What Is a SWIFT Code &amp; an IBAN Number?

A SWIFT code, also called a BIC (Bank Identifier Code), identifies a specific bank or financial institution during a cross-border transfer. An <a href="https://www.skydo.com/blog/what-is-iban-number">IBAN (International Bank Account Number)</a> identifies a specific individual bank account. The two serve different purposes in the same payment journey.

SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. It's an electronic messaging network that banks use to send and receive instructions during international financial transactions. Every financial institution on the network has a unique SWIFT code.

An IBAN is an internationally standardised account number (ISO 13616) that can run up to 34 characters. It starts with a two-letter country code and two check digits, followed by the domestic bank and account details. The check digits let banks validate the number before sending money, which cuts down on failed or misrouted payments. IBANs are used across Europe, the Middle East and parts of other regions, but not everywhere. India and the US, for example, don't use them.

SWIFT codes and IBANs differ in what they identify, their format, where they're used, and who regulates them. A SWIFT code identifies a specific bank or branch, has 8 to 11 alphanumeric characters, and is used globally across 200+ countries, with SWIFT (the network itself) as its regulatory body. An IBAN identifies a specific individual bank account, has up to 34 alphanumeric characters, and is used primarily in Europe, the Middle East, and some other regions, with national banking authorities and ISO as its regulatory body. India uses SWIFT codes and doesn't use IBANs.

A SWIFT code routes money globally across different international networks. An IBAN contains both the bank code and account details in a single string; within Europe (SEPA), an IBAN alone handles the full routing and crediting without needing a SWIFT code.

Indian recipients don't need both. India doesn't use or issue IBANs.

Here's how each code is built, with examples:

Do Indian Businesses Need Both SWIFT and IBAN to Receive International Payments?

No, Indian businesses don't need an IBAN to receive international payments. India doesn't use or issue IBANs, and <a href="https://www.skydo.com/blog/iban-number-of-hdfc-bank-icici-bank-sbi-bank-and-more-all-you-need-to-know">Indian bank accounts aren't assigned IBAN numbers</a>. To receive a cross-border wire transfer into an Indian bank account, you share 5 details with your overseas client: beneficiary name, bank account number, SWIFT/BIC code, IFSC code, and bank name and address.

If a European client fills out a payment form and sees an "IBAN" field, they can't enter an Indian account number there. Indian accounts simply don't have one.

Your client will need to use a SWIFT transfer instead and fill in the Indian SWIFT code and account number fields.

How Does Skydo Help Indian Businesses Receive International Payments?

Sorting out SWIFT and IBAN is one symptom of a bigger problem. Receiving international payments into an Indian bank account involves multiple steps, potential delays, <a href="https://www.skydo.com/blog/swift-transfer-charges">hidden bank fees</a>, and manual compliance work.

Skydo is built to remove all of that friction for Indian exporters and freelancers. Skydo gives Indian businesses free virtual accounts in USD, EUR, GBP, SGD, AUD, and CAD. That means your foreign client can pay you using a local domestic transfer in their own currency, with no <a href="https://www.skydo.com/blog/best-swift-payment-alternative">SWIFT routing</a>, no IBAN confusion, and no international wire fees on their end.

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What Are the Main Methods of Payment in International Trade?

The main methods of payment in international trade are Cash in Advance, Letter of Credit (LC), Documentary Collection, Open Account, Consignment, Bank Draft, and Telegraphic Transfer (TT). However, each method balances payment security and commercial flexibility differently.

With Cash in Advance, the importer pays before the exporter ships the goods, thereby making it the most secure option for the exporter.

A Letter of Credit is a bank's commitment to pay the exporter when the exporter presents the documents required by the <a href="https://www.skydo.com/blog/lc-payment-meaning-process?utm_source">LC</a> and meets its terms.

Documentary Collection uses banks to transfer shipping documents and collect payment, but the banks do not provide the payment guarantee offered by an LC.

Under an Open Account arrangement, the exporter ships the goods before the buyer's payment becomes due, typically after 30, 60, or 90 days.

Under Consignment, the exporter sends goods to a foreign distributor or buyer but receives payment only after those goods are sold to the end customer.

A Bank Draft is a payment instrument issued by a bank on behalf of the buyer and made payable to the seller.

Telegraphic Transfer moves money electronically from the buyer's bank to the seller's bank, often through correspondent banking networks such as SWIFT.

