30 International Banking Terms: Glossary for Indian Exporters

30 International Banking Terms: Glossary for Indian Exporters

International banking terms describe the information, payment networks, account details, and charges involved in receiving money from overseas clients. For Indian freelancers and service exporters, understanding these terms can help avoid incorrect payment instructions, unexpected deductions, delayed settlements, and compliance issues.

Expert advice

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Most Indian freelancers meet several of these terms on their very first international payment. Knowing the difference between a SWIFT code, a routing number and a currency conversion charge helps you share the right details, and understand why the amount credited to your Indian account can differ from what your client sent.

Anshul Sharma

Partnerships Manager, Skydo · View on LinkedIn

The easiest way to understand these terms is to follow them through the international payment journey. The first group covers the details your overseas client may need before sending the payment. The later groups cover what happens while the money is being processed and after it reaches India.

Group 1: Setup Terms

These are the account details, banking identifiers, and payment methods your overseas client may need to initiate a payment.

1. SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT is a global financial messaging network that banks use to securely exchange instructions for cross-border transactions. It does not hold or transfer the money itself. The actual funds move through the banking system, often using correspondent banks, while SWIFT carries the payment instructions between financial institutions.

Example: When a US client sends a $2,000 international wire to an Indian exporter, the client's bank can send the payment instruction through SWIFT to the relevant banks. The funds then move through the banking and correspondent network before reaching the Indian account.

Note that SWIFT is the messaging layer, and not the money-transfer system itself.

2. BIC (Bank Identifier Code)

A BIC is a standardised identifier used to identify a financial institution in an international transaction. It is commonly called a SWIFT code because BICs are used to identify institutions within SWIFT messaging.

A BIC contains 8 characters, namely, a 4-character business-party code, a 2-character country code, and a 2-character location code. An optional 3-character branch identifier can extend it to 11 characters.

Example: An Indian exporter receiving a SWIFT wire may need to provide the receiving bank's BIC/SWIFT code along with the account number and other beneficiary details.

3. IBAN (International Bank Account Number)

An IBAN is a standardised account identifier used for international bank transfers in countries that participate in the IBAN system. It combines elements such as the country code, check digits, bank information, and account number.

IBAN is widely used across Europe and other participating markets, but Indian bank accounts do not use IBAN. An Indian exporter receiving money directly into an Indian bank account would instead provide the account details and SWIFT/BIC information requested by the bank.

4. Virtual Account

A virtual account is a dedicated set of bank details that allows a business to receive payments in a particular market or currency without maintaining a conventional local bank account there. Payment platforms can provide these details so an overseas client can make a local-style payment.

Example: Skydo provides global receiving accounts that allow Indian businesses to collect payments from overseas clients. A US client can pay into the exporter's USD receiving account, after which the funds are settled into the exporter's Indian bank account. Skydo’s account setup takes around 5 minutes.

5. Wire Transfer

A wire transfer is an electronic bank-to-bank transfer of funds and is one of the most common ways to send international B2B payments. Cross-border wires can use SWIFT for messaging and may involve intermediary or correspondent banks before the payment reaches the beneficiary.

Example: A German client sending €2,000 to an Indian exporter's bank account may need the beneficiary's account number, bank details, and SWIFT/BIC code. If intermediary banks are involved, they can add both processing time and charges.

This is why the amount received can sometimes be lower than the amount the client originally sent.

6. ACH (Automated Clearing House)

ACH is a US electronic payment network used primarily for domestic bank transfers. Unlike a typical SWIFT wire, ACH payments are processed through the US ACH system and are commonly used for recurring business payments such as salaries, invoices, and subscriptions.

For an Indian freelancer or exporter, ACH becomes relevant when the client pays into a suitable US receiving account or virtual account.

Example: A US startup paying an Indian developer a $2,000 monthly retainer could use ACH if the developer has US local receiving details. An international transaction that involves the US ACH network can also fall under the International ACH Transaction (IAT) rules where applicable.

7. SEPA (Single Euro Payments Area)

SEPA is the European payment framework that standardises euro payments between participating countries and territories. It allows eligible euro transfers to be processed using common payment standards rather than treating each participating country as a separate international payment market.

SEPA's geographical scope currently covers 41 countries and territories, including the EU and several non-EU countries.

For an Indian exporter with a EUR receiving account that supports SEPA, a French client could send €500 using a SEPA Credit Transfer instead of a traditional international wire. The exact processing time depends on the payment type and receiving institution.

