Chapter 5: Facilities for Exporters and Importers (CAIIB – Paper 2)
1. As per FEMA guidelines, within how many days from the date of shipment must export proceeds be realized in India?
A. 90 days
B. 120 days
C. 9 months
D. 12 months
FEMA requires export proceeds to be realized and repatriated to India within 9 months from the date of shipment (for most exporters). In case of status holders and 100% EOUs, the period may differ.
2. Which document is mandatory for an exporter to declare the value of goods shipped abroad?
A. Bill of Exchange
B. Export Declaration Form (EDF)
C. Letter of Credit
D. Importer’s Invoice
Exporters must file an Export Declaration Form (EDF) with the authorized dealer bank, declaring the full value of goods exported, as per RBI’s trade control guidelines.
3. A software exporter in India receives payment for services rendered abroad. Which type of export proceeds realization guideline applies?
A. No realization period applies
B. 180 days
C. 12 months
D. Same 9 months rule as goods exporters
For service exporters (like software companies), the same realization period applies as goods exporters: 9 months from the date of invoice/remittance as per FEMA guidelines.
4. Which of the following is NOT permitted under exchange control regulations for exporters?
A. Retaining 100% of foreign exchange earnings in EEFC account without limit
B. Using export proceeds for repayment of packing credit loans
C. Opening EEFC accounts with authorized dealers
D. Availing export credit refinance from RBI
RBI allows exporters to retain a portion of their earnings in EEFC accounts, but not 100% without limit. Currently, the limit is 100% retention, but balances must be converted into INR at the discretion of the exporter; earlier, limits were capped. The option is framed to test awareness of regulatory changes.
5. An exporter has shipped goods worth USD 50,000. The buyer defaults and does not remit funds. Which authority grants permission for write-off of unrealized export bills?
A. DGFT
B. RBI Central Office
C. Authorized Dealer Bank (subject to prescribed limits)
D. Ministry of Commerce
Authorized Dealer (AD) banks have been delegated powers by RBI to permit write-off of unrealized export bills up to specified limits. For higher amounts, RBI’s approval is needed.
6. Pre-shipment finance (Packing Credit) is generally granted for which of the following purposes?
A. To meet the buyer’s payment after shipment
B. To finance purchase, processing, and packing of goods for export
C. To pay customs duty and port charges
D. To hedge foreign exchange exposure
Packing Credit (pre-shipment finance) is granted to exporters for financing purchase of raw materials, processing, manufacturing, and packing of goods before shipment.
7. What is the usual maximum period for which packing credit is sanctioned to an exporter?
A. 90 days
B. 120 days
C. 6 months
D. 180 days
Packing credit is generally sanctioned for a maximum period of 180 days. RBI may permit extension in genuine cases.
8. Post-shipment finance in foreign currency is generally provided through which facility?
A. Export Bills Rediscounting (EBR) / PCFC converted to post-shipment
B. Cash Credit Accounts
C. Export Credit Guarantee Scheme
D. External Commercial Borrowing
Post-shipment finance in foreign currency is given through Export Bills Rediscounting (EBR) or conversion of Packing Credit in Foreign Currency (PCFC) into post-shipment credit.
9. Which of the following is TRUE about Packing Credit in Foreign Currency (PCFC)?
A. It can be availed only in USD
B. The interest rate is linked to RBI repo rate
C. It can be availed in major convertible currencies at internationally competitive LIBOR/SOFR linked rates
D. It is available only for status-holder exporters
PCFC can be availed in major convertible currencies (USD, GBP, EUR, JPY, etc.) at internationally competitive LIBOR/SOFR/EURIBOR linked rates, making it cheaper than rupee credit.
10. An exporter has submitted documents under a Letter of Credit (LC). The negotiating bank pays the exporter immediately. This is an example of:
A. Pre-shipment credit
B. Post-shipment finance by negotiation
C. Buyer’s Credit
D. Packing Credit
When documents under an LC are negotiated, the exporter gets immediate payment. This is treated as post-shipment finance by negotiation.