How Do These Payment Methods Compare Cost and Risk?

The payment method determines who carries the financial risk before the transaction is completed. An exporter gets the strongest protection when payment comes first, while a buyer gets better protection when payment can be postponed until after receiving or selling the goods.

From an exporter's viewpoint, the sequence runs from Cash in Advance to Consignment, with protection declining as payment moves further away from the shipment date. That protection comes at a commercial cost. Buyers may be less willing to accept terms that require them to pay before receiving the goods.

<a></a>How Payment Timing Affects Currency Risk

The payment date also matters when the invoice is denominated in a foreign currency. The longer the exporter waits to receive the money, the longer the business remains exposed to exchange-rate movements.

Besides seeing <a href="https://www.skydo.com/blog/how-long-does-international-wire-transfer-take?utm_source=chatgpt.com">how long does an international wire transfer take</a>, the right choice is not simply the method with the lowest exporter risk. Indian exporters should weigh buyer reliability, order value, cash-flow needs, market conditions, and <a href="https://www.skydo.com/blog/international-payment-terms">negotiating</a> power before agreeing to <a href="https://www.skydo.com/blog/payment-terms-in-export?utm_source">payment terms</a>.

How Should Indian Exporters Choose the Right Payment Method?

The right payment method for an Indian exporter depends mainly on the buyer's reliability, the value of the shipment, and how much financial risk the exporter can comfortably take. A method that works for a long-standing customer may be unsuitable for a first-time buyer or a high-value order. Always ask:

<a></a>1. How established is your relationship with the buyer?

The less you know about the buyer, the more protection you generally need against non-payment.

The size of the order changes whether the cost and administrative work involved in securing payment are worthwhile.

For a smaller shipment, requiring an LC may add costs and paperwork that are disproportionate to the transaction value. Cash in Advance may be a simpler option. For a high-value shipment to a new buyer, however, the cost of an LC may be easier to justify than taking the full risk of shipping on Open Account terms.

<a></a>3. How much loss can your business absorb?

Relationship history alone should not determine the payment terms. If a delayed or failed payment would create a serious working-capital problem, taking substantial credit risk may not be appropriate even when the buyer is familiar.

The payment method should therefore reflect the financial consequence of non-payment, and not just the level of trust between the two parties.

These are practical starting points rather than fixed rules. An exporter may begin with Cash in Advance or an LC and move toward more flexible terms as the buyer builds a reliable payment history across multiple transactions.

Smaller exporters may sometimes accept more buyer-friendly terms to remain competitive, while larger traders may be better positioned to pay for additional payment security. The decision also affects working capital, pricing negotiations, commercial relationships, and foreign-exchange exposure.

<a></a>Consider the Indian Compliance Requirements

The payment channel matters for Indian exporters beyond simply deciding when they will receive their money. Not every payment route automatically results in the same remittance documentation. Hence, exporters should confirm what certificate or bank record they will receive before agreeing to the arrangement.

For example, FIRA/FIRS or other remittance evidence may be relevant depending on the payment channel and transaction. Exporters should also ensure that the chosen arrangement provides the documentation needed for their applicable GST, FEMA, banking, and export-record requirements rather than assuming that a FIRC will be issued automatically.

Payment terms also affect how closely export proceeds need to be tracked against applicable realisation requirements. This is particularly important for Open Account and Consignment, where the time between shipment and actual payment can be significantly longer.

Before choosing a payment method, exporters should therefore check both the commercial terms and the documentation their bank or payment provider will issue.

How to Sell on Amazon USA from India: Fees, Shipping, Products (2025 Guide)

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B2B cross-border <a href="https://www.skydo.com/blog/what-are-cross-border-payments-and-how-skydo-can-help-you-receive-them">payments</a> refer to financial transactions between businesses operating in different countries. For example, an Indian IT services company billing a US client and receiving USD into its Indian bank account is a B2B cross-border payment. The same is true for a garment exporter shipping to a European buyer, or a SaaS company billing a client in Singapore.

Unlike a simple domestic bank transfer, B2B cross-border payments involve currency conversion, multiple banking systems that may or may not be connected directly, and country-specific regulations on both sides of the transaction. All of those add cost, time, or paperwork, often all three.

B2B cross-border payments work by moving money from the buyer's bank or payment platform through the relevant payment network and, where required, intermediary banks before reaching the exporter's bank. The receiving bank then performs the required compliance checks, converts the foreign currency into INR where applicable, and credits the funds to the exporter's account.

