Packing Credit Loan in India: Rates, Eligibility, and Process
Packing Credit Loan in India: Rates, Eligibility, and Process
If you are an exporter who needs funds to buy raw materials, manufacture goods, and pack them before shipping, a packing credit loan is exactly what you need. It is a short-term working capital facility offered by Indian banks specifically to exporters, and it comes at concessional interest rates thanks to RBI’s export promotion policies.
Banks like SBI, HDFC, ICICI, Axis, and Kotak actively offer packing credit loans. Even EXIM Bank and Cooperative Banks serve smaller exporters in commodity-heavy regions like Gujarat, Maharashtra, and Tamil Nadu.
What Is a Packing Credit Loan?
A packing credit loan (also called pre-shipment credit) is a working capital advance given to an exporter against a confirmed export order or letter of credit (LC). The funds are used to procure inputs, manufacture goods, pay labour, and transport goods to the port.
Once the goods are shipped and export documents are submitted to the bank, the packing credit account is liquidated from export proceeds. If the exporter gets post-shipment finance, the packing credit is converted into a post-shipment loan automatically.
Rupee Packing Credit vs PCFC
- Rupee Packing Credit (PC): Loan in Indian rupees at rates between 7% and 9% per annum. Suitable for exporters whose costs are entirely in rupees.
- Packing Credit in Foreign Currency (PCFC): Loan in USD, EUR, or GBP at SOFR-linked rates, typically 4% to 6% per annum. Suitable for exporters with foreign currency raw material costs or those wanting to save on interest.
Interest Rates
| Facility | Tenure | Rate (Approx.) |
|---|---|---|
| Rupee Packing Credit | Up to 180 days | 7% to 9% p.a. |
| Rupee Packing Credit (extended) | 181 to 270 days | 9% to 11% p.a. |
| PCFC | Up to 180 days | 4% to 6% p.a. |
| Beyond sanctioned period | Any | Penal rates: 14%+ |
These are indicative rates. Actual rates depend on the bank, your credit score, and the tenure. SBI and Canara Bank tend to be the most competitive for rupee packing credit among public sector banks.
Eligibility
Packing credit is a priority sector loan under RBI guidelines. Eligibility is relatively straightforward for established exporters:
- Valid IEC (Importer Exporter Code) from DGFT
- Confirmed export order, LC, or firm contract from an overseas buyer
- Good credit record with the bank; CIBIL score above 700
- Business vintage of at least 1 year (new exporters may need 100% collateral)
- Satisfactory turnover and financial health
- ECGC policy recommended for higher limits
Documents Required
- Packing credit application form
- Copy of export order / LC from overseas buyer
- IEC certificate
- GST registration certificate
- Last 2 to 3 years of audited balance sheets and P&L accounts
- Last 6 months of bank account statements
- Projected turnover and export order pipeline
- Collateral documents, if required by the bank
Application Process
- Receive export order: Get a confirmed purchase order or LC from your overseas buyer with clear shipment deadlines and quantity.
- Calculate packing credit requirement: Estimate the funds needed for procurement, production, labour, and logistics. Keep it tied to the specific export order value.
- Apply at the bank: Submit the application at your bank’s trade finance desk. SBI has dedicated export credit cells in port cities like Mumbai, Chennai, and Kolkata.
- Credit appraisal: The bank checks your financials, export order authenticity, and credit history. New applicants may take 7 to 14 days; existing customers with limits can get disbursals in 1 to 2 days.
- Disbursement: Funds are credited to your packing credit account. Draw as needed to pay suppliers and workers.
- Liquidation: After shipment, submit documents to the bank. The packing credit is closed from export proceeds within the sanctioned tenure.
FAQ
Is packing credit available for deemed exports?
Yes. RBI guidelines extend pre-shipment credit to deemed exports like supplies to EOU units, SEZ developers, and government projects funded by international agencies. The tenure for deemed exports can be up to 180 days.
Can a packing credit loan be extended?
Yes, but only with the bank’s approval and valid reasons such as shipping delays or buyer requests. Extensions from 180 to 270 days are common. Beyond 270 days, the account is treated as a non-performing asset unless regularised.
What if the export order gets cancelled after packing credit disbursal?
If the export does not happen, the packing credit must be repaid at a higher interest rate applicable to domestic loans. The bank may also require you to show documentary evidence of the cancellation. This is a significant commercial risk to manage carefully.
