Methods of Foreign Payments

Whether there is private foreign payments or govt. foreign payments, any country's central bank plays important role. Central bank makes the rules and regulation for smooth payment at minimum risk. All methods of foreign payments work under the rules of central bank.

In India, RBI is the controller of all foreign payments. Whether you are importer or exporter, you have to follow these rules or financial institutions have to follow.

For example, I am getting payment from Paypal. Paypal is the online payment system for foreign payment, recent, it has verified my PAN, my name and address as per strict rules of RBI.

Following are the main methods of Foreign Payments

1. Advance Payments Method

As per this method, importer will pay the advance to exporter. Exporter will secure regarding payment. All risk will be of buyer. In India, as per rules, you can pay advance for import of books, machine and other capital goods. Upto 2500$, you can buy commercial goods from foreign.

2. On Account Payments Method

Goods are imported on credit basis. Both side, account has maintained. On the due day, importer pays for his bought goods. Balance will show in the account of importer and exporter. All risk will be of exporter.

3. Consignment Method

Exporter can send the goods on the consignment basis. In foreign country, there may be exporter's agent who will sell the goods on the behalf of consignor. Time to time, agent will send the money to consignor.

4. Documentary Payment Method

As the documentary payment method, exporter's bank and importer's bank will be middlemen. Exporter will not give the goods before getting the evidence of payment transfer to his account. He has to give proof that he has the money equal to bought goods. Importer will not transfer money before getting the evidence of delivery of goods. Exporter fulfills all the documents which are the evidence for importer and gives to the banker and same banker will give to the banker of importer. So, banker of importer will transfer payment to the banker of exporter.

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Accounting Education: Methods of Foreign Payments
Methods of Foreign Payments
Accounting Education
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