Citi India has launched the first digital cross-border payments solution for importers, following the government’s directive to streamline trade facilitation.
Last year, the Indian government implemented its single-window system, which allows importers to submit documents such as shipping and customs documentation electronically, as a single entity.
The system is commonly used as a means of speeding up trade processing across the world, and Citi was the only foreign bank on a working group established by the government, regulators and customs officials to see how it could be used to improve trade finance processing.
Citi subsequently developed a solution which allows its clients to directly share import payment information with the bank, by simply quoting Reserve Bank of India’s (RBI) Import Data Payment and Monitoring System (IDPMS) number, as against the earlier process of sharing multiple documents to support a single payment.
Debopama Sen, Citi’s head of trade and treasury solutions for India, allows it to reduce transaction time to three hours. Previously, the best the bank could offer clients was “same-day”, without any proper indication as to how many hours an import settlement would take.
It’s a world away from the previous system which was arduous and paper intensive. For years, the trade industry has been lobbying the Indian government to improve its customs processes (both on its international and domestic state borders). Narendra Modi’s government last year delivered, and Citi is the first bank to take advantage.
“Previously, banks always had to confirm that the actual import had happened prior to affecting such payments. We had to get original documents to prove the shipment had entered the country,” Sen explains.
“The second aspect is that historically such proof of documentation had to be in paper form. To understand that we have to understand how the entire trade infrastructure of customs worked, where these documents were originated. The entire paperwork at customs, where the importer had to submit the paperwork and shipping documents to customs, seek approvals, evidence that payments of customs duty – all of that used to be manual.
“However, these original documents certified and issued by customs had to be submitted to the banks for us to verify shipment had happened and the goods had entered the country and on that basis we could allow the payment.”
The RBI’s digital tracking programme IDPMS is open source, and so it is likely that other banks are developing similar solutions. Citi’s, however, is the first, but it will likely be a while before it has been rolled out across its entire base.
Companies will be able to use the solution by logging onto their existing digital account, without installing an additional trade module, Sen confirms. However for large importers it may be the case that an additional module is beneficial at some point.
The common consensus is that the single-window system will be a huge boon to India’s notoriously bureaucratic trading system. It follows that trade finance banks in the country will be competing to replicate Citi’s lead.