International finance is the study of the flow of money and capital between countries.
Trade finance is the use of financial products and services to facilitate international trade.
Following are the ways of international financing:
I. Medium to Long term:
a) External Commercial Borrowings (ECB): It is a commercial loan in the form ofbank loans, buyers’ credit, suppliers’ credit, and securitized instruments.
b) Foreign Currency Convertible Bonds (FCCBs): A bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency. It is subscribed by a non- resident in foreign currency and convertible into ordinary share of issuing company.
c) Foreign Currency Exchangeable Bond (FCEB): A bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency. It is subscribed by a non- resident in foreign currency and convertible into ordinary share of some other company.
II. Short term:
a) Trade credits (for importers): It includes suppliers’ credit or buyers’ credit for business import.
b) Export Credit: The exporter can avail pre-shipment and/ or post shipment credit either in rupees or foreign currency.
Pre-shipment finance is any loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards rendering of services.
Post-shipment finance is any loan or advance granted or any other credit provided by a bank to an exporter of goods / services from India from the date of extending credit after shipment of goods / rendering of services to the date of realization of export proceeds as per the period of realization
Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorized Dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, so that the account holders do not have to convert foreign exchange into Rupees and vice versa.
