India - Country Commercial Guide
Trade Financing
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Methods of Payment

Import financing procedures in India adhere to Western business practices. The safest method of receiving payments from Indian importers is through an irrevocable letter of credit (L/C). L/Cs should be payable in favor of the supplier against presentation of shipping documents through the importer’s bank. Importers open L/Cs valid for three to six months depending upon the terms of the agreement. Typically, L/Cs are opened for a specified period to cover products and shipping. There are several lines of credit available to U.S companies doing business in India.

The Indian Rupee is a partially convertible currency. The Reserve Bank of India (RBI) and the Foreign Exchange Management Act, 1999, govern transactions involving foreign exchange. The RBI delegates its powers to authorized dealers within suitable guidelines to deal in foreign exchange.

Indian importers must comply with RBI guidelines on the Master Direction – Import of Goods and Services for import related payments. The guidelines specify time limits for import payments and advance remittances, including the interest payment mechanism. The guidelines also cover procedures for receiving import documents and for purchases of foreign currency, gold, aviation goods, non-physical imports, and situations such as import payments through online Payment Gateway Service Providers.

A resident Indian may pay for the import of goods in foreign currency with an international credit card or debit card issued through the servicing bank in India against the charge slip signed by the importer (assuming the transaction conforms to the foreign trade policy in force). However, international cards are often not accepted by vendors as payment processors regularly refuse to complete such transactions.

RBI authorized banks to enter factoring arrangements with international factoring companies, preferably members of the Factors Chain International. RBI approval is not required for transactions compliant with the latest foreign trade policy and import-related foreign exchange guidance.

Deferred payment arrangements, including supplier and buyer credit, up to five years are treated as trade credits. The RBI has issued related guidance in Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations. Indian importers have access to trade credits extended by overseas suppliers, banks, financial institutions, and other lenders recognized in this framework. Importers can choose between local currency or foreign currency for importation of capital goods and non-capital goods allowed under India’s foreign trade policy.

The Securities and Exchange Board of India registers and authorizes Indian credit rating agencies. Such agencies compute and share credit scores and reports with financial institutions and applicants. Credit rating agencies in India include Credit Rating Information Services of India Ltd., India Rating and Research Pvt. Ltd., The Investment Information and Credit Rating Agency, Credit Analysis and Research Ltd., Brickwork Ratings India Pvt. Ltd., SMERA Ratings Ltd., and Infometrics Valuation and Rating Pvt. Ltd.

India allows a wide variety of debit and credit cards issued by banks and supported by the Visa, MasterCard, Discover, American Express, RuPay and JCB networks. According to the RBI, as of April 2022, the number of credit and debit cards issued has soared to 75.16 million and 920 million, respectively. As noted above, international credit cards issued by these networks may not be accepted in India.

Recently, an Inter Departmental Group (IDG) was constituted by the Reserve Bank of India (RBI) for internationalization of Indian Rupee, now enabling use of INR for settling foreign trade thereby achieving internationalization of INR. The RBI made regulations permitting banking arrangements for invoicing, payment and settlement of exports and imports in INR. Currently, the RBI allows banks of 18 countries to trade internationally in INR via vostro accounts (special rupee vostro account) on approval.

Banking Systems

India has an extensive banking network that includes 12 public sector, 22 private sector, and 46 foreign commercial banks. Eleven small finance banks and six payment banks are the latest additions to the banking network to improve financial inclusion in the country. In addition, there is a large network of regional rural banks and cooperative banks. Public sector banks in India that have dominated the Indian banking industry for many years have witnessed turmoil in recent years due to poor quality and non-performing assets. The Indian government recently led a massive restructuring and recapitalization of public sector banks to address non-performing assets and rising loan defaults.

Open banking in India is gaining popularity with the success of the Unified Payment Interface (UPI) and mobile wallets for digital payments. Indian banks, realizing the need to be a part of the digital innovation process, have embraced financial technology solutions by offering digital lending, insurance, capital market and asset management, and robo-advisory services. India’s UPI is steadily becoming globally attractive amid measures to enable seamless cross-border transactions. This is lowering the cost of fund transfers and remittance payments. Overseas markets accepting UPI payments include Singapore, Malaysia, UAE, France, BENELUX countries, Nepal, UK, UAE, Saudi Arabia, Bahrain, Singapore, Maldives, Bhutan, and Oman.

The RBI has sole authority to issue banknotes and is also responsible for granting licenses for new bank branches. The RBI is also the supervisory body for banking operations in India and administers exchange control, banking regulations, and the Indian government’s monetary policy. Indian banks must also adhere to the prudential norms laid down by the Basel Group.

Indian companies that are importing goods or borrowing from U.S. companies should comply with RBI guidelines in administering Foreign Exchange Management Act, 1999.

For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide available a

Foreign Exchange Controls

The RBI sets India’s exchange-control policy and administers foreign exchange regulations in consultation with the Indian government. The RBI also acts as a custodian of foreign exchange reserves in India. India’s foreign exchange control regime is governed by the Foreign Exchange Management Act. This act facilitates external trade and payments and promotes the orderly development and maintenance of the foreign exchange market in India.

Export-Import Bank of the United States (EXIM)

The EXIM is the official export credit agency of the United States. When private sector lenders are unable or unwilling to provide financing, EXIM fills the gap for U.S. businesses by equipping them with the financing tools necessary to compete for global sales. In doing so, the EXIM Bank levels the playing field for U.S. goods and services competing with foreign competition in overseas markets so that American companies can create more jobs at home. EXIM consistently maintains a low default rate and closely monitors credit and other risks in its portfolio. This ensures comprehensive management of EXIM transactions throughout the entire transaction lifecycle. EXIM’s County Limitation Schedule outlines the level of support available for the Indian market.

To access India’s ICS section on financing, visit the U.S. Department of State Investment Climate Statement website.