Export payment terms: A complete guide for Indian exporters in 2026

Most payment problems in Indian exports don't start at the bank. They start in the contract, on the day you signed off export payment terms you hadn't really thought through.

Whether you get paid in advance, on document presentation, or ninety days after your buyer has already sold your goods is a commercial decision you make before anything ships. Once it's agreed, your leverage is mostly gone.

This guide covers the six export payment terms Indian exporters actually use, what each one does to your risk, and the RBI rules that sit on top of all of them. Two of those rules changed in November 2025, and a lot of published guidance (including our own earlier version of this page) still quotes the old numbers.

• There are six standard export payment terms, ordered from safest to riskiest for you: cash in advance, letter of credit, documents against payment (D/P), documents against acceptance (D/A), open account, and consignment.
• Telegraphic transfer (T/T) is a payment channel, not a term. It's commonly listed as a term in Indian export practice, so this guide covers it in full, but it always sits underneath one of the six above.
• RBI now gives you 15 months, not 9, to realise export proceeds. The change came via Notification FEMA 23(R)/(7)/2025-RB dated 13 November 2025 and applies to goods, services and software alike.
• The GST clock is separate. If you export services under a Letter of Undertaking (LUT), Rule 96A of the CGST Rules still requires realisation within one year of the invoice date.
• Documentation, not buyer bad faith, causes most LC failures. An ICC Banking Commission briefing summarised by Trade Finance Global puts first-presentation refusal rates at 65% to 80%.
• Match the term to the buyer, not to habit. New buyer plus large order plus high country risk points to an LC. Repeat buyer plus small recurring invoices points to open account settled by wire.

Every term below answers the same two questions in a different way: who carries the risk of non-payment, and at what moment does money actually move. Here they are ranked from most secure for you to least.

Sources for the rows: ICC UCP 600 governs documentary letters of credit, and ICC Uniform Rules for Collections (URC 522) governs D/P and D/A. Cash in advance, open account and consignment are commercial conventions rather than rule-governed instruments.

Consignment sits at the far end of the risk ladder and is covered in the table above and in its own entry below.

Payment Terms Versus Payment Channels

This distinction trips up more exporters than any of the definitions. A payment term allocates risk and timing between you and your buyer. A payment channel is the plumbing that moves the money: a SWIFT wire, a telegraphic transfer, a card rail, or a foreign-currency receiving account in your buyer's country.

You can settle an open account invoice by wire. You can settle a cash-in-advance order by wire too. Same channel, opposite risk position. Payment channels are easy to change later. Export payment terms are not, once the contract is signed.

Our earlier version of this page listed a virtual receiving account alongside LC and open account as if it were a seventh term. It's a collection channel, not a risk-allocation term. Useful, often cheaper, but it belongs in a different category.

T/T is the awkward case. Indian exporters, freight forwarders and buyers routinely write "T/T terms" into contracts, and search behaviour follows that habit. So it gets full treatment below, with the caveat that what you're really agreeing to is advance payment, payment against documents, or open account, settled by wire.

The definitions below are short where a sibling guide already goes deep, and long where the mechanics genuinely decide whether you get paid.

Cash in Advance

Your buyer pays before you ship. You carry no payment risk at all, and the buyer carries the full risk that you never deliver.

Priya, a jewellery designer from Jaipur, only accepts advance payment for custom pieces. Buyers wire the money, she confirms receipt, then starts making. Three years in, no bad debts.

The catch is commercial, not financial. Most buyers refuse full advance payment, and insisting on it will cost you orders in competitive categories. Part-advance (30% to 50% up front, balance on documents) is the usual compromise.

One RBI point that's easy to miss: if you take an advance, you're expected to ship within the regulatory window. That window was extended from one year to three years by the November 2025 amendment, which gives long-lead-time manufacturers real breathing room.

Letter of Credit (LC)

An LC is the buyer's bank promising to pay you against documents that comply exactly with the credit. Your risk moves off the buyer and onto the issuing bank, plus that bank's country.

