Post-Shipment Finance
Credit from shipment to realisation, and the transit-period rules that set its clock.
Post-shipment finance is credit a bank gives an exporter after the goods are shipped or the service is rendered, running until the export proceeds are realised. It bridges the gap between handing over documents and the buyer's money reaching India.
RBI's definition also includes loans against duty drawback the Government allows. In most branches, post-shipment credit is what pays off the packing credit: the export bill is financed, and the proceeds of that finance liquidate the pre-shipment advance.
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Forms of Post-Shipment Credit
Export bills purchased
What the bank does
Buys a sight bill drawn outside an LC and pays the exporter upfront
Typical case
D/P bills on a known buyer
Export bills discounted
What the bank does
Pays the discounted value of a usance bill now
Typical case
D/A bills on credit terms
Export bills negotiated
What the bank does
Pays against documents drawn under a letter of credit
Typical case
LC exports, where the bank is a nominated bank
Advance against bills for collection
What the bank does
Lends against bills it is only collecting, without buying them
Typical case
Exporters who prefer collection but need liquidity
Advance against duty drawback
What the bank does
Lends against drawback receivable from the Government
Typical case
Bridging the drawback claim
| Form | What the bank does | Typical case |
|---|---|---|
| Export bills purchased | Buys a sight bill drawn outside an LC and pays the exporter upfront | D/P bills on a known buyer |
| Export bills discounted | Pays the discounted value of a usance bill now | D/A bills on credit terms |
| Export bills negotiated | Pays against documents drawn under a letter of credit | LC exports, where the bank is a nominated bank |
| Advance against bills for collection | Lends against bills it is only collecting, without buying them | Exporters who prefer collection but need liquidity |
| Advance against duty drawback | Lends against drawback receivable from the Government | Bridging the drawback claim |
How Long Post-Shipment Credit Can Run
- Demand (sight) bills
- The advance runs for the Normal Transit Period (NTP) specified by FEDAI.
- Usance bills
- Credit for up to 365 days from the date of shipment, including NTP and any grace period. RBI asks banks to monitor the need and persuade exporters to realise sooner.
- Normal Transit Period
- The average time from negotiation, purchase or discount of the bill until the proceeds reach the bank's nostro account. It is not the time the goods take to reach the buyer.
- Overdue bill
- A demand bill not paid before NTP plus any grace period ends, or a usance bill not paid on its due date.
FEDAI Normal Transit Periods (selected)
From FEDAI Rule 2.3. Where a usance bill has a fixed or known due date, NTP does not apply.
| Bill type | NTP |
|---|---|
| Foreign currency bills on D/P or sight basis, not under LC | 25 days |
| Rupee bills, not under LC | 20 days |
| Rupee bills under LC, reimbursement at the centre of negotiation | 3 days |
| Rupee bills under LC, reimbursement in India at a different centre | 7 days |
| Rupee bills under LC, reimbursement by banks outside India | 20 days |
| Exports to a country under United Nations guidelines | Up to 120 days |
| TT reimbursement under LC by electronic means | 5 days |
NTP Is No Longer Fixed for Every Case
FEDAI's current rules let an AD bank apply a higher or lower transit period than the table for exceptional situations, based on historic data for the exporter, buyer, destination or mode of transport. The deviation must be documented, any finance beyond the prescribed NTP is capped at 90 days from shipment, and the due date cannot change after the bill has been purchased, discounted or negotiated.
NTP, overdue and liquidation questions. No signup.
Liquidation and the Exporter's Continuing Liability
Post-shipment credit is liquidated by the proceeds of the export bill when they arrive. By agreement it can also be repaid from the exporter's EEFC balance or from proceeds of other, unfinanced collection bills. To save interest, an exporter with overdue bills may also extinguish the post-shipment credit from rupee resources.
Repaying the bank does not end the export obligation. The bill stays outstanding in the bank's export monitoring until realised, and the exporter remains liable to realise it within the period FEMA prescribes. Paying off the loan and realising the export are two different things.
Two Special Cases
- check_circleUndrawn balances: where trade practice lets the exporter draw only part of the contract value (often 90-98% of FOB) with the balance payable after the buyer checks quality or quantity, banks may lend against the undrawn balance on commercial judgement, since payment is contingent.
- check_circleRetention money: on turnkey and construction contracts, no advance against retention money on the services portion; on the supplies portion banks may lend selectively. RBI suggests exporters offer guarantees instead of retention money where possible.
Temporary 450-Day Window
RBI's Trade Relief Measures Directions allowed banks to permit up to 450 days of pre-shipment and post-shipment credit for disbursements up to 31 March 2026, extended in March 2026 to disbursements up to 30 June 2026. It is a time-bound relief, not a change to the standard 365-day usance rule.
How CCFE Tests This
- check_circleNTP confusion: NTP is measured to receipt of proceeds in the nostro account, not to the goods' arrival. This is the single most common wrong option.
- check_circleDemand vs usance overdue: demand bills go overdue after NTP plus grace; usance bills on the due date.
- check_circleThe 365-day ceiling includes NTP and grace; it is counted from shipment, not from negotiation.
- check_circleRepayment vs realisation: settling the loan from rupee funds does not discharge the FEMA realisation obligation.
FAQs
What is post-shipment finance?expand_more
Credit a bank gives an exporter from the date of shipment of goods, or rendering of services, until the export proceeds are realised. It includes advances against duty drawback receivable from the Government.
What is the maximum period of post-shipment credit?expand_more
For demand bills, the FEDAI Normal Transit Period. For usance bills, up to 365 days from the date of shipment, including NTP and grace period. A temporary RBI relief allowed up to 450 days for credit disbursed up to 30 June 2026.
What is the normal transit period for export bills?expand_more
The average time from negotiation, purchase or discount of the bill until the proceeds reach the bank's nostro account, as fixed by FEDAI. For foreign currency sight bills not under an LC it is 25 days.
What are the types of post-shipment finance?expand_more
Export bills purchased, discounted or negotiated; advances against bills sent for collection; and advances against duty drawback receivable.
Next steps
- Pre-shipment financearrow_forward
- Bill purchase vs discountarrow_forward
- Crystallisationarrow_forward
- Export Realisationarrow_forward
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