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Bank & Trade Finance

A reference guide to the banking instruments, payment methods, and regulatory requirements that govern India's cross-border trade — from Letters of Credit to eBRC compliance.

Payment Methods in International Trade

Risk & Structure

The payment method agreed between an Indian exporter and their overseas buyer — or between an importer and their overseas supplier — determines who bears the risk of non-payment or non-delivery, and what banking infrastructure is required. Four main methods are used in practice, each with a distinct risk profile.

Method Who bears risk Typical use Bank involved? FEMA compliance
Advance Payment (TT) Importer pays before shipment — exporter bears zero risk Small orders; new exporters; high-trust buyers Yes — telegraphic transfer via AD bank Proceeds received upfront; eBRC still required after shipment
Letter of Credit (LC) Bank guarantees payment on compliant documents — risk shared through bank Large orders; new trade relationships; high-risk countries Yes — issuing bank (importer's) + advising/confirming bank (exporter's) LC must be routed through an Authorised Dealer (AD) bank
Documents against Payment / Acceptance (DP/DA) Exporter ships and submits documents through bank; buyer pays to release Established relationships; moderate-risk markets Yes — collecting bank and remitting bank Proceeds must be realised within the FEMA timeline
Open Account Exporter ships first; buyer pays later — exporter bears full credit risk Long-term buyers in stable, low-risk countries Minimal — direct bank transfer on invoice due date Proceeds must be realised within 15 months of shipment

Country risk matters. RBI and FEMA guidelines require all export proceeds to be realised through an Authorised Dealer (AD) bank. For buyers in countries with currency controls or a history of payment delays, a confirmed Letter of Credit or full advance payment significantly reduces exposure.

Trade Finance Instruments

Bank-backed tools
Export & Import

Letter of Credit (LC)

An LC is a written undertaking by a bank (the issuing bank, on behalf of the importer) to pay a specified amount to the exporter, provided the exporter presents a set of documents that strictly comply with the LC's terms — within a defined period.

The key standard governing LC transactions internationally is UCP 600 (Uniform Customs and Practice for Documentary Credits), published by the ICC.

Sight LC — payment made immediately on presentation of compliant documents.
Usance (Deferred) LC — payment made after a defined period (e.g. 60 or 90 days), giving the importer time to sell goods before paying.
Export & Import

Standby Letter of Credit (SBLC)

An SBLC functions as a guarantee rather than a primary payment mechanism. It is drawn upon only if the applicant (buyer) defaults on their primary payment obligation — making it a safety net rather than a routine trade settlement tool.

Widely used as security for credit facilities extended by overseas or domestic banks.

Export & Import

Bank Guarantee (BG)

A Bank Guarantee is an instrument of indemnity issued by a bank, guaranteeing that the applicant will meet a specific commercial or financial obligation to the beneficiary. If the applicant defaults, the bank pays the beneficiary the guaranteed amount.

Performance BG — guarantees completion of a contract or supply obligation.
Financial BG — guarantees payment of a financial liability (e.g. duty deferment, tender security).
Export

Export Bill Negotiation

After shipping goods and presenting documents under an LC, the exporter can approach their bank to negotiate (purchase) the bill before the LC's payment date. The bank pays the exporter immediately — at a discount — and recovers from the overseas bank on due date.

Also possible for non-LC export bills, subject to the bank's assessment of the exporter's creditworthiness.

Export

Export Bill Collection (DP / DA)

The exporter ships goods and hands documents to their bank (remitting bank), which forwards them to the buyer's bank (collecting bank). Under Documents against Payment (DP), the buyer must pay to receive documents. Under Documents against Acceptance (DA), the buyer accepts a bill of exchange and can receive documents before payment.

Import

Buyer's Credit

A financing arrangement where an overseas lender (a foreign bank or financial institution) extends credit to an Indian importer, enabling them to pay the overseas supplier immediately while repaying the foreign lender later — typically at international benchmark rates (SOFR-linked), which are often lower than domestic borrowing costs.

Trade Credit can be extended for up to 1 year for non-capital goods and up to 3 years for capital goods, under RBI guidelines.
Import

Supplier's Credit (UPAS LC)

Under a Usance Payable at Sight (UPAS) LC structure, the overseas supplier grants deferred payment terms to the Indian importer. The supplier gets paid immediately by their bank; the importer repays on a future date. The cost is borne by the importer at international rates, which can be lower than domestic credit.