It's governed by ICC UCP 600, the 2007 revision, which remains the current rule set. That matters because UCP 600 is what a bank will point to when it refuses your presentation.

Ravi, a chemical exporter, had a $100,000 LC payment held for three weeks because his invoice was dated one day after the bill of lading. Nothing about the shipment was wrong. The paperwork just didn't match.

That's the normal failure mode. An ICC Banking Commission briefing, as summarised by Trade Finance Global, reports that 65% to 80% of documentary credit presentations are refused on first presentation, mostly on timing and issuer discrepancies.

A standby letter of credit export works differently. It's a guarantee you hope never to draw on, not a payment mechanism you expect to use, and it has its own guide.

Documents Against Payment (D/P)

Written in full as documents against payment, and commonly called cash against documents or CAD. It's a documentary collection governed by ICC URC 522.

Here's the flow. You ship, then hand the shipping documents to your own bank (the remitting bank) with collection instructions. Your bank forwards them to the buyer's bank (the collecting or presenting bank). That bank releases the documents to your buyer only against payment.

Until payment clears, the collecting bank holds the documents. Because the bill of lading typically represents title to the goods, you keep control of the cargo through the bank chain.

The risk you're carrying is real but specific. Your goods are usually already at or near the destination port when payment is demanded. If the buyer walks away, you're paying for demurrage, warehousing, a resale at a discount, or a return leg. You keep title, but title at a foreign port is an expensive thing to own.

Banks under URC 522 handle documents. They don't guarantee payment. That's the whole difference between a collection and an LC, and it's the sentence to remember when someone tells you D/P is "almost as safe" as a credit.

Documents Against Acceptance (D/A)

Same document flow, one changed condition. The collecting bank releases the documents when your buyer accepts a time draft, a written undertaking to pay at a future date. Not when they pay.

Title passes at acceptance. Your buyer has the goods and the documents, and you have a signed promise. URC 522 stands behind that promise no more than it stands behind a D/P payment.

So D/A puts you a full step down the ladder from D/P. You've converted a secured position into unsecured trade credit, and you've done it for the length of the draft tenor, often 60 or 90 days. Use it for buyers you'd be comfortable invoicing on open account anyway.

Don't let anyone call it an "acceptance credit" and imply bank backing. Unless a bank has separately avalised the draft or added its own undertaking, no bank is on the hook.

T/T Payment Terms in Export, and the Three Variants

A T/T, or telegraphic transfer, is a bank-to-bank electronic transfer of funds. In modern practice it's executed over the SWIFT messaging network, which is why "T/T" and "wire transfer" get used interchangeably in Indian export contracts. T/T is the older trade-finance vocabulary for the same movement of money.

Something worth stating plainly: T/T sits outside ICC's rule sets. UCP 600 covers documentary credits and URC 522 covers collections, because both are document-release mechanisms. A wire isn't. No ICC rulebook allocates risk on a T/T, so the risk lands wherever the underlying commercial term puts it.

Indian export practice splits T/T three ways, and knowing which one you've agreed to is the entire point.

Advance T/T is a cash-in-advance deal settled by wire. T/T against documents behaves like D/P but without a bank controlling document release, so you're relying on courier timing and your own discipline about releasing originals. T/T after delivery is open account with a nicer name.

On cost, expect an outward remittance charge from the buyer's bank, correspondent bank deductions along the chain, an FX conversion spread, and sometimes a flat messaging fee. We're not publishing rupee figures here, because bank tariffs vary too widely to quote honestly. Ask your AD bank for its current tariff sheet, then check what actually lands against what was invoiced.

Insist on advance or part-advance T/T when the buyer is new, when the order is small enough that an LC's cost makes no sense, or when the destination country worries you. Don't use T/T after delivery as a substitute for a bank guarantee on a large first order.

