Export Bill Discounting

Export bill discounting is a financing technique used by Indian exporters to obtain short-term funds against their export bills or invoices. It is similar to domestic bill discounting, but the underlying transaction involves exports.

Under export bill discounting, the exporter sells the export bill to a bank or financial institution at a discounted rate. The bank or financial institution then pays the exporter the discounted amount and assumes the responsibility of collecting the full amount from the foreign buyer on the due date.

Export bill discounting is governed by the Foreign Exchange Management Act, 1999, and the Reserve Bank of India (RBI) has issued guidelines for banks and financial institutions on the process of export bill discounting. The RBI allows banks to offer pre-shipment and post-shipment finance to exporters, and export bill discounting falls under post-shipment finance.

Export bill discounting is a useful financing technique for Indian exporters as it provides them with immediate cash flow to meet their working capital requirements. It also helps them to reduce their exposure to credit risk and exchange rate fluctuations. However, banks and financial institutions typically charge a discounting fee or interest rate on the export bill amount, which varies depending on the creditworthiness of the exporter and the tenor of the bill.

Overall, export bill discounting is an important component of export finance in India and plays a critical role in supporting the growth of India’s export sector