Once the client's business opts to pay, here's more or less how the money moves:

A payment corridor involving multiple correspondent banks can increase transaction processing time and costs. The more correspondent banks involved, the longer and more expensive the journey becomes. A payment that goes through two or three intermediaries may take two to five business days and cost considerably more than a more direct route.

This is one of the key reasons fintech platforms can offer faster and more cost-effective transfers: they use local payment rails in the sending country and their own internal settlement networks, reducing or eliminating the need for correspondent banks before converting the funds to INR.

<a></a>What Are the Biggest Challenges with B2B Cross-Border Payments for Indian Businesses?

The biggest challenges with B2B cross-border payments for Indian businesses are hidden fees and FX losses, slow and unpredictable settlement, heavy FEMA/RBI documentation, manual reconciliation errors, and fraud risk. Here they are in detail:

Hidden fees and FX losses: Bank wires can involve FX markups, sender fees, and correspondent bank charges, making the final INR amount difficult to predict upfront. Card-based payments can also add merchant and currency-conversion fees.

Regulatory and documentation burden: FEMA requirements, purpose codes, FIRC/FIRA, GST documentation, EDPMS closure, and eBRC generation can create significant manual work, particularly for businesses without a dedicated finance team.

Slow and unpredictable settlement: International wire transfers can take several business days to settle. Correspondent-bank reviews and processing cycles can cause further delays, making cash-flow planning harder.

Manual reconciliation: Businesses may need to reconcile the original foreign-currency invoice with the INR amount received after FX conversion and fee deductions. Without a clear transaction trail, this can lead to mismatches and payment-tracking issues.

Fraud and payment-security risks: Businesses can be targeted by phishing and Business Email Compromise (BEC) scams, including fraudulent requests to redirect payments to a different bank account.

<a></a>Virtual Accounts and Fintech Platforms

What are the Compliance Rules for Receiving B2B Cross-Border Payments in India?

Every foreign remittance to India is governed by FEMA and administered by the RBI. The cardinal rule: the payment has to go through an RBI-approved channel, an authorised dealer bank or an RBI-approved payment aggregator, and it has to be properly documented. A personal account or an unauthorised channel cannot receive foreign business payments.

Exporters commonly face the following compliance requirements:

How Does Skydo Simplify B2B Cross-Border Payments

<a href="https://www.skydo.com/">Skydo</a> simplifies B2B cross-border payments for Indian exporters and freelancers by replacing unpredictable bank fees with flat per-transaction fees, auto-issuing FIRCs, and settling funds within one working day. Here is what Skydo does differently from a normal bank:

<a href="https://www.skydo.com/"> Start with Skydo</a>

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SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network that enables banks and financial institutions to securely exchange payment instructions for cross-border transactions. A SWIFT transfer is an international payment sent through the SWIFT network, the messaging system banks use to instruct each other to move money across borders securely.

Founded in 1973 and headquartered in Belgium, SWIFT connects more than 11,000 financial institutions across over 200 countries. It carried over 59.8 million messages a day as of 2025, the most recent year SWIFT has published figures for.

When receiving an international payment into an Indian bank account, the sender’s bank uses the recipient bank’s SWIFT/BIC code along with the beneficiary’s account details to route the payment to the correct institution. This is also called a <a href="https://www.skydo.com/blog/telegraphic-transfer">Telegraphic Transfer (TT)</a>, an older term Indian banks still use for the same wire sent over SWIFT.

SWIFT transfer charges are made up of several costs that can arise at different points in an international payment. The sender's bank, intermediary banks, recipient's bank, and currency conversion can all affect the amount that finally reaches the Indian account.

Note that SWIFT charges are not fixed. The total cost can change based on the sending and receiving banks, currency, transfer amount, payment route, intermediary banks involved, and the exchange rate used. A quoted SWIFT fee therefore does not necessarily represent the total cost of receiving the payment.

After a SWIFT payment has been processed, you can ask the bank for the MT103 or equivalent SWIFT payment confirmation, where available. It contains transaction details that can help trace the payment and <a href="https://www.skydo.com/blog/swift-transfer-charges">check deductions</a> made during transit.

What Do OUR, SHA, and BEN Charge Codes Mean?