11. The Gold Card Scheme for exporters was introduced by RBI with the objective of:
A. Providing gold-backed loans to exporters
B. Allowing exporters to invest surplus in gold ETFs
C. Offering concessional interest rates on retail loans
D. Ensuring easier and timely availability of export credit to creditworthy exporters
The Gold Card Scheme was introduced by RBI in 2004 to provide creditworthy exporters with assured, easier, and faster access to export credit at competitive terms.
12. Under the Gold Card Scheme, the minimum validity period of the card is:
A. 1 year
B. 3 years
C. 5 years
D. 7 years
The Gold Card is valid for a minimum period of 3 years and may be renewed thereafter, subject to satisfactory performance of the exporter.
13. Which of the following is NOT a benefit of the Gold Card Scheme for exporters?
A. Automatic renewal of card without review
B. Faster processing of export credit proposals
C. Longer repayment periods and flexibility in operations
D. Preference in granting packing credit and post-shipment finance
The Gold Card Scheme offers several benefits, including quicker sanction of export credit, longer repayment period, and operational flexibility. However, automatic renewal without review is not a feature.
14. Export Data Processing and Monitoring System (EDPMS) was introduced by RBI primarily to:
A. Track import payments
B. Monitor inflows under FDI
C. Capture, track, and monitor export transactions electronically
D. Maintain records of gold imports by nominated agencies
RBI introduced EDPMS in 2014 to digitally capture and monitor all export transactions through authorized dealer banks, ensuring timely realization and better compliance with FEMA guidelines.
15. If an exporter fails to realize export proceeds within the prescribed period, how is this reflected in the EDPMS system?
A. Exporter is automatically blacklisted
B. The exporter’s name appears in the caution list
C. The exporter’s bank account is frozen
D. DGFT cancels Importer Exporter Code (IEC)
In case of non-realization of export proceeds, EDPMS reflects the pending transactions and the exporter may be placed on RBI’s caution list, restricting further exports until compliance is ensured.
16. In export finance, factoring primarily helps the exporter by:
A. Providing long-term project finance
B. Eliminating exchange rate risk completely
C. Converting credit sales into cash by selling receivables to a factor
D. Facilitating only government-guaranteed exports
Factoring is a financial service where the exporter sells receivables (invoices) to a factor at a discount, thus getting immediate cash instead of waiting for the buyer’s payment.
17. Which of the following is NOT a feature of factoring?
A. Collection of receivables by factor
B. Credit protection in case of non-payment (in non-recourse factoring)
C. Immediate liquidity to exporter
D. Financing based on long-term capital expenditure
Factoring is a short-term financing tool based on receivables, not meant for long-term capital expenditure financing.
18. Forfaiting is best described as:
A. Short-term discounting of export bills
B. A mechanism where exporters sell medium/long-term receivables to a forfaiter without recourse
C. A credit insurance policy for exporters
D. A system of offering concessional rupee finance to exporters
Forfaiting is the purchase of an exporter’s receivables (arising from medium to long-term credit sales) by a forfaiter, without recourse, thus transferring all risks to the forfaiter.
19. Which type of exports are most suitable for forfaiting?
A. Capital goods and high-value projects with medium/long-term payment terms
B. Perishable goods requiring quick realization
C. Small-value retail exports
D. Domestic trade financing
Forfaiting is best suited for capital goods exports or project exports where credit is extended for medium to long-term periods.
20. The key difference between factoring and forfaiting is:
A. Factoring is used only for domestic trade, while forfaiting is used only for exports
B. Factoring covers only recourse financing, while forfaiting covers non-recourse
C. Factoring is generally for short-term receivables, whereas forfaiting is for medium/long-term receivables
D. Factoring is available only through RBI, while forfaiting is done through EXIM Bank
Factoring is typically used for short-term receivables and working capital needs, while forfaiting is used for medium/long-term receivables, especially in capital goods exports.
