How can an Indian exporter choose between export finance in rupees and foreign currency?
A. Foreign Currency Packing Credit (FCPC) • Interest charged at LIBOR + 1.5% (Max.) • A 90 days Dollar Packing Credit can be availed at 3m LIBOR + 1.5%. • 6.10% + 1.50 = 7.60%. Under this facility, the exporter does not have the option of booking a forward contract nor can he gain from any dollar appreciation against the rupee. The packing credit amount in dollars together with interest will be adjusted against the dollar bill tendered for negotiation. Rupee Packing Credit • Interest charged at 10% A 90 days Rupee Packing Credit can be availed at 10%. However, under this facility, the exporter has the option of booking a forward contract for the export proceeds, thereby getting back some money in the form of premium. At prevailing levels of premiums, the exporter will get Rs.0.35 for booking his dollar export proceeds for 90 days. This would amount to receiving 3.25% interest back. (0.35/43.63*100*365/90). The net interest cost of a rupee packing credit with a simultaneous booking of f
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