Packing Credit is a short-term export finance facility that helps Indian exporters pay for expenses before goods are shipped. It can be used for buying raw materials, processing, manufacturing, packing, and other costs related to fulfilling an export order.
PCFC (Pre-Shipment Credit in Foreign Currency) is packing credit provided in a foreign currency. It can be useful for exporters who have foreign-currency export receivables and want to reduce exposure to currency fluctuations. Both facilities are generally provided against an export order or another eligible export-related basis, subject to the lender’s terms.
How It Works:
- The exporter receives an export order.
- Exporter applies for pre-shipment finance.
- The bank provides packing credit or PCFC.
- Exporters use funds for production and packing.
- Loan is repaid from export proceeds.
Benefits:
- Provides funds before shipment
- Helps purchase raw materials
- Supports export production
- Reduces working capital pressure
Example:
An Indian exporter receives a $50,000 export order and needs funds to manufacture the goods. It uses PCFC to finance production before shipping the order.