Why Government of India introduce export financing and elaborate the two types of export financing available in India?

Huge quantities of goods are sold in the form of exports in the International Market. These exports require a certain amount of financial assistance for the execution of the order. The finance depends upon the types of goods to be executed and also based on the overseas buyers. The amount can vary based on the requirement from short term to long term finance. This financial assistance provided by financial institutions for the export purpose is called EXPORT FINANCE. The two types of Export Finance are pre- and post-shipment finance. 1. Pre-shipment finance: Pre-shipment finance is provided when the exporter or seller wants the payment even before the shipment of the products or goods. Finance is provided for the purchase of raw materials/goods, processing them into finished products, storage cost, packing and marking of goods prior to shipment. This type of finance is approved when a firm order is placed by the importer. Also known as packing credit. Pre-shipment finance is granted for a period of 180 days as it is a working capital. In the case of unforeseen circumstances, it can be extended to 90 days. The maximum period allowable is 270 days. 2. Post shipment finance: After dispatching the goods to the importer, the exporter has to make a bill, which is to be paid by the importer. It takes about 3 to 6 months before the amount is received by the exporter. This time gap effects the production of the exporter. For this purpose, the exporter will present the bill to the financial institution which provides finance for exports. The bank can purchase the bill or collect the bill or even discount the bill. Post shipment finance is used to pay the wages or other services. To pay for cargo/shipping charges. To pay for advertising in overseas market for promotion. The rate of interest on post-shipment finance varies from minimum 90 days and can be extended based on individual financial institution.