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Foreign currency outflows are a concern for any large economy, and as such, international trade remains highly regulated. In a country like India, where trade was liberalized in the 90s, there are many such restrictions to safeguard the interests of the local economy. Choosing the best bank in India for import-export business is a critical first step toward ensuring a successful and smooth operation in the global market.
The right bank can help you manage these regulations, provide necessary documentation, and help with currency exchange.
Excluding fintech and neo banks, there are 3 traditional categories for banks available in India: public, private, and international banks. The general insight is that public banks offer the best rates but the slowest service, private banks charge more than public banks but provide better service and international banks are expensive but provide the best service.
So which should you choose?
The most important thing to consider is the bank's proximity to your place of doing business. An import/export business requires extensive documentation, like LCs (letters of credit), currency exchange requests, stamped letterheads, etc. This translates to regular trips to the bank, making it essential for you to choose one that is close to your office. But that's not all, there are some other things to consider.
AD Code
An AD (Authorised Dealer) code is essential when conducting international trade. This code is required to process customs clearance and is linked to all your shipping documents. Without it, ports and shipments will not accept your goods. The AD code is provided by your bank and only banks authorized by the RBI can give you an AD code. Not every bank branch can do this, you need to visit the branch where you want an open and ask if they can provide you AD codes.
Trade Finance Services
Before opening an account, research the bank's trade finance offerings. Letters of credit, bank guarantees, and export credit are crucial for managing risks in international trade. These services provide financial backing in times of need. They also ensure payment security, which is vital when dealing with unfamiliar international partners.
Foreign Exchange (Forex) Rates
Fluctuations in currency exchange rates may lead to unexpected costs, so it’s important to choose a bank that offers favorable Forex rates. Banks that offer hedging options like forward contracts or futures options are also desirable to protect against currency risk.
Ease of International Transactions
Consider banks that have a strong global network of correspondent banks, as this will help reduce the time and cost associated with international wire transfers. International banks like HSBC, DBS, Citibank, etc. tend to have a large global network.
Digital & Banking Support
Though most banks have a functioning digital platform these days, there are still some smaller banks that have no digital banking support. Due to the nature of an import/export business, reliable digital banking options are essential to your ease of doing business. You can also ask if the bank will appoint an expert relationship manager to help with any questions you may have regarding your specific trade.
Proximity
Trade finance and Forex-related transactions require a lot of documentation. Close proximity to your bank can make paperwork faster. Your bank can also provide quicker assistance with complicated international transactions.
HDFC Bank
HDFC Bank is a top pick if you’re running an import-export business. Their Forex rates are competitive, and their EEFC accounts make managing foreign currency earnings pretty straightforward. It’s a solid choice for mid to large-sized businesses.
ICICI Bank
ICICI Bank provides a broad range of trade services. They offer everything from letters of credit to custom Forex solutions, plus you get the benefit of having a dedicated relationship manager. It’s a great option if you need personalized support and a strong international network.
State Bank of India (SBI)
SBI is India’s largest public sector bank, and it’s known for its extensive branch network and low fees. They provide specialized Forex services and are ideal for businesses that need a cost-effective solution and accessibility, even if you’re in a more remote area.
Axis Bank
Axis Bank is all about modern solutions with a tech twist. They offer a range of financing options for import and export, plus their online banking is efficient and user-friendly. If you’re looking for a modern approach to managing your international transactions, Axis Bank is a great choice.
Yes Bank
Yes Bank is tailored for SMEs. With competitive charges and customized trade solutions, it’s a good fit for smaller businesses.
EXIM Bank
EXIM Bank focuses on trade finance and is made for businesses engaged in international trade. They offer lower Forex margins, which can be especially beneficial for large transactions. EXIM Bank is a great alternative if you’re looking for specialized trade services.
Selecting the best bank in India for import-export business will help you ensure long-term success for your business. By carefully considering the factors in this article, you can choose the right banking partner. Karbon Forex can make it easier by providing various import/export-related services. We specialize in managing foreign transactions and provide better rates than traditional banks. Speak to one of our experts to get a custom plan for your business.
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