OUR, SHA, and BEN are the three charge instructions used for international SWIFT transfers. They determine how the sender's bank, intermediary banks, and beneficiary's bank charges are allocated, which can directly affect the amount ultimately credited to an Indian recipient.

For an Indian freelancer or exporter who needs the full invoice value to reach their account, OUR is generally the more favourable charge instruction. SHA and BEN can result in deductions from the amount received, although the actual outcome depends on the banks and payment route involved.

Example of SWIFT Transfer Charges on an Invoice

A $10,000 SWIFT payment from the US to India can lose value at several stages, depending on the banks involved, charge arrangement, and exchange rate. The following is an illustrative SHA example, and not a fixed industry fee schedule. For context, Chase currently charges $40 for an online international wire in USD, while Axis Bank lists ₹250 plus GST for an inward SWIFT transfer to a resident account. Correspondent-bank deductions vary by payment route.

Here, if the Indian bank fee is ₹295 and the reference rate is ₹86/USD, the fee equals $3.43, leaving $9,916.57. At a 2.5% FX spread, assuming ₹86/USD is the mid-market reference rate, the effective bank rate would be ₹83.85/USD. The final credit would therefore be approximately ₹8,31,504

The important point is that the FX spread is calculated on the amount being converted and not on the original $10,000. The actual INR credit will depend on the bank's quoted exchange rate, so a 2.5% spread should be treated only as an illustration, not as a standard bank markup.

If the payment is sent under OUR terms, the sender agrees to bear the applicable transfer charges rather than passing standard correspondent charges to the beneficiary. The Indian recipient may still have receiving-bank charges or currency-conversion costs, and <a href="https://www.skydo.com/blog/avoid-hidden-international-transaction-charges">hidden costs</a> depending on the bank and arrangement.

How Can Indian Businesses Reduce SWIFT Transfer Charges?

Besides looking for <a href="https://www.skydo.com/blog/best-swift-payment-alternative">SWIFT payment alternatives</a>, Indian businesses can reduce SWIFT costs by avoiding unnecessary intermediary banks, consolidating payments, choosing the right charge arrangement, negotiating exchange rates, and using foreign-currency accounts strategically.

<a></a>Bypass SWIFT with Local Clearing Rails

<a></a>Maintain Multi-Currency Balances (EEFC Accounts)

For a cost comparison, make sure you understand the underlying differences between <a href="https://www.skydo.com/blog/ach-vs-wire-transfer-vs-card">ACH vs wire transfer vs card </a>and check what is the cheapest for Indian receivers.

How Does Skydo Help Reduce SWIFT Transfer Charges for Indian Businesses?

Skydo can make receiving overseas payments cheaper than a conventional SWIFT transfer by letting customers pay into local-currency receiving accounts instead of sending money through multiple correspondent banks.

<a href="https://www.skydo.com/">Skydo</a> gives businesses access to receiving accounts in USD, EUR, GBP, SGD, AUD, and CAD. Where local payment methods such as ACH or SEPA are supported, the customer can pay domestically, avoiding the correspondent-bank chain that can reduce the amount received through a traditional wire. Alongside, it offers:

Additionally, payment records and remittance documentation are available digitally, while exporters can use Skydo's eBRC and EDPMS assistance for processes such as shipping-bill uploads and matching inward remittances.

Skydo does not charge a monthly account fee. Opening an account takes around 5 minutes, and the applicable <a href="https://www.skydo.com/blog/best-way-transfer-money-internationally">international bank transfer fees</a> are charged only when you receive a payment.

What are Nodal, Escrow and Current Accounts?

Nodal, escrow, and current accounts serve different purposes in business banking, with nodal accounts handling funds collected by payment intermediaries, escrow accounts holding money until agreed conditions are met, and current accounts supporting a business's regular financial transactions.

Examples for Nodal, Escrow and Current Accounts

Nodal accounts separate customer funds handled by intermediaries, escrow accounts hold funds until agreed conditions are met, and current accounts manage a business's routine financial transactions.

<a></a>1. Nodal Account, A Freelance Marketplace

Consider GigIndia, an online marketplace that connects freelance designers with businesses. If a client pays ₹10,000 for a design project, the platform collects the payment on behalf of the parties. The funds are kept separate from GigIndia's own operating funds and later settled to the designer, with the platform receiving its applicable commission. This illustrates how a nodal account separates customer or merchant funds from an intermediary's own money.

