Page 21 - Banking Finance October 2015

EXPORT IMPORT NEWS

project exporters can take advantage Indian companies executing contracts Performance Guarantee (PG): PG
of these facilities to support their ex- within India, but which are financed by
port trade financing requirement. The multilateral funding agencies, or con- for up to 5-10% of contract value is is-
facilities cover Indian capital and engi- tracts for which deemed export benefits sued valid until completion of mainte-
neering goods and related services. are available under Foreign Trade nance period and/or grant of Final Ac-
One of the following securities is taken Policy, can avail credit under Finance for ceptance Certificate (FAC) by the over-
by Exim Bank: Cash Collateral; Corpo- Deemed Exports facility,which is aimed seas employer/client.
rate Guarantee; Shareholders and / or at helping them meet cash flow deficits.
Directors' Guarantee; Landed prop- Retention Money Guarantee
erty; Charge on fixed and/or floating Non Funded Facilities: (RMG): This enables the exporter to
assets of customers; Assignment of in-
surance policies, agreements, contract Indian companies can avail of these obtain the release of retained pay-
proceeds, rights and benefits; Any facilities to secure & facilitate execu- ments from the client prior to issuance
other security acceptable to the Bank. tion of export contracts or deemed of Project Acceptance Certificate
export contracts. (PAC)/ Final Acceptance Certificate
Export Project Cash Flow Deficit Fi- (FAC).
nance (EPCDF) is provided to Indian Advance Payment Guarantee
Project exporters executing project (APG): Issued to project exporters to Other Guarantees: E.g. in lieu of
export contract overseas. The facility
(INR/FC) enables project exporters to secure a project mobilization advance customs duty or security deposit for ex-
take care of temporary deficits in their as a percentage (10-20%) of the con- patriate labour, equipment etc.
cash-flow during contract execution tract value, which is generally recov-
period. ered on a pro-rata basis from the Eligibility: Indian project exporters se-
progress payment during project ex- curing overseas or deemed export con-
ecution. tracts.

RBI proposes for the amendment of

cooperative bank laws

In a move to bring urban co-operative banks into the mainstream, the RBI has recommended the government to
amend the laws for granting a universal bank licence to these entities. RBI had set
up a committee chaired by one of its deputy governors, R. Gandhi on the Urban
Cooperative Banks (UCBs) system. The panel has suggested the law be so amended as
to allow these to exit from the ambit of the Multi State Co-operative Societies Act
and come under the Companies Act. All new banks in the private sector are governed
by the latter law.

At present, the Banking Regulation Act that governs commercial banks does not apply fully on co-operative banks. As
a result, all RBI norms are not applicable to these entities. Today, the Companies Act allows an entity to become a
bank but that provision is not there in the laws that govern co-op banks. We have recommended to the government
to accordingly amend the laws," announced Gandhi.

He added that UCBs were now functioning well and the sector as a whole had stabilized. "UCBs have gone through
various ups and downs. The latest problem they had was in early 2000. We had to tighten the regulation and supervision.
Now they have reached a good position. Gross non-performing assets are around five per cent (of the total) and net
NPAs are three percent," he said. This move to grant commercial banking licences to UCBs comes as the central bank
has decided to issue niche bank licenses - as opposed to universal bank licenses - and has invited applicants in the
payments bank and small finance bank segment.

BANKING FINANCE | OCTOBER | 2015 | 21

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