Post Shipment Credit in Foreign Currency: How It Works
TL;DR - Summary
- What is post shipment credit in foreign currency? - Post shipment credit in foreign currency (PSFC) is a short-term loan that a bank extends to an Indian exporter after goods have been shipped, disbursed in foreign currency against export bills to bridge the gap until the overseas buyer pays.
- Who is eligible for post shipment credit in foreign currency and what documents are needed? - Merchandise exporters, service exporters with a valid export contract and proof of service delivery, and e-commerce exporters with valid documentation are eligible for post shipment credit in foreign currency, and the core documents are the export contract or order, commercial invoice, shipping bill, airway bill or bill of lading, and any buyer credit-related documents or Letter of Credit.
- What does post shipment credit in foreign currency cost and how long can you hold it? - RBI mandates that the interest rate on post shipment credit in foreign currency must not exceed LIBOR/SOFR plus a permitted spread, and the facility typically runs for a maximum of 180 days from the date of shipment, after which the loan is reclassified and penal interest applies.
- How is post shipment credit in foreign currency repaid and what happens after settlement? - Post shipment credit in foreign currency is repaid from the foreign remittance your buyer sends, and after repayment you still need a Foreign Inward Remittance Certificate (FIRC) as RBI-mandated proof that export proceeds were realised.
What Is Post Shipment Credit in Foreign Currency?
Post shipment credit in foreign currency (PSFC) is a short-term loan that a bank extends to an Indian exporter after goods have been shipped, disbursed in foreign currency against export bills.
Exporters use PSFC to bridge the working capital gap between the date of shipment and the date the overseas buyer actually pays. Operations, supplier payments, and overheads keep moving while you wait for the remittance.
Say a Pune-based garment exporter ships an order worth $50,000 to a US retailer on 60-day credit terms. The exporter submits the shipping bill and invoice to their bank and draws PSFC to cover payroll and raw material costs while the payment clock ticks.
Who Is Eligible for PSFC and What Documents Do You Need?
PSFC is open to merchandise exporters, and DGFT's 2023 e-commerce extension also covers service exporters and e-commerce exporters with valid documentation. Service exporters need a valid export contract and proof of service delivery. The core documents you bring to the bank are the export contract or order, commercial invoice, shipping bill, airway bill or bill of lading, and any buyer credit-related documents or Letter of Credit.
PSFC is available to eligible merchandise exporters. Service exporters and e-commerce exporters may also qualify, subject to the applicable rules and documentation.
To apply, you may need the following documents:
- Export contract or order
- Commercial invoice
- Shipping bill
- Airway bill or bill of lading
- Any buyer credit-related documents or Letter of Credit
What Are the Different Types of Post Shipment Credit in Foreign Currency?
Post shipment credit in foreign currency comes in four main types: bill discounting, advance against export bills sent for collection, advance against duty drawback, and advance against export incentives.
- Bill discounting: you submit export bills to the bank, which buys or discounts them after verifying their credibility and validity, then credits funds to your account after deducting applicable interest for the period.
- Advance against export bills sent for collection: the bank advances funds based on bills that have been sent for collection but not yet paid by the overseas buyer.
- Advance against duty drawback: when you qualify for duty drawback (a customs duty refund on imported inputs that are subsequently exported), you can draw an advance against that entitled amount from your bank.
- Advance against export incentives: if you are eligible for government export incentives, you can receive an advance against those receivables from your bank or financial institution.
The table below sets PSFC against pre shipment credit in foreign currency (PCFC).
| Parameter | PSFC (Post Shipment Credit in Foreign Currency) | PCFC (Pre Shipment Credit in Foreign Currency) |
|---|---|---|
| Stage | After goods are shipped | Before goods are shipped |
| Purpose | Bridge gap until buyer payment arrives | Fund production/procurement before shipment |
| Trigger document | Shipping bill, export invoice, bill of lading | Export order or Letter of Credit |
| Currency | Foreign currency | Foreign currency |
| Repayment source | Incoming foreign remittance from buyer | Proceeds from export shipment |
| When to choose | Buyer is on credit terms; you need liquidity post-shipment | You need funds to manufacture or procure before shipping |
What Does PSFC Cost? Interest Rates and Tenure Explained
RBI mandates that PSFC interest rates must not exceed LIBOR/SOFR plus a permitted spread. The facility typically runs for a maximum of 180 days from the date of shipment, and a loan that is not repaid within that window is reclassified and attracts penal interest.
Ask your bank to show you the benchmark rate it is using, so you can verify the quote independently.
Tenure also affects what you pay. If your buyer is on 90-day payment terms, structure your PSFC tenure to match, because drawing for 180 days when you expect payment in 90 means paying unnecessary interest.
⚠️ WATCH OUT
PSFC has a maximum tenure of typically 180 days from the shipment date. If the buyer's payment is delayed beyond this window, the loan is reclassified by the bank and penal interest is charged on the outstanding amount. Structure your buyer payment terms so they fall well within this deadline.
How Do You Apply for PSFC? Step-by-Step for Indian Exporters
You apply for PSFC in six steps: assess how much financing you need, gather your documents, select a bank or financial institution, submit the application, negotiate the loan terms, and receive the disbursement.
