The Export-Import Bank of India is known as the Exim bank. It is a financial institution established to promote cross border trade and investment. It was established under the 1981 Act of Export-Import Bank of India. It has its headquarters in Mumbai. It is managed by a Board of Directors. The Board of Directors includes the representative from the Government, RBI, Export Credit Guarantee Corporation of India, Financial Institution, Public Sector Banks, and the business community.
Prior to 1981, the need for separate and apex institution for export and import was not felt. The field of the Indian market at the global level was limited. But after the establishment of WTO: World Trade Organization the definition of export-import totally changed. The change in the world market, globalization, and establishment of WTO have somewhere compelled India to step into the creation of Apex institution for Export-Import and that is how the Exim bank came into being in 1982.
Need for Exim Bank
Exim bank has helped the Indian market to establish itself at the global level. The country like India with 70% of the rural population where proper guidance and support at the grass-root level was needed to establish the industries Exim bank has financially helped the rural as well as urban industries to access the global market and sell their products at better prices. The Exim bank has to an extent helped India to come out of the poverty line and made the Indian economy survive globally.
The major need felt for the establishment of the Exim bank when the importers have to bear the high cost on the value-added products and also to promote more value-added exports.
Functions of the Exim Bank
Finance for Export-Import Credits
An Exim bank provides finance facilities to the exporter and importer of the goods. It includes Pre-shipment credit, guarantee facilities, etc. One of the major export policies adopted by the govt. of India is the value-added items. Value-added means items to include all the costs incurred by the producer to make finished goods from the raw material.
Finance on Deferred basis
Exim bank provides finance to the importers on a deferred basis. Sometimes the cost of machinery and equipment in the foreign currency are more which becomes difficult for the Indian importer to afford. The Exim bank provides the guarantee on behalf of the importer or, the bank pays the amount to the foreign exporter and then later revives the amount in installment from the Indian importer.
The Exim bank helps the cross border transaction which involves the relation of Lessor and lessee for example: If the lessor is in a foreign country and lessee will be in India. Exim bank helps the Indian lessee in making payment and acquiring the item from the lessor.
Finance to export projects
Indian project exporter, executing the overseas project export, has to spend in foreign currency. So, the Exim bank helps such exporter to meet such expenses.
Line of Credit
When the number of buyers is located in the same country so, the credit or say the loan is extended to the central bank of the country and ultimately reaches the importer. The advantage of Line of Credit is the creditworthiness of different buyers shifts to that financial institution located in the buyer’s country.
Exim provides technical, administrative and other services to the exporters. Exim bank analyzes the foreign projects from the technical, managerial, marketing, financial and other relevant factors which needed to be taken in consideration and after securitizing, it will fund the project or provide business advisory and expert advice to the parties if any changes needed to be done in the project.
Resources of Exim Bank
The Exim Bank makes the availability of the funds Export-Import Business through
1) The central government makes the funds available to the Exim bank. Central Government gives a loan of twenty crores which has to be payable by the bank at a rate of interest of 5% per quarter in 15 equal annual installments. The no of installments can be increased at the request of the bank.
2) The Exim bank can also arrange funds by the issue or sell bonds and debentures.
3) It can also borrow the money from the Reserve Bank of India, which is repayment after a certain date and time fixed.
4) It can also borrow the money from different organizations, financial institutions but only after approved by the Central Government.
5) It can also receive gifts, donations grants from any government inside or outside India.
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Frequently Asked Questions
Does the State Government have any say in Exim bank activity?
The answer is No, because Exim bank comes under the ambit of the central government. The central government is the subscriber of the Exim Bank.
Is the Exim bank a body corporate?
Yes, the Exim bank is a body corporate with perpetual succession, common seal and with the power to hold and dispose of the property and can sue and be sued by its name.
Being the corporate body can proceed of winding up be initiated against the Exim Bank?
No, Exim bank is a corporate body but laws relating to winding up of companies are not applicable to the bank. But yes, it can be liquidated only after the order passed by the Central Government and the procedure as may be directed.