Open Account

You ship, you invoice, your buyer pays on the agreed date. No bank sits between you and the money, and you have no document-based leverage if they don't pay.

Meera, a handicraft exporter, shipped ₹12 lakhs to a US retailer on 60-day terms. The buyer filed for bankruptcy at day 45. Recovering that from India was, in practice, never going to happen.

Open account still dominates world trade, because buyers with options demand it. The right response isn't to refuse. It's to price the risk in, check the buyer's credit before you ship, cap your exposure per buyer, and consider export credit insurance for the balance.

Consignment

You ship goods to an overseas distributor and get paid only when they sell. You carry inventory risk, market risk and buyer risk together. It's a market-entry tactic rather than a term you'd choose for its economics, so treat it as a deliberate investment in a market rather than a payment arrangement.

Vague terms cause more disputes than aggressive ones. A buyer who knows exactly when they owe you money is easier to chase than one who can point at an ambiguity.

• Settlement currency - named explicitly, on the contract and the invoice, with who bears conversion cost.
• The payment trigger - shipment, document presentation, draft acceptance, delivery, or a fixed calendar date.
• Credit period - net 30, 60 or 90, and stated from a defined date (invoice date or bill of lading date, not "after delivery").
• Delivery term - the applicable Incoterms, which fixes where risk in the goods transfers. It says nothing about payment timing or currency, so never let an Incoterm stand in for payment terms.
• Required documents - the commercial invoice, packing list, transport document, certificate of origin and insurance certificate as applicable.
• Late-payment consequences - interest rate, suspension of further shipments, and the escalation path.
• Governing law and dispute resolution - the forum and the seat, agreed before you need them.

Your export payment terms and your FEMA obligations run on separate tracks, and RBI holds you responsible for the second one regardless of what your buyer agreed to.

The Realisation Window Is Now 15 Months

RBI Notification No. FEMA 23(R)/(7)/2025-RB, dated 13 November 2025, amended Regulation 9 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. The words "nine months" were replaced with "fifteen months".

This is a permanent amendment, not a temporary relief like the 2020 COVID extension. It applies uniformly to goods, services and software, and there's no separate carve-out for units in Special Economic Zones.

The same notification amended Regulation 15, extending the window to ship against an advance payment from one year to three years. If you took a deposit on a long-lead-time order, that's the change that matters most to you.

If you're still working to a 9-month internal deadline, you're being stricter with yourself than RBI is. Correct the calendar, but keep the discipline.

The GST Clock Runs Separately

This is where services exporters get caught. If you export under a Letter of Undertaking (Form GST RFD-11), Rule 96A of the CGST Rules requires you to realise payment in convertible foreign exchange within one year of the invoice date to keep the supply zero-rated.

Miss that and IGST plus interest at 18% per annum becomes payable, and your LUT privileges can be withdrawn. FEMA's 15 months does not help you here. Two clocks, two consequences, and the shorter one bites first.

eBRC, SOFTEX and EDPMS

The electronic Bank Realisation Certificate is now self-certified by the exporter on the DGFT portal. Banks transmit Inward Remittance Messages to DGFT directly, you match them against your shipping bills or invoices, and you certify. No more paying your bank per certificate. DGFT Trade Notice No. 02/2025-26 added a mandatory "Mode of Export of Services" field for the services category.

Software and IT-enabled services exports currently require a SOFTEX filing, with no minimum value threshold. RBI has notified a change retiring SOFTEX in favour of a unified Export Declaration Form covering goods, services and software together, with AD banks able to certify software exports, effective 1 October 2026.

Either way, your data reaches EDPMS, and an entry sitting unmatched there is what triggers your bank's follow-up letters.

The honest answer depends on what you sell, because goods exporters and services exporters face different mechanics even under identical FEMA rules.

If You Export Goods

You have a transport document, which means you have leverage. Use it.