<a></a>2. Escrow account, A Cross-Border IT Export

High-Value M&amp;A or Real Estate Transaction An Indian IT firm acquires a boutique software company for ₹5 crore. To ensure both parties are protected, the buyer deposits the funds into a third-party escrow account managed by an authorized bank. The bank releases the payment to the seller only after specified contractual conditions such as IP transfers, due diligence verification, and regulatory approvals are fully satisfied.

<a></a>3. Current account, An Indian Business Operation

A software agency uses a current account to manage payroll for 15 employees, vendor payments, server costs, and other operating expenses. Current accounts are designed for frequent business transactions and generally do not pay interest, while some banks may provide facilities such as overdrafts. Unlike a nodal or escrow account, a current account is primarily used to manage the business's own funds.

What Are the Similarities of Nodal, Escrow, and Current Accounts?

Nodal, escrow, and current accounts are similar in that they are business-focused accounts that require applicable KYC checks, support business transactions, and maintain records of money moving in and out. However, their permitted uses, transaction limits, and other features vary by account type.

Note that interest is generally not the primary purpose. These accounts are designed for handling or managing business funds rather than generating returns on balances. Whether interest is paid depends on the specific account and arrangement, so it should not be treated as a universal rule.

Nodal Account vs Escrow Account vs Current Account: Key Differences

The key differences between a nodal, escrow, and current account are their purpose, ownership of funds, level of control, regulatory requirements, and how and when funds can be used or released.

Related: <a href="https://www.skydo.com/blog/what-are-capital-and-current-account-transactions">Capital and Current Account Transactions: Complete Guide</a>

Nodal, Escrow, and Current Account: Which one Does Your Business Actually Need?

Most Indian freelancers, service exporters, and goods exporters do not need to open a nodal or escrow account themselves. A typical setup is a current account for business funds, combined with a compliant payment collection layer suited to how the business receives international payments.

<a></a>1. Indian Freelancer with Clients Abroad → Current Account + Virtual Bank Account Layer

An Indian freelancer receiving payments from foreign clients will generally need a current account along with a compliant cross-border collection platform. A platform can provide local virtual bank account details in supported markets, allowing clients to pay through local rails such as ACH or SEPA instead of sending a traditional international wire.

Also Read: <a href="https://www.skydo.com/blog/virtual-accounts-vs-local-banks">Virtual Accounts vs. Local Banks</a>

<a></a>2. Indian Goods Exporter with Clients Abroad → Current Account + EEFC Account + Trade Remittance Rail

An Indian goods exporter may use a current account along with an EEFC account to manage foreign-currency export earnings and international business expenses. An EEFC account allows eligible foreign-exchange earners to hold export-related foreign currency with an authorised dealer bank and use the balance for permitted foreign-exchange payments.

<a></a>3. Indian Services Exporter with Clients Abroad → Current Account + Multi-Channel Payment Layer

An Indian services exporter such as an IT agency, consulting firm, or SaaS business can combine a current account with multiple payment channels based on how its overseas customers pay.

Bank-transfer-based collection can suit large B2B invoices, while payment gateways can be more suitable when customers need to pay by card or through recurring billing.

In short, the right setup depends on the business model. Freelancers generally need a current account and a simple cross-border collection layer, goods exporters may benefit from adding an EEFC account, and services exporters with varied payment methods may need a combination of bank-transfer and merchant-payment channels.

Indian businesses receiving international payments generally do not need their own nodal or escrow account. They need a compliant way to collect overseas payments, receive the required documentation, and settle the money into their Indian bank account. Skydo is built to provide this payment collection layer.

Skydo is a cross-border payment aggregator for Indian businesses and freelancers receiving international payments. It helps address three common challenges with overseas collections, i.e.. high or unclear costs, manual compliance paperwork, and uncertain settlement timelines. Alongside that, <a href="https://www.skydo.com/">Skydo</a> offers:

Skydo payments are settled into the Indian bank account within 24 hours, thereby giving businesses greater visibility over when their funds will arrive.

Skydo offers India-based customer support alongside payment tracking and other assistance for businesses receiving international payments.

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30 International Banking Terms: Glossary for Indian Exporters

International banking terms describe the information, payment networks, account details, and charges involved in receiving money from overseas clients. For Indian freelancers and service exporters, understanding these terms can help avoid incorrect payment instructions, unexpected deductions, delayed settlements, and compliance issues.