- Assess your requirement: calculate the financing amount you need to cover working capital until buyer payment is expected, and factor in interest cost before deciding on the quantum.
- Gather documents: export contract or order, commercial invoice, shipping bill, airway bill or bill of lading, and any buyer credit-related documents or Letter of Credit.
- Select your bank or financial institution: approach your existing banker first, since your relationship and existing export account speed up processing. Also evaluate terms and processing timelines at other institutions.
- Submit the finance application: lodge the complete document set with your bank. The bank reviews the documents, validates the export bill, and either approves or requests additional documents.
- Negotiate loan terms: discuss the interest rate (benchmarked to LIBOR/SOFR plus a permitted spread), repayment structure, and tenure. You may also negotiate for a higher limit if your business volume justifies it.
- Receive disbursement: once approved, funds are credited to your account. Plan how you will deploy them against specific working capital needs, and calendar the repayment date against your expected buyer payment.
How Is PSFC Repaid and What Happens After Settlement?
You repay PSFC from the incoming foreign remittance your buyer sends, in the same foreign currency you receive from the buyer. Once the loan is repaid, you still need a Foreign Inward Remittance Certificate (FIRC) as RBI-mandated proof that export proceeds were realised.
Repayment depends entirely on how fast the foreign remittance from your buyer lands in your account. Delays in receipt mean delays in repayment, and potential penal interest.
Skydo virtual accounts in USD, EUR, GBP, SGD, AUD, and CAD ensure incoming buyer payments arrive within 1 working day with full real-time visibility, so your PSFC repayment timeline stays on track.
The FIRC is the primary document that proves export realization to your bank, auditors, and RBI. Missing or delayed FIRCs can hold up future PSFC applications. With Skydo, a FIRC is auto-generated for every inward remittance, so you do not need to request it manually from your bank.
⚠️ COMMON MISCONCEPTION
Repaying PSFC does not automatically close your export compliance loop. You still need the FIRC and, where applicable, eBRC closure to satisfy RBI and DGFT reporting requirements.
PSFC vs PCFC: What Is the Difference and Which Should You Choose?
The core difference between PSFC and PCFC is timing. You avail PSFC after shipment against export bills already raised, and PCFC before shipment to fund production or procurement. Choose PCFC when you need working capital to manufacture, pack, or procure raw materials before you can ship, and choose PSFC when the goods are already shipped and you are waiting on the buyer to pay.
Both facilities are denominated in foreign currency. That means you avoid exchange rate risk on the loan itself, because repayment is in the same foreign currency you receive from the buyer.
You can also use both sequentially: PCFC to fund production, then PSFC once the goods are dispatched and the export bill is raised. The two facilities are complementary, not mutually exclusive.
| Parameter | PSFC | PCFC |
|---|---|---|
| Stage of trade cycle | Post-shipment | Pre-shipment |
| Trigger | Shipping bill + export invoice | Export order / Letter of Credit |
| Purpose | Bridge gap until buyer remits | Fund production/procurement |
| Repayment source | Buyer's foreign remittance | Export shipment proceeds |
| Typical tenure | Up to 180 days from shipment | Up to 360 days from order date |
| Best for | Exporters selling on credit terms | Exporters needing upfront production finance |
How Does Skydo Help After Your PSFC Is Repaid?
Once PSFC is repaid, the practical challenge for every exporter is the same: making sure the foreign payment from the buyer arrived in full, on time, and with the documentation needed for RBI compliance. Skydo addresses all three.
Skydo is a cross-border payments platform for Indian exporters. Here is what it gives you at this stage.
- Free virtual accounts: you get accounts in USD, EUR, GBP, SGD, AUD, and CAD. Buyer payments land directly in the relevant currency account, triggering PSFC repayment without delays caused by currency mismatch or correspondent bank routing.
- Automatic FIRC: every inward remittance through Skydo generates a Foreign Inward Remittance Certificate automatically. You do not need to chase your bank's relationship manager or wait in a queue, and the document is ready for your RBI compliance file the moment funds arrive.
- Transparent pricing: you pay a flat $19 under $2,000 and a flat $29 from $2,000 to $10,000, and 0.3% above $10,000. There is no hidden spread, so you know exactly what you net from every settlement.
- Real-time settlement visibility: you can see exactly when funds land and how much arrived, which matters when you are managing a PSFC repayment deadline and cannot afford uncertainty on timing.
- Quick setup: setup takes 10 to 15 minutes. There are no monthly fees, and you pay only when you transact.
You can get started at Skydo.
Can a service exporter or e-commerce seller avail of PSFC?
Yes. Following DGFT's 2023 e-commerce extension, service exporters and e-commerce exporters with a valid export contract and proof of service delivery are eligible for PSFC, not just merchandise exporters.
What is the maximum tenure for PSFC?
How is PSFC different from regular post-shipment credit in rupees?
What documents does the bank require to process a PSFC application?
Can PSFC and PCFC be used together for the same shipment?
What is bill discounting under PSFC?
What happens to PSFC if the buyer delays payment beyond 180 days?
Why is the FIRC important after PSFC is repaid?