Import

Import Loan (Trust Receipt)

An import loan (often called a Trust Receipt or TR facility) allows the importer to take possession of goods and sell them before settling the bank's payment. The bank holds a charge over the goods or their proceeds until repayment. This is a short-term working capital facility specific to import transactions.

eBRC & FIRC — Export Payment Proof

Compliance documents

Two certificates are central to proving that an Indian exporter has received and realised their foreign-currency payment. Both are issued electronically by Authorised Dealer banks and are required for claiming export incentives and GST refunds.

Electronic Document

eBRC — Electronic Bank Realisation Certificate

The eBRC is issued by the exporter's AD bank once it identifies and links an inward foreign remittance (in the RBI's EDPMS system) to the corresponding export document — such as a Shipping Bill number. The bank automatically uploads this data to the DGFT's eBRC portal.

What it is used for:

— Claiming RoDTEP, RoSCTL, Duty Drawback incentives
— DGFT and foreign trade policy compliance
— GST refund claims
— RBI / FEMA audit records

Exporters can view and download their eBRCs by logging in to the DGFT portal (dgft.gov.in) using their IEC. The physical BRC has been fully replaced by the electronic system.
Electronic Document

eFIRC — Foreign Inward Remittance Certificate

An eFIRC is issued by the AD bank as official proof that a specific foreign remittance has been credited to the exporter's Indian account. Unlike an eBRC, which is linked to a specific shipment, an FIRC covers a single inward remittance and may be used for non-goods transactions (e.g. services, royalties).

What it is used for:

— Proof of foreign-currency receipt for service exporters
— GST refund claims where shipping bills are not raised
— FEMA compliance and audit purposes

When the overseas remitter and the Indian goods consignee are different entities, the bank needs clear documentation to link the payment to the shipment before issuing the eBRC.

How eBRC is generated — step by step

1

Exporter ships goods and raises Shipping Bill

The Shipping Bill number (generated at ICEGATE) is the primary identifier that links the export shipment to later payment documentation.

2

Overseas buyer makes payment

The buyer remits foreign exchange to the exporter's Indian bank account. The remittance arrives as a SWIFT inward message.

3

AD bank generates IRM in EDPMS

The exporter's Authorised Dealer bank creates an Inward Remittance Message (IRM) in RBI's Export Data Processing and Monitoring System (EDPMS).

4

Bank links remittance to Shipping Bill

The exporter provides the relevant Shipping Bill number. The bank matches and links the inward remittance to the export document in EDPMS — this is the critical step that closes the export cycle.

5

eBRC auto-uploaded to DGFT portal

Once linked, the bank automatically uploads the eBRC data to DGFT's portal. The exporter can log in with their IEC at dgft.gov.in to view, track, and download their eBRCs.

Export Finance

Exporter working capital

Export finance bridges the working capital gap between the time a manufacturer starts producing goods for an export order and the time the export payment is finally received. Indian banks offer two main stages of financing.

Pre-shipment

Packing Credit (PC)

A loan or advance granted to an exporter to finance the purchase of raw materials, manufacture, or processing of goods prior to shipment against a confirmed export order or LC. Available in Indian Rupees (PCFC in foreign currency).

Under RBI's 2025 Trade Relief Measures, the maximum credit period for packing credit has been extended to 450 days for facilities disbursed up to 31 March 2026.
Post-shipment

Post-Shipment Credit

Finance extended to the exporter after shipment of goods, against shipping documents. Covers the period between shipment and realisation of export proceeds. Includes:

Export Bill Purchase / Discount — against documents under LC or on collection basis.
Advance against undrawn balance — where part of the invoice value is collected later.
Advance against retention money — for project exporters where a portion is retained by the buyer.

Export Credit in Foreign Currency (PCFC / PSCFC)

Exporters can avail pre- and post-shipment credit in foreign currency from their AD bank. Since the loan and export proceeds are both in the same currency, this eliminates exchange rate risk on the borrowing — and the interest rate is typically linked to international benchmarks (SOFR or equivalent), which may be lower than INR lending rates.

Import Finance

Importer working capital

For Indian importers, two main structures provide access to cost-effective financing to bridge the gap between import payment and domestic sale or utilisation of goods.