The easiest way to understand these terms is to follow them through the international payment journey. The first group covers the details your overseas client may need before sending the payment. The later groups cover what happens while the money is being processed and after it reaches India.

These are the account details, banking identifiers, and payment methods your overseas client may need to initiate a payment.

<a></a>1. SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT is a global financial messaging network that banks use to securely exchange instructions for cross-border transactions. It does not hold or transfer the money itself. The actual funds move through the banking system, often using correspondent banks, while SWIFT carries the payment instructions between financial institutions.

Example: When a US client sends a $2,000 international wire to an Indian exporter, the client's bank can send the payment instruction through SWIFT to the relevant banks. The funds then move through the banking and correspondent network before reaching the Indian account.

Note that SWIFT is the messaging layer, and not the money-transfer system itself.

A BIC is a standardised identifier used to identify a financial institution in an international transaction. It is commonly called a SWIFT code because BICs are used to identify institutions within SWIFT messaging.

A BIC contains 8 characters, namely, a 4-character business-party code, a 2-character country code, and a 2-character location code. An optional 3-character branch identifier can extend it to 11 characters.

Example: An Indian exporter receiving a SWIFT wire may need to provide the receiving bank's BIC/SWIFT code along with the account number and other beneficiary details.

<a></a>3. IBAN (International Bank Account Number)

An IBAN is a standardised account identifier used for international bank transfers in countries that participate in the IBAN system. It combines elements such as the country code, check digits, bank information, and account number.

IBAN is widely used across Europe and other participating markets, but Indian bank accounts do not use IBAN. An Indian exporter receiving money directly into an Indian bank account would instead provide the account details and SWIFT/BIC information requested by the bank.

A virtual account is a dedicated set of bank details that allows a business to receive payments in a particular market or currency without maintaining a conventional local bank account there. Payment platforms can provide these details so an overseas client can make a local-style payment.

Example: <a href="https://www.skydo.com/">Skydo</a> provides global receiving accounts that allow Indian businesses to collect payments from overseas clients. A US client can pay into the exporter's USD receiving account, after which the funds are settled into the exporter's Indian bank account. Skydo’s account setup takes around 5 minutes.

A wire transfer is an electronic bank-to-bank transfer of funds and is one of the most common ways to send international B2B payments. Cross-border wires can use SWIFT for messaging and may involve intermediary or correspondent banks before the payment reaches the beneficiary.

Example: A German client sending €2,000 to an Indian exporter's bank account may need the beneficiary's account number, bank details, and SWIFT/BIC code. If intermediary banks are involved, they can add both processing time and charges.

This is why the amount received can sometimes be lower than the amount the client originally sent.

ACH is a US electronic payment network used primarily for domestic bank transfers. Unlike a typical SWIFT wire, ACH payments are processed through the US ACH system and are commonly used for recurring business payments such as salaries, invoices, and subscriptions.

For an Indian freelancer or exporter, ACH becomes relevant when the client pays into a suitable US receiving account or virtual account.

Example: A US startup paying an Indian developer a $2,000 monthly retainer could use ACH if the developer has US local receiving details. An international transaction that involves the US ACH network can also fall under the International ACH Transaction (IAT) rules where applicable.

<a></a>7. SEPA (Single Euro Payments Area)

SEPA is the European payment framework that standardises euro payments between participating countries and territories. It allows eligible euro transfers to be processed using common payment standards rather than treating each participating country as a separate international payment market.

SEPA's geographical scope currently covers 41 countries and territories, including the EU and several non-EU countries.

For an Indian exporter with a EUR receiving account that supports SEPA, a French client could send €500 using a SEPA Credit Transfer instead of a traditional international wire. The exact processing time depends on the payment type and receiving institution.

A sort code is a six-digit identifier used by banks in the UK to route domestic payments to the correct bank and branch. It is generally used together with an account number.

Example: If an Indian exporter has a GBP virtual account with UK banking details, a UK client may be asked for the 6-digit sort code and account number to make a domestic UK transfer.

Note that this is different from a SWIFT/BIC code, which is used for identifying financial institutions in international transactions.

<a></a>9. Routing Number (ABA Routing Number)

A routing number is a 9-digit identifier used by US banks to route domestic payments to the correct financial institution. It is commonly required for ACH transfers and may also be used for certain US domestic wire instructions.

Example: If an Indian exporter receives USD through a US virtual account, the US client may need the account's 9-digit routing number and account number to initiate the payment.

