When banks support Indian importers and exporters, central bank regulation specifies various documentary procedures. These can inadvertently delay the movement of the goods in and out of the country, despite digitalisation efforts so far. flow reports on an award-winning solution
In recent years, the Indian government has been increasingly focused on developing digital initiatives and improving the ease of doing business in India in order to raise the country’s standing worldwide. Digitalisation will also be key to the country achieving its US$5trn GDP by 2024 target and contributing to help reduce an estimated global US$1.5trn trade finance gap. At the centre of all this is the digitalisation of import-export documentation verification – a necessary and complex obstacle.
A paper-heavy process
Compared with other leading Asian economies, India embraced its digital revolution at a relatively late stage, the government only making major pushes for digitalisation in the past decade. This is no different for trade finance, where banks’ processes for handling transactions have traditionally been paper-intensive in nature and a highly regulated area under the Reserve Bank of India (RBI) guidelines and the 1999 Foreign Exchange Management Act.
Even if the trade transaction takes place on open account, the importer or exporter still must go to the bank to submit the necessary documents and ensure regulatory compliance. Meanwhile, banks acting both as an enabler and a gatekeeper, are required to ensure the veracity of these documents and then submit them to the RBI. In paper format, this verification can take up to 15 days. It became clear that a digital alternative could help expedite the entire process, though the question of how to develop such a solution remained.
“Because of these burdensome requirements, unique to the country’s regulatory framework, we saw the need to develop an appropriate solution to simplify and streamline processes for both the clients and the bank,” says Bhuvaneshwari Karthik, India Trade Product Head at Deutsche Bank.