Packing Credit

Trade Finance

Pre-shipment finance from an Indian bank to fund packaging and preparation of goods for export.

Sources

1. Reserve Bank of India — Master Direction – Export of Goods and Services, FED Master Direction No. 16/2015-16 (updated as on 17 July 2026) rbi.org.in accessed 23 September 2026

The Master Direction does not define packing credit — it is pre-shipment export finance, and the defining instrument is RBI’s credit-delivery framework rather than this one — but it settles one question that recurs in practice: how it may be repaid. “AD Category – I banks may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or Rupee resources to the extent exports have actually taken place.” Two things follow. Packing credit exists in both rupee and foreign-currency form, and repayment out of retained foreign exchange is permitted only to the extent of exports actually made — the facility follows the shipment, not the intention.

What this source settles. The Reserve Bank of India’s Master Direction is a direction to Authorised Dealer banks under sections 10(4) and 11(1) of FEMA 1999. It settles what an AD bank in India may do and what an Indian exporter must do — not what the instrument means in general commercial use elsewhere. Where the entry above states a rule, it is India’s rule for an Indian transaction; the market practice behind the term is wider than the Direction and is not defined by it.

Related terms

• Advance Payment
• Aval
• Back-to-Back LC
• Bank Guarantee
• Bill Discounting
• Bill of Exchange

From the AJG lexicon archive (July 2026).