Under the pre-shipment credit in foreign currency (PCFC) exporters are allowed to avail pre-shipment credit in convertible currency at interest rates not exceeding 2% over 6 months LIBOR. The credit will be self-liquidating in nature and will be adjusted by discounting the relative export bill designated in foreign currency.
The banks which lend under the scheme may use the balances available in EEFC, Resident Foreign Currency Accounts, FCNR (B) Accounts, Foreign currency balances available in Escrow accounts and exporters’ foreign currency accounts. Or, it may raise lines of credit abroad at a cost not exceeding (6 months) LIBOR plus 1%.
The credit under the scheme is available for a maximum period of 180 days. If extended beyond this period 2% penal interest is chargeable. If the PCFC is not adjusted within 360 days, it will be adjusted at the TT selling rate for the currency concerned and will be treated as a rupee advance.
Banks may extend PCFC in one convertible currency in respect of an export order involved in another convertible currency. For example, an exporter can avail of PCFC in US dollars against an export order invoiced in Deutsche mark. The risk and cost of cross currency transaction will be that of the exporter.
PCFC is not available for Asian Clearing Union transactions in view of the separate method of payment prescribed for such transactions. Similarly PCFC is not available for ‘deemed exports’.
Other conditions applicable to rupee Packing Credit Accounts are applicable to PCFC also.