About payment for exports from India, Overseas customers want to make payment to Indian exporters upon receipt of goods. Overseas customers also raise concern why Indian exporters want to route shipping documents through Bank.

Reserve Bank of India’s Master Circular guides about payment for exports from India.

In India, exports and imports are highly regulated. Mainly, the following  agencies are involved:

1. DGFT (Directorate General of Foreign Trade): Responsible for policy decisions
2. Indian Customs: Responsible for operations
3. RBI (Reserve Bank of India): Federal bank of India which monitors the (in & out) flow of money.

These 3 agencies always work in-sync, thanks to IT systems in India.

In case of goods exports from India when foreign buyers asks Indian exporter to send the original shipping documents to him.

At this point, let’s refer to Master Circular of RBI here, clause No B.14 (1) (i) which reads as follows:

RBI’s master circular establishes crystal clear responsibility that Bank (Exporter’s bank) is responsible for dispatching documents.

As banks are involved, they need a guarantee about payment either from overseas buyer or overseas bank. So Indian bank will dispatch documents to:

• Overseas Buyer: If full payment is received in advance or through irrevocable LC. (Indian bank will verify the LC with client’s overseas bank).
• Overseas Buyer’s Bank: If there is any other type of LC is in contract.

The understanding of  2 options clarifies the linkage between shipping documents and payment.  Also, why Indian exporters start thinking when overseas client asks credit.