8. Sort Code

A sort code is a six-digit identifier used by banks in the UK to route domestic payments to the correct bank and branch. It is generally used together with an account number.

Example: If an Indian exporter has a GBP virtual account with UK banking details, a UK client may be asked for the 6-digit sort code and account number to make a domestic UK transfer.

Note that this is different from a SWIFT/BIC code, which is used for identifying financial institutions in international transactions.

9. Routing Number (ABA Routing Number)

A routing number is a 9-digit identifier used by US banks to route domestic payments to the correct financial institution. It is commonly required for ACH transfers and may also be used for certain US domestic wire instructions.

Example: If an Indian exporter receives USD through a US virtual account, the US client may need the account's 9-digit routing number and account number to initiate the payment.

Group 2: In-Transit Terms

Once a client initiates an international payment, the transaction can pass through several banks and payment systems before reaching your account. These terms explain what happens during that journey and where charges or delays can arise.

10. Correspondent Bank

A correspondent bank is a bank that provides payment and other banking services to another bank, particularly when the two banks do not have a direct relationship. In cross-border payments, correspondent banks form part of the network that allows money to move between different banking systems.

A payment can pass through one or more correspondent banks, depending on the route and banking relationships involved. Each bank in the chain may apply its own charges.

Example: Your US client's bank does not have a direct correspondent relationship with your Indian bank. A $1,200 payment therefore travels through a correspondent bank in the US before reaching India. If that bank applies a $15–$25 processing charge, the amount passed to the next bank may be reduced accordingly.

11. Intermediary Bank

An intermediary bank is a bank that helps route a payment between the sender's bank and the beneficiary's bank. The term is often used broadly for a bank that sits somewhere between the two end institutions in a cross-border payment chain.

In practice, correspondent bank and intermediary bank can overlap. A correspondent bank may act as an intermediary in a particular transaction, while "intermediary bank" is commonly used in payment instructions to describe the bank through which the payment should be routed.

Example: When your overseas client enters your bank details for an international wire, their bank may ask for intermediary-bank information. This identifies the institution that will bridge the payment route between the sending and beneficiary banks.

12. Nostro Account

A nostro account is an account that one bank holds with another bank in a foreign country, usually in the foreign currency needed for payments and settlements. The word nostro means "our account with you."

Indian banks can maintain foreign-currency nostro accounts with overseas correspondent banks to facilitate international payments and settlements.

Example: An Indian bank maintains a USD nostro account with a US correspondent bank. When a US client sends a dollar payment through the relevant banking network, the correspondent relationship and associated accounts can be used to settle the transaction before the Indian bank credits the exporter's INR account.

13. Vostro Account

A vostro account is the same banking relationship viewed from the other bank's perspective. It is an account that a foreign bank holds with a domestic bank.

The distinction is simply whose account is being described. Nostro means "our account with you," while vostro means "your account with us." Both concepts are used in correspondent banking and foreign-currency settlement.

Example: Suppose a US bank maintains an account with an Indian bank to facilitate transactions in India. From the US bank's perspective, that account is its vostro account with the Indian bank. From the Indian bank's perspective, the same account is a nostro account belonging to the US bank.

14. SWIFT Message Types (MT103)

MT103 is the SWIFT message type historically used for a single customer credit transfer, carrying the payment instructions for a customer-to-customer international transfer. It can contain information such as the ordering customer, beneficiary, amount, currency, and other transaction details.

Example: If you ask your bank for a "SWIFT copy" for an international wire, the document may contain the MT103 details associated with the payment. It can help the bank trace or investigate a payment.

However, MT103 should not be treated as the only current format for cross-border payments. SWIFT is transitioning payment messaging to ISO 20022, with the MT103 customer-credit-transfer message corresponding broadly to the pacs.008 format.

Additionally, another related identifier you may see is the UETR (Unique End-to-End Transaction Reference), which is attached to relevant SWIFT payment messages and helps with end-to-end tracking.

15. Remittance

A remittance is a transfer of money from one party to another. In international trade, an inward remittance refers to money received in India from an overseas party.

For an Indian exporter, an overseas client's payment against an invoice can therefore be recorded as an inward remittance when the funds enter India.

Example: A US client pays an Indian software company $3,500 for development services. Once the payment is received through the Indian banking system, it is treated as an inward remittance and forms part of the documentation and reporting trail associated with the transaction.

16. Beneficiary Bank

The beneficiary bank is the bank that holds the recipient's account and ultimately receives the payment for credit to that account. In a simple transfer, it is the receiving bank at the end of the payment chain.

