This module will not be further enhanced. Support is limited to defect fixing only.

Introduction to Trade Finance

The following functionalities are part of the Trade Finance module.

Bank Guarantee Validations and Restrictions

An important criterion for judging the soundness of a banking institution is the size and character, not only of its assets portfolio but also, of its contingent liability commitments such as guarantees, letters of credit, etc. As a part of business, banks issue guarantees on behalf of their customers for various purposes.

The guarantees executed by banks comprise both performance guarantees and financial guarantees. The guarantees are structured according to the terms of the agreement, viz., security, maturity, and purpose. With the introduction of risk weights for both on-balance sheet and off-balance sheet exposures, banks have become more risk-sensitive, resulting in the structuring of their business exposures in a more prudent manner.

This functionality allows users to define the guarantee beneficiaries and validate the specific records.

The PAYMENT.CATEG.PURPOSE application allows users to define the beneficiary categories for the guarantees.

The following versions of the MD.DEAL application have been introduced for each type of beneficiaries of the guarantees:

• MD.DEAL,IN.INST.GUARANTEE.DGSD.
• MD.DEAL,IN.INST.GUARANTEE.CSTM.
• MD.DEAL,IN.INST.GUARANTEE.IATA.
• MD.DEAL,IN.INST.GUARANTEE.STEX.
• MD.DEAL,IN.GUARANTEE.FINANCIAL.
• MD.DEAL,IN.GUARANTEE.PERFORMANCE.
• MD.DEAL,IN.GUARANTEE.EXIM.

The IN.MD.CUST.SECTOR.RISK.CLASS application has been introduced to identify the sector values, using the entered Sector codes.

The ENQ.MD.IN.INST enquiry lists the issues of the guaranteed based on the selected MD.DEAL version.

Export Process Validations and Restrictions

Banks need to closely watch the realisation of bills and in cases where bills remain outstanding, beyond the due date for the payment from the date of export, the matter needs to be promptly taken up with the concerned exporter. If the exporter fails to arrange for the delivery of the proceeds within the stipulated period or seek an extension of time beyond the stipulated period, the matter need to be reported to the regional office concerned of the RBI stating, where possible, the reason for the delay in realising the proceeds.

The LETTER.OF.CREDIT,EXAMDEXT.IN version has been created for the extension of the expiry date of the letter of credit and a validation will check the permitted extension period.

The DRAWING.DETAILS enquiry has been provided to fetch the details of the outstanding drawings.

The expiry date of the outstanding bills cannot be extended beyond the stipulated period. The days or months the bills can be extended is defined in the Default Prn Extension Period field from the INLEND.IMPORT.EXPORT.ATTRIBUTES application.

Import and Export Bills Validations and Restrictions

The Reserve Bank of India had launched a comprehensive IT- based system called Export Data Processing and Monitoring System (EDPMS) for better monitoring of the export of goods and software and facilitating AD banks to report various returns through a single platform. The EDPMS had been operationalised with effect from February 28, 2014 and the same was available to AD banks with effect from March 01, 2014.

Under the system, the banks download the shipping bills or softex forms issued by export agencies such as customs, special economic zones (SEZ) and Software Technology Parks of India (STPIs), bill of entry issued by ports.

This data is then matched with the data on inward remittance of export proceeds from the exporting company.

The data set allows banks to immediately track the status of each consignment exported with all instruments and also allows exporters to claim benefits faster.

Merchanting Trade and Interest on Import Bills

This functionality allows banks to monitor and control the merchanting trades. Merchanting trades are transactions when there is a trader in India buying and selling goods from country A and country B with the goods never coming to India. The merchanting trades happen when the supplier of goods is resident in one foreign country, the buyer of goods is resident in another foreign country and the merchant or the intermediary is resident in India. The merchant or the intermediary will be resident in India, will book the order from the buyer, place the order with the supplier, and coordinate the shipment of goods from the supplier’s country and deliver the same in the buyer’s country.

The system performs the following primary checks for the merchanting trades:

• Is the deal reasonably profitable.
• Tenor < 9 months (end to end).
• Max outlay (4 months).
• Earmarking.

The following items have been introduced as part of this functionality:

• The AC.LOCKED.EVENTS,MTT.IN version is used to create locked events.
• The AC.LOCKED.EVENTS,REVERSAL.IN version is used to reverse locked events.
• The MTT.EARMARKING.IN enquiry is used to check the earmarking funds and to remove the locked funds.
• The INLEND.MTT.LC.DRAWING and INLEND.MTT.LETTER.OF.CREDIT routines can be attached in any drawings or LC versions respectively to validate the Merchanting Trade Transaction (MTT) cycle.

The following fields have been added to the INLEND.IMPORT.EXPORT.ATTRIBUTES application:

• Mtt Period: This field allows the user to provide the maximum merchant trading transaction period in months, for example, 9M.
• Exp Proceed Prd: This field allows the user to provide the maximum period for the export proceeds to be realised, in months, for example, 4M.
• Mtt Exp Purpose Code: This field allows the user to provide the purpose code for export proceeds.
• Mtt Imp Purpose Code: This field allows the user to provide the purpose code for import proceeds.