Cabinet nod to proposed banking mechanism for facilitation of cross-LoC trade

JAMMU: To take the cross-LoC trade to the next level, the cabinet on Wednesday endorsed the proposed institutional mechanism to provide banking facilities to traders for conducting their business across the dividing line.
The banking mechanism will help the trade to grow much faster and enable import and export of listed commodities at a larger scale and faster pace. It will address the regulatory aspects related to the trade between India and Pakistan.
The commercial banks in Jammu & Kashmir and Pakistan administered Kashmir would provide a facility to their respective exporters to realise their dues by opening a trade facilitation account at their end. The initial debit and final credit by the exporter’s bank would be through the facilitation account.
The facilitation account will enable the banks to charge handling/documentation/interest charges. It will also afford a cushion to the banks to bear exchange loss on bank’s books depending on the exchange rate movement.
On credit basis model, the exporter will get the money on day one with the bank debiting facilitation account and parting with its funds until they are paid by the importer and the amount is credited to the Nostro account. Interest payable for transactions based on credit shall be included in the facilitation fee. The facilitation fee, for credit based transactions would include interest, documentation charges and handling charges etc.
Transactions shall be possible on collection basis as well bills purchased/discounted/collected basis. No interest shall be payable on transactions done on collection basis.
The goods shall be invoiced in exporter’s domestic currency. Hence, there is no exchange risk for the exporters. Any exchange risk shall be borne by the importer.
The settlement would be done in US Dollar with the cross rates between the two currencies arrived via dollar.

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