AND PAID BY HIM TO THE EXPORTER. AMOUNT OF DUTY PAID OR TO BE PAID ABROAD BY THE IMPORTER AND RECEIVABLE FROM THE INDIAN EXPORTER ENTITLED TO TARIFF CONCESSION UNDER THE GENERALIZED SCHEME OF PREFERENCES (GSP).
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NEGOTIATION UNDER RESERVE WHERE THE CUSTOMER IS AN EXPORTER OF ESTABLISHED REPUTATION. EXECUTES AN INDEMNITY DUE TO AN IRREGULARITY OF A MINOR IN NATURE. UNDER THIS INDEMNITY, THE CUSTOMER SHOULD UNDERTAKE TO REFUND THE AMOUNT RECEIVED ON NEGOTIATION, INDEMNIFYING THE BANKER AGAINST ALL LOSSES, EXPENSES ETC., IN CASE THE DOCUMENTS ARE REFUSED BY THE FOREIGN BUYER. BANKER MAY NEGOTIATE. SUCH NEGOTIATION IS KNOWN AS NEGOTIATION UNDER RESERVE.
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DIRECT AND INDIRECT BILLS DIRECT BILL : IT IS AN EXPORT BILL DRAWN IN THE CURRENCY OF THE OVERSEAS BUYER’S COUNTRY AND SENT TO A BANK IN THAT COUNTRY OR ANY OTHER COUNTRY, PROVIDED THAT THE PROCEEDS ARE REALIZED DIRECTLY IN THE CURRENCY IN WHICH THE BILL IS DRAWN. INDIRECT BILL : IT IS AN EXPORT BILL DRAWN IN A CURRENCY OTHER THAN THAT OF THE OVERSEAS BUYER'S COUNTRY AND SENT TO A BANK IN THAT COUNTRY OR IN ANY OTHER COUNTRY FOR COLLECTION AND THE PROCEEDS ARE REALIZED IN THE CURRENCY IN WHICH IT IS DRAWN IN AN INDIRECT MANNER.
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ENDORSEMENT ON L/C ON NEGOTIATION OF THE BILL: THE AMOUNT SHOULD BE ENDORSED ON THE REVERSE OF THE LETTER OF CREDIT, IN THE FOREIGN CURRENCY AS WELL AS IN EQUIVALENT RUPEE. BALANCE IF ANY AVAILABLE SHOULD ALSO BE MENTIONED.
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EXCHANGE COVER THE NEGOTIATION / PURCHASE /DISCOUNTING OF AN EXPORT BILL IS A PURCHASE TRANSACTION. IT MUST BE COVERED BY THE BANKER BY A FORWARD SALE OF A SIMILAR AMOUNT FOR DELIVERY AND REALIZATION OF THE BILL.
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E.C.G.C. POLICY / GUARANTEE THE BANKER SHOULD SEE, THAT THE SHIPMENT IS COVERED BY THE EXPORTER BY AN E.C.G.C. SHIPMENT POLICY FOR THE FULL VALUE. IT WOULD BE IN THE INTEREST OF THE BANKER TO OBTAIN AN E.C.G.C. POST-SHIPMENT EXPORT CREDIT GUARANTEE COVERING THE DISCOUNTING FACILITIES GRANTED. THE E.C.G.C. POLICY COVERS 90% OF THE LOSS, IF ANY AND THE GUARANTEE COVERS 75% OF THE BALANCE. IF THE EXPORT IS COVERED BY BOTH THE POLICY AND THE GUARANTEE, THE BANKER IS COVERED TO THE EXTENT OF 98% OF THE CREDIT GRANTED TO THE EXPORTER.
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PERMISSIBLE CHANGES CERTAIN CHANGES IN RESPECT OF EXPORT BILLS, WHICH HAVE BEEN NEGOTIATED ARE PERMISSIBLE. CHANGE OF TENOR: AN EXPORT BILL DRAWN ON DP BASIS AND NEGOTIATED, PURCHASED OR SENT FOR COLLECTION, MAY BE CHANGED TO A DA ONE PROVIDED THAT THE MATURITY FALLS WITHIN THE PERIOD PRESCRIBED FOR REALIZATION. CHANGE OF BUYER / CONSIGNEE: IN THE EVENT OF DEFAULT ON THE PART OF THE BUYER, THE SHIPMENT MAY BE TRANSFERRED TO ANOTHER BUYER, PROVIDED THE SALE IS MADE ON THE SAME TERMS AND CONDITIONS.
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DOCUMENTATION THE DOCUMENTS OF EXPORT BILLS TO BE OBTAINED BY THE BANKER AGAINST: NEGOTIATION / PURCHASE / DISCOUNTING ARE: AN APPLICATION. THE LETTER OF CREDIT OR EXPORT ORDER. A DEMAND PROMOTE. A LETTER OF HYPOTHECATION OF BILLS. AN INDEMNITY IN THE CASE OF NEGOTIATION UNDER RESERVE. A LETTER OF CONTINUITY WHEN THE EXPORTER IS ALLOWED TO DRAW AGAINST SHIPPING DOCUMENTS.
