PCFC and EBR: Export Credit in Foreign Currency
Borrow in the currency you will earn: PCFC before shipment, EBR after.
Export credit in India comes in two currencies. Rupee packing credit and rupee bill finance carry Indian interest rates. Export credit in foreign currency lets the exporter borrow in dollars, euros or another convertible currency at internationally competitive rates, and repay from the foreign currency the export earns.
PCFC (Pre-shipment Credit in Foreign Currency) is the pre-shipment leg. EBR (Rediscounting of Export Bills Abroad) is the post-shipment leg. Together they let a bank finance an export end to end without converting to rupees until the proceeds arrive.
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PCFC and EBR at a Glance
Stage
PCFC
Pre-shipment
EBR
Post-shipment
What is financed
PCFC
Domestic and imported inputs of the exported goods
EBR
Export bills, by discounting or rediscounting
Currency
PCFC
Any convertible currency: USD, GBP, JPY, EUR and others
EBR
Any convertible currency
Maximum period
PCFC
360 days
EBR
Mainly usance bills up to 180 days from shipment, including NTP and grace; longer where FEMA allows longer usance
How it ends
PCFC
Liquidated by export documents under EBR or by foreign currency loans against demand bills
EBR
Paid off by realisation of the bill
Interest
PCFC
Freely determined by banks, linked to an international benchmark
EBR
Linked to international interest rates
| Feature | PCFC | EBR |
|---|---|---|
| Stage | Pre-shipment | Post-shipment |
| What is financed | Domestic and imported inputs of the exported goods | Export bills, by discounting or rediscounting |
| Currency | Any convertible currency: USD, GBP, JPY, EUR and others | Any convertible currency |
| Maximum period | 360 days | Mainly usance bills up to 180 days from shipment, including NTP and grace; longer where FEMA allows longer usance |
| How it ends | Liquidated by export documents under EBR or by foreign currency loans against demand bills | Paid off by realisation of the bill |
| Interest | Freely determined by banks, linked to an international benchmark | Linked to international interest rates |
The Exporter's Three Routes
The Master Circular gives exporters these options:
- check_circleRupee packing credit, then rupee post-shipment credit or discounting under EBR.
- check_circlePCFC, then discounting or rediscounting of the export bill in foreign currency under EBR.
- check_circleRupee packing credit converted into PCFC at the bank's discretion.
PCFC Rules in Working Terms
- Cross-currency PCFC
- PCFC may be in one convertible currency against an order invoiced in another, for example USD PCFC against a EUR order. The cross-currency risk and cost are the exporter's.
- Source of funds
- Banks may use EEFC, RFC(D) and FCNR(B) balances, lines of credit from overseas banks (no prior RBI approval needed), lines from other Indian banks, and foreign currency raised through buy-sell swaps, within their Aggregate Gap Limit.
- Benchmark
- The courseware describes LIBOR-linked rates. In August 2021 RBI permitted banks to use any widely accepted Alternative Reference Rate in the currency concerned, which is how PCFC is priced after LIBOR's end.
- No export in 360 days
- PCFC is adjusted at the TT selling rate for the currency, and the bank may remit to repay the overseas line without RBI permission.
- Cancelled order
- The exporter repays by buying foreign exchange through the bank, with interest on the rupee equivalent at the pre-shipment rate plus a penal rate from the date of advance.
- Forward cover
- Exporters may book forward contracts in any permitted, actively traded currency, provided they carry exchange risk in a permitted currency in the underlying transaction.
- ECGC cover
- Available in rupees only, although the PCFC itself is in foreign currency.
Foreign currency export credit questions. No signup.
Special PCFC Cases
- check_circleRunning account: available for all commodities to good-track-record exporters who establish the need; marked off first-in, first-out.
- check_circleSharing: PCFC can be split between the export order holder and the manufacturer, on the order holder's disclaimer, where the same bank or consortium leader serves both or the different banks agree.
- check_circleEOU to EOU supplies: the supplier unit's PCFC is liquidated by foreign exchange from the receiver unit, not by negotiating export documents.
- check_circleDeemed exports: only for supplies to projects financed by multilateral or bilateral agencies, liquidated by a foreign currency loan at the post-supply stage for up to 30 days or until the project authority pays, whichever is earlier.
- check_circleAgro products where packing credit exceeds FOB value: PCFC covers only the exportable portion.
How EBR Works
A bank discounts the exporter's usance bill in foreign currency. It can hold the bill in its own portfolio, funded from EEFC, RFC or FCNR(B) balances, or rediscount it abroad, usually under a Bankers' Acceptance Facility (BAF) arranged with an overseas bank or rediscounting agency. Factoring arrangements under EBR must be without recourse. Exporters may also arrange their own discounting line abroad, but it must be routed through their designated AD bank, which first adjusts any packing credit outstanding.
The rupee equivalent of the discounted value is paid to the exporter and used to liquidate the packing credit. Overdue bills carry interest from the due date to crystallisation as per the bank's policy, and if the bill is not paid, the bank may remit the discounted amount back to the overseas discounter without RBI approval.
With Recourse vs Without Recourse
Exporter's liability
With recourse (usual)
Continues until the bill is paid
Without recourse
Ends on rediscounting
Restoration of limits, EEFC credit
With recourse (usual)
Only on realisation
Without recourse
Immediately on rediscounting
ECGC cover
With recourse (usual)
Continues as before
Without recourse
ECGC liability ceases on rediscounting
| Point | With recourse (usual) | Without recourse |
|---|---|---|
| Exporter's liability | Continues until the bill is paid | Ends on rediscounting |
| Restoration of limits, EEFC credit | Only on realisation | Immediately on rediscounting |
| ECGC cover | Continues as before | ECGC liability ceases on rediscounting |
How CCFE Tests This
- check_circle360 days is PCFC's ceiling; 180 days is the usance window EBR mainly covers. Options swap them.
- check_circleNon-export within 360 days is adjusted at TT selling, not TT buying: the exporter is buying foreign currency to repay.
- check_circleExport benefits such as EEFC credit accrue on realisation, not on conversion from pre- to post-shipment, unless the bill is rediscounted without recourse.
- check_circleLIBOR wording in older questions: answer as the courseware frames it, but know that rates now link to an Alternative Reference Rate.
FAQs
What is PCFC in export finance?expand_more
Pre-shipment Credit in Foreign Currency: packing credit given in a convertible currency for domestic and imported inputs of exported goods, for up to 360 days, priced against an international benchmark rate.
What is EBR in export finance?expand_more
Rediscounting of Export Bills Abroad: the post-shipment foreign currency scheme under which banks discount export bills and may rediscount them abroad at rates linked to international interest rates.
What happens if PCFC is not liquidated within 360 days?expand_more
If no export takes place within 360 days, the PCFC is adjusted at the TT selling rate for the currency concerned.
What benchmark replaced LIBOR for PCFC?expand_more
Since August 2021 RBI has allowed banks to price export credit in foreign currency on any widely accepted Alternative Reference Rate in the currency concerned.
Next steps
- Pre-shipment financearrow_forward
- Post-shipment financearrow_forward
- EEFC Accountarrow_forward
- Forward Contractsarrow_forward
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