Example: If you maintain your export account with HDFC Bank, HDFC Bank is your beneficiary bank when a client sends an international wire directly to that account.

The beneficiary bank may also apply its own inward-remittance or processing charges. However, this depends on its tariff and the type of payment. Intermediary banks can separately deduct charges while the payment is in transit.

17. OUR / SHA / BEN Charges

OUR, SHA, and BEN are charge-allocation instructions used for international payments to indicate who bears the applicable bank charges. For SWIFT payments, these instructions appear in the payment's charge details.

Example: Your client sends $1,000 with SHA selected. If an intermediary bank deducts $20, only $980 may reach your account, before considering any separate beneficiary-bank charges or currency conversion.

The exact deductions depend on the banks and payment route involved. Even under OUR, the actual handling of charges can depend on the institutions and jurisdictions in the payment chain.

For exporters, it is worth confirming the charge instruction before the client sends the payment, particularly when the invoice must be settled for an exact amount. This helps avoid having to reconcile a short payment caused by intermediary or bank charges.

Group 3: Settlement and Compliance Terms

Once an international payment reaches India, a different set of terms becomes relevant. These cover proof of receipt, export reconciliation, currency conversion, tax rules, and the compliance information your bank or CA may need.

18. FIRC (Foreign Inward Remittance Certificate)

A FIRC is a bank-issued certificate that provides evidence of a foreign inward remittance received in India. It records details of the remittance and can be used as supporting documentation for certain tax, regulatory, and commercial requirements.

However, a FIRC is not a document that RBI universally mandates for every inward export payment. The documentation required depends on the nature of the transaction, bank, and purpose for which proof of remittance is needed. RBI's framework provides for authorised dealers to issue certificates for specified inward remittances and export-related purposes.

Example: An Indian service exporter may need evidence of foreign payment receipt for their GST or accounting records. Their bank may provide the applicable inward-remittance certificate or advice for that transaction.

19. FIRA (Foreign Inward Remittance Advice)

A FIRA is an inward-remittance document that confirms the receipt of a foreign payment and provides transaction details such as the amount, currency, and remitter information. The terminology and format can vary between banks and payment platforms.

For exporters and freelancers using a payment platform, a FIRA can provide readily accessible proof of the incoming transaction.

Example: Skydo provides an instant, free FIRA for every settled transaction, which users can access through their dashboard or receive in their inbox. This avoids having to separately request the document for each payment.

20. AD Code (Authorised Dealer Code)

An AD Code is a bank-issued code associated with an exporter's bank account for customs and foreign-exchange reporting purposes. It is used in India's export documentation and helps link export transactions to the authorised dealer bank handling the exporter's foreign-exchange transactions.

The AD Code is commonly described as a 14-digit code and is required for relevant goods-export procedures, including registration with Customs for export shipments.

Example: If an Indian business exports goods and files a shipping bill, its AD Code needs to be registered as required at the relevant port or customs location so the export transaction can be linked to the appropriate bank. The AD Code is a specific field in the Indian Customs shipping-bill process.

21. eBRC (Electronic Bank Realisation Certificate)

An eBRC is an electronic record of export realisation maintained through DGFT's system. It connects export-related information with inward-remittance data to establish that export proceeds have been received.

The process has changed from the older bank-generated model. Under DGFT's current workflow, banks transmit Inward Remittance Messages (IRMs) to DGFT, and eligible exporters can use those IRMs to generate or self-certify eBRCs. Banks continue to have access for reconciliation and legacy transactions.

Example: An exporter receives payment against an export invoice. The bank's IRM data becomes available in the DGFT system, where the exporter can link the relevant export information and generate the applicable eBRC.

The eBRC can be important when establishing export realisation for eligible regulatory or export-benefit purposes.

22. EDPMS (Export Data Processing and Monitoring System)

EDPMS is an RBI system used by authorised dealer banks to monitor export transactions and the realisation of export proceeds. Banks use the system to track export bills and update the status when the corresponding proceeds are realised and the transaction is reconciled.

Example: An Indian exporter ships goods worth $20,000 and later receives the corresponding payment. The bank reconciles the payment against the relevant export transaction and updates the export record. If an export bill remains outstanding, the bank may follow up with the exporter for the reason and supporting documentation.

This makes timely receipt and proper matching of export payments important for keeping export records in order.