21. As per RBI’s exchange control guidelines, the normal time limit for settlement of import payments is:
A. 3 months from shipment date
B. 6 months from shipment date
C. 9 months from shipment date
D. 12 months from shipment date
RBI stipulates that import payments must normally be completed within 6 months from the date of shipment. Extensions require specific approval from AD banks or RBI.
22. Which of the following is mandatory for making import payments above USD 2,000,000 in value?
A. Importer Exporter Code (IEC)
B. Bill of Lading
C. Insurance Certificate
D. Letter of Credit or Bank Guarantee or direct remittance through AD Bank
For large import payments above USD 2 million, RBI requires settlement through established banking channels, typically via LC, Bank Guarantee, or direct remittance under FEMA rules.
23. An importer wishes to make advance payment for machinery imports. As per RBI guidelines, advance remittance without bank guarantee is allowed up to:
A. USD 500,000
B. USD 1,000,000
C. USD 2,000,000
D. USD 5,000,000
RBI permits AD banks to allow advance remittances up to USD 500,000 without bank guarantee. Above this limit, a bank guarantee or standby letter of credit is required.
24. Which system introduced by RBI monitors import transactions similar to how EDPMS monitors export transactions?
A. IDPMS (Import Data Processing and Monitoring System)
B. DGFT e-BRC System
C. SWIFT Import Data Exchange
D. ICEGATE Monitoring System
RBI introduced IDPMS (Import Data Processing and Monitoring System) in 2016 to digitally capture and monitor import transactions, ensuring compliance with FEMA and trade regulations.
25. If import payments are outstanding beyond the permitted period in IDPMS, what action may be taken against the importer?
A. Automatic cancellation of IEC code
B. Importer may be caution-listed by RBI/AD Bank
C. Importer’s current account is mandatorily frozen
D. DGFT imposes monetary penalty immediately
If import dues remain pending beyond permitted timelines, IDPMS reflects them, and the importer may be placed on the caution list by RBI/AD Bank, restricting further remittances until compliance.
26. Which of the following is a short-term credit facility extended to an importer by overseas banks or financial institutions?
A. Packing Credit
B. Export Bill Discounting
C. Buyer’s Credit
D. Forfaiting
Buyer’s Credit is a short-term credit provided by overseas lenders to importers for payment of imports, usually backed by a Letter of Comfort or Bank Guarantee from an Indian bank.
27. Supplier’s Credit in import finance refers to:
A. Credit extended by the exporter (supplier) to the importer
B. Loan from RBI to the importer
C. Credit arranged by the Import Data Processing System
D. Deferred credit under FEMA 1999
Supplier’s Credit is the credit period allowed by the exporter (supplier) to the importer, generally backed by a bill of exchange or deferred payment terms.
28. As per RBI guidelines, trade credits for imports (buyer’s/supplier’s credit) are normally permitted for a maximum period of:
A. 90 days
B. 180 days
C. 270 days
D. 3 years (for capital goods), 1 year (for non-capital goods)
Trade credits are allowed up to 3 years for capital goods and up to 1 year for non-capital goods. This ensures flexibility in financing imports.
29. In the Import Data Processing and Monitoring System (IDPMS), import transactions are matched against:
A. DGFT e-BRC filings
B. Bill of Entry data from Customs
C. Export General Manifest (EGM)
D. Shipping Bill data
IDPMS integrates with Customs systems to capture Bill of Entry data, which is then matched with AD bank records of remittances made for imports.
30. What happens if import remittances remain outstanding in IDPMS without evidence of goods being received?
A. RBI automatically debits the importer’s account
B. Customs cancels the Bill of Entry
C. The importer may be caution-listed by AD Bank/RBI
D. The transaction is automatically closed after 1 year
In case of unmatched import transactions, AD Banks can caution-list the importer in IDPMS, which restricts future remittances until compliance proof (Bill of Entry submission) is provided.
31. Trade Credit for imports refers to:
A. Any export finance facility provided to overseas buyers
B. Term loans raised from Indian banks for imports
C. Credit facilities under ECGC guarantee for exporters
D. Credit extended to importers by overseas suppliers or financial institutions
Trade Credit refers to the financing arrangements made for import payments, either as Supplier’s Credit (from exporter) or Buyer’s Credit (from overseas bank/financial institution).
