DIBM404 EXPORT IMPORT FINANCE

Description

SESSION	JAN – FEB 2026
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	IV
COURSE CODE & NAME	DIBM404 EXPORT-IMPORT FINANCE

 

 

Assignment Set – 1

 

Q.1. (a) Explain the concept, process, and functions of a Letter of Credit in international trade. (b) Examine the role and implications of UCP 600 in the operation of Letters of Credit. (10 Marks)

Ans 1.

A Letter of Credit is a payment instrument issued by a bank on behalf of the importer, guaranteeing payment to the exporter upon presentation of compliant shipping and trade documents. It is the most widely used payment mechanism in international trade, providing security to both buyer and seller in transactions where the parties are unknown to each other and legal enforcement across borders is uncertain.

Concept and Process

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Q.2. (a) Explain the various methods of import financing available to businesses. (b) Explain the concept of factoring and discuss the various types of factoring methods. (5+5 = 10 Marks)

Ans 2.

Import financing and factoring are two critical financial mechanisms that support the working capital needs of businesses engaged in international trade. Import financing enables businesses to fund overseas procurement, while factoring converts receivables into immediate liquidity, improving cash flow and reducing credit risk exposure.

Part A – Methods of Import Financing

Letters of Credit with deferred payment allow importers to take possession of goods and defer payment for a defined period

 

Q.3. (a) Explain foreign exchange exposure and distinguish between transaction, translation, and economic exposure. (b) How can firms strategically benefit from exchange rate fluctuations? (10 Marks)

Ans 3.

Foreign exchange exposure refers to the degree to which a company is affected by changes in exchange rates. It is a fundamental risk for businesses engaged in international trade and investment, but firms that understand and manage exposure strategically can also identify opportunities within currency volatility.

Types of Foreign Exchange Exposure

Transaction

 

Assignment Set – 2

 

Q.4. (a) Explain the structure and key characteristics of the foreign exchange market. (b) Analyse the recent movement of USD/INR exchange rate and key influencing factors. (5+5 = 10 Marks)

Ans 4.

The foreign exchange market is the world largest and most liquid financial market, operating continuously around the clock across global financial centers. It determines the prices at which currencies exchange hands and plays a critical role in facilitating international trade, investment flows, and economic policy implementation.

Part A – Structure of the Foreign Exchange Market

The forex market operates at multiple levels. The interbank market, where commercial banks trade currencies among themselves, forms the core of the market and sets reference rates that flow down to retail customers

 

Q.5. Discuss the duty exemption and duty remission schemes available to exporters. Critically evaluate their benefits, limitations, and role in enhancing export competitiveness. (10 Marks)

Ans 5.

Duty exemption and duty remission schemes are key instruments of India export promotion policy that reduce the tax burden on exports, enabling Indian products to compete in international markets without the handicap of domestic duty costs embedded in the price of exported goods.

Duty Exemption Schemes

Advance Authorization scheme allows duty-free import of inputs including raw materials, components, consumables, and packaging materials that are physically incorporated into export products. Exporters

 

Q.6. (a) Explain the objectives, features, and significance of FEMA in regulating foreign exchange in India. (b) Analyse the role and functions of FEDAI. (5+5 = 10 Marks)

Ans 6.

FEMA and FEDAI together constitute the primary regulatory and self-regulatory infrastructure governing foreign exchange transactions in India. FEMA provides the statutory framework while FEDAI establishes operational guidelines and professional standards for the banking community engaged in foreign exchange business.

Part A – FEMA: Objectives, Features, and Significance

The Foreign Exchange Management Act 1999 replaced the restrictive Foreign Exchange Regulation Act with a facilitative framework aligned with India post-liberalization economic objectives. FEMA objectives include facilitating external trade and payments, promoting orderly development of the foreign exchange market, and preventing money laundering and capital flight. Unlike