23. Exchange Rate

The exchange rate is the rate used to convert one currency into another. For an Indian exporter receiving USD, EUR, GBP, or another foreign currency, the applicable conversion rate determines how many Indian rupees ultimately reach the bank account.

Here, two rates are particularly useful to understand:

Example: Suppose the relevant USD/INR mid-market rate is ₹84 per $1, but your bank converts the payment at ₹82 per $1. The ₹2 difference per dollar means a $10,000 payment would produce ₹20,000 less than if the conversion were made at ₹84, before considering any separate fees.

24. FX Markup

FX markup is the additional margin built into the exchange rate offered by a bank or payment provider when converting one currency into another. Unlike a transaction fee, it may not appear as a separate deduction on the payment statement.

Example: A provider converts your dollars at a rate that is 2% below the applicable mid-market rate. Even if it advertises a zero transfer fee, that 2% difference effectively reduces the INR value you receive. On a $10,000 payment, a 2% FX difference represents $200 in value before considering other charges.

25. Value Date

The value date is the date assigned to a transaction for purposes such as when the funds are considered effective or available for settlement, interest, or accounting purposes. It can differ from the date on which a payment instruction was initiated.

Example: Your client initiates a wire on Monday, but the payment completes through the banking chain on Wednesday. Wednesday may be the relevant value date, depending on the transaction and bank.

The exact meaning and effect of the value date depend on the payment system and bank. Hence, it should not automatically be treated as identical to the date the payment instruction was created.

26. Settlement

Settlement is the process through which the financial obligations created by a payment are completed and the funds are transferred between the relevant participants. A payment can therefore be initiated before it is finally settled.

Example: A client may initiate an international payment on Day 1, while processing through banks or payment systems means the funds are settled later.

For Skydo users, payments are settled into the Indian bank account within 24 hours after the funds are received by Skydo, subject to its applicable process and conditions.

27. LRS (Liberalised Remittance Scheme)

The Liberalised Remittance Scheme (LRS) allows resident individuals in India to remit up to USD 250,000 per financial year for permitted current-account and capital-account transactions, or a combination of both. The financial year runs from April to March. The scheme is available to resident individuals, including minors, but not to entities such as companies, partnership firms, HUFs, or trusts.

For an Indian freelancer or exporter, LRS is relevant mainly when sending money abroad, rather than receiving export proceeds.

Example: A resident individual paying for a permitted foreign software subscription, investing overseas, or making another eligible outward remittance may use the LRS framework, subject to the applicable rules and limits.

28. TCS (Tax Collected at Source) on Foreign Remittance

TCS on foreign remittances is collected on certain outward remittances made by resident individuals under LRS. It does not apply simply because an Indian exporter receives money from an overseas client.

Under the LRS, no TCS is applicable on remittances up to ₹7 lakh per financial year. Above ₹7 lakh, a 20% TCS applies to general remittances (like investments or overseas tours). For education and medical treatment, the rate is 5% above the ₹7 lakh threshold (or 0.5% if the education is funded by an approved loan).

Example: If a resident individual makes ₹12 lakh of eligible LRS remittances for a purpose subject to the general rate, the amount above the ₹10 lakh threshold, or ₹2 lakh, is subject to TCS at 20%, resulting in ₹40,000 of TCS.

29. Purpose Code

A purpose code is an RBI classification used to identify the nature of a foreign-exchange transaction. Banks use these codes when reporting inward and outward remittances, so the correct code helps classify the transaction for regulatory reporting.

For instance, P0802 is used for software implementation or consultancy services other than those covered by the relevant SOFTEX framework. Other codes apply to different types of services, goods, royalties, and other transactions.

Example: If an Indian software consultant receives payment from a foreign client, the bank may ask for the applicable purpose code based on the actual service provided. Using the correct code helps ensure the inward remittance is reported under the right transaction category.

30. KYC (Know Your Customer)

KYC is the process through which a bank or financial institution verifies a customer's identity and assesses the nature and legitimacy of their financial activity. For international payments, the provider may request identity, tax, banking, and business information before enabling transactions.

The documents required depend on the institution and customer profile. They may include PAN, Aadhaar, bank-account details, business registration documents, invoices, or information about the nature of the business.

Example: Before an Indian freelancer starts receiving international business payments through a bank or payment platform, they may need to complete KYC by submitting their PAN, identity information, bank details, and relevant business documentation.

KYC is not necessarily a one-time exercise. Banks and regulated payment providers can request updated information or additional documents when required under their ongoing compliance obligations.