32. Buyer’s Credit is generally arranged through:
A. An overseas bank or financial institution, backed by a Letter of Comfort/Guarantee from an Indian bank
B. Direct RBI funding
C. Exporter’s internal reserves
D. Importer’s foreign currency account with AD bank
Buyer’s Credit is short-term credit extended by an overseas lender to the importer’s bank, generally supported by a Letter of Comfort or Bank Guarantee from the Indian bank.
33. In Supplier’s Credit, who extends the credit to the importer?
A. Importer’s bank
B. Overseas financial institution
C. Exporter (supplier) of goods
D. RBI through AD banks
Supplier’s Credit refers to the credit given directly by the overseas exporter (supplier) to the Indian importer, often backed by a usance bill or deferred payment arrangement.
34. As per RBI guidelines, the maximum maturity period for Trade Credit (other than for capital goods) is:
A. 3 years
B. 1 year
C. 2 years
D. 180 days
For non-capital goods, the maximum maturity period allowed for Trade Credit (Supplier’s or Buyer’s Credit) is up to 1 year. For capital goods, it may be extended up to 3 years.
35. Which of the following statements about Buyer’s Credit and Supplier’s Credit is correct?
A. Buyer’s Credit is extended by exporter; Supplier’s Credit by overseas bank
B. Buyer’s Credit is available only for capital goods; Supplier’s Credit only for raw materials
C. Both are extended by RBI as part of FEMA regulations
D. Buyer’s Credit is extended by overseas banks; Supplier’s Credit by exporter (supplier)
Buyer’s Credit is a loan arranged from an overseas bank/financial institution, while Supplier’s Credit is the deferred payment allowed directly by the exporter to the importer.
36. An exporter has received a confirmed export order worth USD 200,000. The bank sanctions a pre-shipment credit (Packing Credit) in INR for 6 months. Which statement is correct?
A. The exporter must liquidate Packing Credit from export proceeds of the shipment
B. The exporter can use the funds freely for any domestic business
C. Packing Credit is available only in foreign currency
D. Packing Credit cannot exceed 90 days as per RBI
Packing Credit is granted against a confirmed export order and must be adjusted (liquidated) out of the export proceeds realized from the shipment.
37. An exporter ships goods worth USD 50,000 under a usance bill of 90 days. The bill is sent for discounting with the bank. What type of finance is this?
A. Packing Credit
B. Advance against Duty Drawback
C. Pre-shipment Credit in Foreign Currency
D. Post-shipment Usance Bill Discounting
Since the goods are already shipped and the exporter is awaiting payment under a usance bill, the bank provides Post-shipment Usance Bill Discounting.
38. An exporter avails Packing Credit in Foreign Currency (PCFC) at LIBOR + 1%. After shipment, the bill is realized early in 45 days. What happens to the unutilized interest period?
A. Exporter still pays for full sanctioned tenor
B. Interest is charged only for the actual period of utilization (45 days)
C. Interest is waived completely
D. PCFC must be converted to INR loan compulsorily
Interest under PCFC is charged only for the actual period of loan utilization, i.e., till export proceeds are realized or the credit is liquidated.
39. An exporter ships goods worth USD 100,000. The buyer refuses to pay citing quality issues. The exporter has availed post-shipment credit from the bank. Who provides risk cover to the bank?
A. RBI
B. DGFT
C. ECGC (Export Credit Guarantee Corporation)
D. EXIM Bank
ECGC provides risk cover to banks against payment defaults by overseas buyers under its Export Credit Insurance schemes.
40. An exporter has availed Advance against Duty Drawback from the bank. Which of the following is correct?
A. This facility is provided by RBI directly
B. It is granted only against Packing Credit
C. It is available only in foreign currency
D. It is a post-shipment advance given by the bank against export incentives receivable
Banks grant Advance against Duty Drawback and other incentives receivable from DGFT/Customs as post-shipment credit until the exporter actually receives such incentives.