• First order with a new buyer - part-advance T/T, or an LC if the value justifies the cost.
• Second to fourth order - D/P through your AD bank, cheaper than an LC, and you still control the documents.
• Established buyer, steady volume - D/A or open account, with a credit limit per buyer and insurance behind it.
• High country risk regardless of buyer - a confirmed LC, or advance payment, or don't take the order.

If You Export Services or Software

There's no bill of lading in a software export, so the document-release mechanisms above simply don't exist for you. D/P and D/A aren't available. In practice you're choosing between advance payment, milestone payments, retainers, and open account with net terms.

Ankur, a Bangalore software developer, used to bill on net 30 and then wait a week beyond that for a SWIFT wire to clear. Moving to a foreign-currency receiving account cut the settlement leg to a day and made his bank charges predictable. His payment term didn't change at all. Only the channel did.

For services exporters the protections look different. Milestone billing (30% on kickoff, 40% at a defined stage, 30% on delivery), a written scope with a change-order clause, and a stop-work right if an invoice ages past a set number of days. Those do the job that documents do in a goods export.

Buyer risk is the one exporters check. Country risk is the one that empties the account.

Three categories are worth screening before you agree to anything beyond advance payment. Political risk covers war, civil unrest and expropriation. Currency inconvertibility covers a solvent buyer who genuinely cannot get dollars out. Import restrictions cover a licence or quota change that strands your cargo at the port.

Sanctions screening belongs in the same check. Screen the buyer, the buyer's bank, the vessel and the end-use before extending open account or D/A terms. A blocked payment mid-transit is worse than a lost order.

ECGC Limited underwrites the commercial and political side for Indian exporters. Its principal short-term cover is the Standard Policy, and exporters with frequent shipments across multiple buyers typically look at the Shipments (Comprehensive Risk) Policy. We're not publishing coverage percentages or premium ranges here.

Work through these in order before you commit to export payment terms. The sequence matters, because a good buyer in a bad country is still a bad transaction.

• Check the buyer. Credit report, trade references, years in business, and whether anyone you know has shipped to them.
• Check the country. Political stability, currency convertibility, and whether your product needs an import licence there.
• Size the exposure. Not the invoice value, but the total value you'd have at risk if two shipments were in transit at once.
• Pick the term that matches steps 1 to 3, then check it against what your competitors are offering. If everyone else sells on net 60 and you demand an LC, you'll lose the order.
• Get the documentation right the first time. Given first-presentation refusal rates on LCs, this step is where the money actually leaks.

Most export payment failures we see aren't dramatic. They're a document dated wrong, a deadline nobody diarised, or a buyer who was already in trouble when they placed the order.

Run a Credit Check Before You Ship, Not After

Open account and D/A both hand your buyer the goods on the strength of their word. Verify the word first. A credit report costs less than a week of demurrage.

Diarise Both Realisation Clocks

Put the FEMA 15-month date and, if you're a services exporter under LUT, the GST one-year date on the same calendar as the invoice. The most common realisation breach isn't buyer default. It's an exporter who was owed money, expected it, and let the window close.

Treat Document Accuracy as a Process, Not a Task

For LC shipments, check the credit terms against your draft documents before the goods leave. Match dates, spellings, quantities and description wording exactly to the credit. Most refusals are avoidable.

Fix the Channel Once the Term Is Right

Getting your export payment terms right controls your risk. The channel controls your cost and your timing, and it's much the easier of the two to change.

Xflow is one option on the channel side, built for Indian exporters receiving money from abroad. It's used by 20,000+ customers and supports collections from 140+ countries in 25+ currencies.

It settles to your Indian account by noon on the next business day, converts at the live mid-market rate, and issues an eFIRA automatically on every payment. It's ISO 27001 and SOC 2 certified, and holds final Payment Aggregator - Cross Border (PA-CB) authorisation from the RBI for both exports and imports as of February 2026.

If you're comparing providers rather than terms, that's a different question with a different answer, and our solutions pages are the better place to work through it. Nothing about your commercial agreement with the buyer changes when you switch collection channels.