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OVERDUE BILLS THE BANKER SHOULD KEEP A CLOSE WATCH ON THE REALIZATION OF THE EXPORT BILLS NEGOTIATED / PURCHASED / DISCOUNTED OR SENT FOR COLLECTION WHICH SHOULD BE WITHIN THE PRESCRIBED PERIOD. IF THE BILL REMAINS OUTSTANDING BEYOND THE PRESCRIBED PERIOD, HE SHOULD TAKE UP THE MATTER WITH THE EXPORTER. IF THE EXPORTER FAILS TO ARRANGE FOR THE DELIVERY OF THE PROCEEDS ON THE DUE DATE, THE BANKER SHOULD REPORT THE MATTER TO THE RESERVE BANK.
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REIMPORT OF UNSOLD GOODS GOODS EXPORTED BUT REFUSED BY THE DRAWEE OR CONSIGNEE AND IF THE EXPORTER DESIRES MAY BE RE- IMPORTED WITHOUT PRIOR PERMISSION OF RBI. THE BANKER IS REQUIRED TO VERIFY THE APPROPRIATE DOCUMENTARY EVIDENCE e.g. CUSTOMS BILL OF ENTRY OR POSTAL WRAPPER, THAT THE GOODS CLAIMED TO HAVE BEEN RE- IMPORTED HAVE ACTUALLY RECEIVED BACK, AND TO REPORT THE RE- IMPORTATION TO THE RESERVE BANK AND RETURNING THE DUPLICATE COPY OF THE RELATIVE GR. IF THE VALUE OF THE GOODS IS IN EXCESS OF RS.5000 THE CUSTOMS BILL OF ENTRY SHOULD ALSO BE FORWARDED.
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LOST SHIPMENT WHEN THE PAYMENT HAS NOT BEEN RECEIVED, AND THE SHIPMENT IS LOST IN TRANSIT, THE BANKER MUST PUT A CLAIM AS SOON AS THE LOSS IS KNOWN. BANKER SHOULD FURNISH TO THE RESERVE BANK THE DUPLICATE COPY OF THE GR/PP UNDER SUCH INFORMATION .
- THE AMOUNT FOR WHICH THE SHIPMENT WAS INSURED.
- THE NAME AND ADDRESS OF THE INSURANCE COMPANY.
- THE CURRENCY IN WHICH AND THE PLACE WHERE THE
CLAIM IS PAYABLE.
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GIFT PARCELS THE GIFT PARCELS OR OTHER EXPORTS WHICH DO NOT INVOLVE ANY FOREIGN EXCHANGE TRANSACTION, THE BANKER, MAY ISSUE A CERTIFICATE TO THAT EFFECT PROVIDED: THE EXPORT HAS BEEN MADE BY POST PARCEL OR AIR FREIGHT. THE BANKER IS SATISFIED THAT THE EXPORT DOES NOT INVOLVE ANY TRANSACTION IN FOREIGN EXCHANGE. THE VALUE OF THE SHIPMENT DOES NOT EXCEED
- RS. 25,000 SUBJECT TO THE ACCEPTANCE BY THE
CUSTOMS.
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EXTERNAL FUNDS MOBILIZATION COUNTRIES NEED TO MOBILIZE EXTERNAL FUNDS TO MEET THE GAP BETWEEN THEIR CURRENT EXTERNAL RECEIPTS AND PAYMENTS. COUNTRIES ARE REQUIRED TO MAKE PAYMENTS TO OTHER COUNTRIES AND EXTERNAL AGENCIES AGAINST THEIR IMPORTS AND REPAYMENT OF EXISTING LIABILITIES AND INTEREST ON SUCH EXISTING OUTSTANDING LIABILITIES. WHEN A COUNTRY IMPORTS MORE GOODS AND SERVICES THAN IT CAN EXPORT, THE RESULTANT GAP IS FINANCED BY EXTERNAL SOURCES. EXTERNAL FUNDS INCLUDE , EXTERNAL COMMERCIAL BORROWINGS, FOREIGN DIRECT INVESTMENT, RAISING EQUITY THROUGH ADRS/GDRS etc, FOREIGN CURRENCY DEPOSITS, FOREIGN CURRENCY LOAN
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ECB POLICY EXTERNAL COMMERCIAL BORROWING ARE PERMITTED BY THE GOVERNMENT AS A SOURCE OF FINANCE FOR INDIAN CORPORATES FOR EXPANSION OF EXISTING CAPACITY AS WELL AS FRESH INVESTMENTS.
- GOVT. OF INDIA ANNOUNCES ECB POLICY EVERY YEAR.
