The paperwork that makes global trade bankable.
Trade instruments for importers, exporters, traders and contractors: letters of credit to reassure suppliers, bank guarantees to satisfy counterparties and tenders, and export packing credit and post-shipment finance to fund the cycle between order and payment.
Four instruments, four different jobs
A Letter of Credit substitutes the bank's creditworthiness for yours in the eyes of a supplier, letting you negotiate better import or purchase terms. A Bank Guarantee assures a counterparty — a tender authority, a landlord, a client — that you will perform, without tying up your own cash as a deposit. Neither is a loan in the conventional sense; both are contingent facilities that become funded exposure only if you default.
Export Packing Credit funds you before shipment, against a confirmed export order, to procure and process the goods. Post-shipment finance (bill discounting, negotiation) advances funds against shipped goods and export documents, closing the gap until the overseas buyer actually pays — often 60 to 120 days on regulated-market exports.
Pricing on export credit benefits from RBI's interest equalisation and refinance support for eligible exporters, generally making it cheaper than equivalent domestic working capital. Confirm current eligibility and rates for your product category and buyer geography, since scheme coverage changes periodically.
Indicative pricing in 2026
Export credit is typically the cheapest working capital available to an eligible exporter, given interest equalisation support. LC and BG are priced as commission, not interest, since they are contingent.
Public Sector Banks
Tier-1 Private Banks
NBFCs / non-export trade
Trade finance mistakes worth avoiding
LC and BG limits eat into your CC limit if not sized separately
Many borrowers set a single working capital limit and use it for both cash drawdowns and LC/BG issuance, then find genuine cash needs squeezed by contingent liabilities carved out of the same limit. Size non-fund-based (LC/BG) and fund-based (CC/OD) limits separately from the start.
Currency exposure between order and shipment
Import LCs and export contracts fix the transaction in a foreign currency, but the rupee cost or realisation is only locked at actual payment. On a large transaction, currency movement between order and settlement can shift outcomes by several percent. A forward cover, priced in alongside the trade instrument, removes that uncertainty.
Export scheme eligibility needs re-checking regularly
Interest equalisation and other export-support schemes have eligibility conditions tied to product category, buyer country and exporter classification, and these are revised periodically. Confirming current eligibility before pricing a large export order avoids an unpleasant surprise on realised margin.
Documents required
Incomplete files cause most multi-week delays. We assemble the full set upfront, in the order credit teams read it.
KYC & constitution
- PAN & Aadhaar of all promoters / partners / directors
- Certificate of incorporation, MOA-AOA or partnership deed
- Board resolution or partners' authority letter
- GST registration & trade licence
Financials
- 3 years ITR with computation of income
- Audited balance sheet, P&L and schedules
- 12 months' bank statements of all operating accounts
- GST returns for the last 12 months
- Existing loan sanction letters & repayment track record
Trade documents
- Export order / import purchase order or contract
- Buyer/supplier KYC and credit information where available
- IEC (Import Export Code) and RCMC where applicable
- Shipping documents, bill of lading, and insurance for post-shipment finance
- Tender document or underlying contract, for bank guarantees
Related facilities & deep-dive guides
Every facility below is placed through the same 80+ lender panel. The long-form guides carry the working numbers, worked examples and lender-by-lender detail.
Frequently Asked Questions
The questions our advisory desk is asked most often about Trade · Export · LC & BG.
A Letter of Credit is a payment undertaking — the bank pays the supplier once agreed documents are presented, used mainly in trade purchases. A Bank Guarantee is a performance or financial assurance to a third party, paid only if you fail to perform or pay as agreed.
Both are contingent, non-fund-based facilities and are typically priced as an annual commission rather than an interest rate.
Only if structured that way. It is generally better to have non-fund-based limits (LC, BG) sanctioned separately from fund-based limits (CC, OD), so contingent exposure does not crowd out your actual cash drawdown capacity.
We structure these as separate lines wherever the lender's policy allows it.
Against a confirmed export order, the bank advances funds before shipment to procure raw materials, process goods and prepare them for export. The facility is typically repaid from post-shipment proceeds or converted into post-shipment finance once goods ship.
Pricing benefits from interest equalisation support for eligible exporters, which usually makes it cheaper than equivalent domestic working capital.
Typically 60 to 120 days after shipment for regulated-market exports, depending on the buyer's payment terms and country. Post-shipment finance bridges exactly this gap, advancing against the shipping documents rather than waiting for realisation.
Buyer-country risk and payment history should factor into how much of this gap is funded versus retained as your own exposure.
Generally worth considering on any sizeable import or export contract, since the rupee cost or realisation is only fixed at actual payment, and currency movement between order and settlement can be material.
A forward cover arranged alongside the LC or export credit removes that uncertainty; we are not authorised to advise on hedging strategy directly but can connect you to your bank's treasury desk as part of the file.
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