Running Account Facility: The RBI has permitted banks to grant packing credit advances even without lodgement of LIC or firm order /contract under the scheme of Running Account Facility subject to the following conditions:

i) The facility may be extended, provided the need for Running Account facility has been established by the exporters to the satisfaction of the bank

ii) The banks may extend this facility only to those exporters whose track record has been good

iii) LIC or firm order is produced within 2 reasonable period of time. For Commodities under selective credit control, banks should insist on production of LICs or firm orders within one month- from the date of sanction.

iv) The concessive credit available in respect of individual pre-shipment credit should not go beyond 180 days.

Packing credit may also be given under the Red Clause letter of credit. In this method, credit is given at the instance and responsibility of the foreign bank establishing the LIC. Here, the Packing credit advance is made against a simple receipt and is unsecured.