THE POLICY GIVE GREATER PRIORITY FOR THE PROJECTS IN CERTAIN SECTORS LIKE INFRASTRUCTURE AND CORE SECTORS, LIKE POWER, OIL EXPLORATION, TELECOM, ROAD AND BRIDGES,INDUSTRIAL PARKS etc. APPLICANTS CAN RAISE ECB FROM ANY RECOGNIZED INTERNATIONAL SOURCE SUCH AS BANKS, EXPORT CREDIT AGENCIES, FOREIGN COLLABORATORS etc.
CONT…..
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ECB POLICY THE PROCEEDS OF ECB CAN NOT BE USED FOR INVESTMENT IN STOCK MARKET AND REAL-ESTATE. PROPOSALS FOR RAISING FOREIGN CURRENCY BORROWINGS ARE REQUIRED TO BE REFERRED TO THE FINANCE MINISTRY. THE PROCEEDS OF ECB SHOULD BE USED TO MEET BUSINESS RELATED EXPENSES. PRE-PAYMENT OF THE OUTSTANDING LIABILITY UNDER ECB MAY BE PERMITTED BY THE GOVT. DEPENDING UPON CERTAIN CONDITIONS. ECB POLICY ALSO CONTAINS PROVISIONS RELATED TO INTEREST RATES FOR PROJECT FINANCING.
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SYNDICATION OF LOANS AS THE SIZE OF THE LOAN INCREASES, INDIVIDUAL BANKS FIND IT DIFFICULT TO BEAR THE RISK . THE REGULATORY AUTHORITIES ALSO PUT A LIMIT ON THE SIZE OF THE INDIVIDUAL EXPOSURE. OTHER BANKS PARTICIPATE IN LOANS TO FORM A SYNDICATE , SUCH LOANS ARE KNOWN AS SYNDICATE LOANS.
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RAISING OF EQUITY THROUGH ADRS /IDRS / GDRS EXTERNAL FUNDS CAN ALSO BE MOBILIZED BY RAISING OF EQUITY IN THE INTERNATIONAL MARKET IN THE FORM OF DEPOSITARY RECEIPTS.
- AMERICAN DEPOSITORY RECEIPTS (ADRS): ARE ISSUED
TO ENABLE THE INVESTORS IN U.S. TO OWN AND TRADE IN SHARE OF NON-U.S. COMPANIES.
- INTERNATIONAL DEPOSITORY RECEIPTS: ARE MEANT TO
FACILITATE ISSUES AND TRADING IN EUROPE AND THEREFORE, THESE ARE ALSO CALLED EUROPEAN DEPOSITORY RECEIPTS.
- GLOBAL DEPOSITORY RECEIPTS: ARE USED IN CASE OF
ISSUES IN THE EURO MARKET COMBINED WITH PRIVATE PLACEMENT IN THE U.S.TO PROFESSIONAL INVESTORS.
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FOREIGN DIRECT INVESTMENT (FDI) FDI IS ANOTHER ROUTE FOR EXTERNAL FUNDS MOBILIZATION IN THE COUNTRY. FDI IN INDIA ARE APPROVED THROUGH TWO ROUTES: 1. THE AUTOMATIC APPROVAL ROUTE. 2. FOREIGN INVESTMENT PROMOTION BOARD ROUTE.
- UNDER AUTOMATIC APPROVAL ROUTE THE RBI
ACCORDS AUTOMATIC APPROVAL,WITHIN A PERIOD OF TWO WEEKS, PROVIDED CERTAIN PARAMETERS ARE MET AS PRESCRIBED.
- WHERE THE PARAMETERS FOR AUTOMATIC APPROVAL
ARE NOT MET FDI CAN BE CONSIDERED AND APPROVED BY FOREIGN INVESTMENT PROMOTION BOARD WITHIN A NORMAL PROCESSING TIME OF 4 TO6 WEEKS.
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NON-RESIDENT ACCOUNTS
- NON-RESIDENT DEPOSITS ARE ALSO ONE OF THE MOST
IMPORTANT SOURCE FOR EXTERNAL FUND MOBILIZATION IN THE COUNTRY.
- PERSONS OF INDIAN NATIONALITY OR INDIAN ORIGIN
LIVING ABROAD (NRIs) AND OVERSEAS CORPORATE BODIES (OCBs).
- THE FACILITIES INCLUDE MAINLY MAINTENANCE OF
BANK ACCOUNTS AND INVESTMENT IN SHARES AND SECURITIES, BUSINESS, IMMOVABLE PROPERTIES etc.
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BILATERAL / MULTILATERAL ASSISTANCE ANOTHER SOURCE FOR EXTERNAL FUNDS MOBILIZATION IS BY WAY OF RECEIPTS OF BILATERAL / MULTILATERAL ASSISTANCE SUCH AS: BILATERAL OVERSEAS DEVELOPMENT ASSISTANCE SUCH AS OFFICIAL DEVELOPMENT ASSISTANCE GIVEN BY ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD) TO DEVELOPING COUNTRIES. MULTILATERAL ASSISTANCE FROM AGENCIES SUCH AS WORLD BANK, IMF, ASIAN DEVELOPMENT BANK IFC etc.