Structure Who lends Currency Max tenor Underlying document
Buyer's Credit Overseas bank or financial institution Foreign (USD, EUR, etc.) 1 year (non-capital goods); 3 years (capital goods) BG / SBLC from importer's bank to overseas lender
Supplier's Credit (UPAS LC) Overseas supplier's bank Foreign (per LC terms) 1 year (non-capital goods); 3 years (capital goods) Usance LC issued by importer's AD bank
Import Loan / Trust Receipt Importer's own Indian bank INR Per bank sanction (typically 90–180 days) Bill of Lading / import documents retired on trust

All trade credits (Buyer's Credit and Supplier's Credit) must comply with RBI Master Directions on trade credits — including prescribed timelines and reporting requirements. Your AD bank is responsible for ensuring compliance.

RBI & FEMA Compliance

Regulatory framework

All cross-border trade transactions by Indian companies are governed by the Foreign Exchange Management Act, 1999 (FEMA) and administered by the Reserve Bank of India (RBI) through its Authorised Dealer (AD) banks. The key requirements for exporters and importers are:

Key timelines — exports

Export proceeds must be realised within 15 months of the shipment date
Advance payment shipment: goods must be dispatched within 3 years of advance receipt
Repatriation from IFSC foreign currency accounts: within 3 months

November 2025 FEMA Amendment — Trade Relief

Under the Foreign Exchange Management (Export of Goods and Services) (Second Amendment) Regulations, 2025 — Notification No. FEMA 23(R)/(7)/2025-RB dated 13 November 2025 — the RBI extended the mandatory export realisation period from 9 months to 15 months, and the advance payment shipment window from 1 year to 3 years. These changes apply to all exporter categories including SEZ units, EOUs, and Status Holders.

Separately, the maximum credit period for pre- and post-shipment export credit was extended to 450 days for loans disbursed up to 31 March 2026, under the RBI (Trade Relief Measures) Directions 2025.

Reserve Bank of India — rbi.org.in ↗

Key compliance terms

Term / Acronym What it means Relevant to
FEMA Foreign Exchange Management Act, 1999 — the primary legislation governing all foreign exchange transactions in India, replacing the earlier FERA All traders
AD Bank Authorised Dealer bank — a bank authorised by RBI to deal in foreign exchange. All international trade payments must flow through AD banks All traders
EDPMS Export Data Processing and Monitoring System — RBI's platform for monitoring export realisation. Banks report all export remittances here and link them to shipping bills Exporters
IRM Inward Remittance Message — the record created by the AD bank in EDPMS when a foreign payment is received. Linking an IRM to a Shipping Bill triggers eBRC generation Exporters
IDPMS Import Data Processing and Monitoring System — RBI's equivalent system for monitoring import payments and ensuring they are made against valid import documents Importers
IEC Import Export Code — a 10-digit code issued by DGFT, mandatory for any company involved in importing or exporting goods. Used to access the eBRC portal All traders
DGFT Directorate General of Foreign Trade — the government body under the Ministry of Commerce responsible for India's Foreign Trade Policy and the eBRC portal All traders
ICEGATE Indian Customs Electronic Gateway — the customs portal where Shipping Bills and Import Bills of Entry are filed. DGFT integrates with ICEGATE to validate export realisation data All traders
UCP 600 Uniform Customs and Practice for Documentary Credits — the ICC's internationally recognised ruleset governing how Letters of Credit are issued, operated, and settled LC users

Non-compliance carries serious penalties. Failure to realise export proceeds within the prescribed FEMA timeline can result in penalty proceedings under FEMA. Exporters should proactively follow up with their AD bank to ensure timely eBRC issuance and EDPMS closure.

SWIFT / BIC Code Lookup

Every international payment is routed using a SWIFT code (also called a BIC — Bank Identifier Code): an 8- or 11-character code that uniquely identifies the receiving bank and branch. You will need your overseas buyer's or supplier's bank SWIFT code when making or receiving a telegraphic transfer (TT), or when your AD bank issues a Letter of Credit via SWIFT.

Look up any SWIFT / BIC code

The official SWIFT directory covers all registered financial institutions worldwide. Use it to verify a bank's BIC before initiating a payment or instructing your AD bank.

SWIFT BIC Directory — swift.com ↗  ·  theswiftcodes.com ↗ (third-party lookup)

Format: AAAABBCCDDD — Bank (4) · Country (2) · Location (2) · Branch (3, optional)

Need guidance on trade finance documentation?

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