Once a client initiates an international payment, the transaction can pass through several banks and payment systems before reaching your account. These terms explain what happens during that journey and where charges or delays can arise.

A correspondent bank is a bank that provides payment and other banking services to another bank, particularly when the two banks do not have a direct relationship. In cross-border payments, correspondent banks form part of the network that allows money to move between different banking systems.

A payment can pass through one or more correspondent banks, depending on the route and banking relationships involved. Each bank in the chain may apply its own charges.

Example: Your US client's bank does not have a direct correspondent relationship with your Indian bank. A $1,200 payment therefore travels through a correspondent bank in the US before reaching India. If that bank applies a $15–$25 processing charge, the amount passed to the next bank may be reduced accordingly.

An intermediary bank is a bank that helps route a payment between the sender's bank and the beneficiary's bank. The term is often used broadly for a bank that sits somewhere between the two end institutions in a cross-border payment chain.

In practice, correspondent bank and intermediary bank can overlap. A correspondent bank may act as an intermediary in a particular transaction, while "intermediary bank" is commonly used in payment instructions to describe the bank through which the payment should be routed.

Example: When your overseas client enters your bank details for an international wire, their bank may ask for intermediary-bank information. This identifies the institution that will bridge the payment route between the sending and beneficiary banks.

A nostro account is an account that one bank holds with another bank in a foreign country, usually in the foreign currency needed for payments and settlements. The word nostro means "our account with you."

Indian banks can maintain foreign-currency nostro accounts with overseas correspondent banks to facilitate international payments and settlements.

Example: An Indian bank maintains a USD nostro account with a US correspondent bank. When a US client sends a dollar payment through the relevant banking network, the correspondent relationship and associated accounts can be used to settle the transaction before the Indian bank credits the exporter's INR account.

A vostro account is the same banking relationship viewed from the other bank's perspective. It is an account that a foreign bank holds with a domestic bank.

The distinction is simply whose account is being described. Nostro means "our account with you," while vostro means "your account with us." Both concepts are used in correspondent banking and foreign-currency settlement.

Example: Suppose a US bank maintains an account with an Indian bank to facilitate transactions in India. From the US bank's perspective, that account is its vostro account with the Indian bank. From the Indian bank's perspective, the same account is a nostro account belonging to the US bank.

MT103 is the SWIFT message type historically used for a single customer credit transfer, carrying the payment instructions for a customer-to-customer international transfer. It can contain information such as the ordering customer, beneficiary, amount, currency, and other transaction details.

Example: If you ask your bank for a "SWIFT copy" for an international wire, the document may contain the MT103 details associated with the payment. It can help the bank trace or investigate a payment.

However, MT103 should not be treated as the only current format for cross-border payments. SWIFT is transitioning payment messaging to ISO 20022, with the MT103 customer-credit-transfer message corresponding broadly to the pacs.008 format.

Additionally, another related identifier you may see is the UETR (Unique End-to-End Transaction Reference), which is attached to relevant SWIFT payment messages and helps with end-to-end tracking.

A remittance is a transfer of money from one party to another. In international trade, an inward remittance refers to money received in India from an overseas party.

For an Indian exporter, an overseas client's payment against an invoice can therefore be recorded as an inward remittance when the funds enter India.

Example: A US client pays an Indian software company $3,500 for development services. Once the payment is received through the Indian banking system, it is treated as an inward remittance and forms part of the documentation and reporting trail associated with the transaction.

The beneficiary bank is the bank that holds the recipient's account and ultimately receives the payment for credit to that account. In a simple transfer, it is the receiving bank at the end of the payment chain.

Example: If you maintain your export account with HDFC Bank, HDFC Bank is your beneficiary bank when a client sends an international wire directly to that account.

The beneficiary bank may also apply its own inward-remittance or processing charges. However, this depends on its tariff and the type of payment. Intermediary banks can separately deduct charges while the payment is in transit.

OUR, SHA, and BEN are charge-allocation instructions used for international payments to indicate who bears the applicable bank charges. For SWIFT payments, these instructions appear in the payment's charge details.

Example: Your client sends $1,000 with SHA selected. If an intermediary bank deducts $20, only $980 may reach your account, before considering any separate beneficiary-bank charges or currency conversion.

The exact deductions depend on the banks and payment route involved. Even under OUR, the actual handling of charges can depend on the institutions and jurisdictions in the payment chain.

For exporters, it is worth confirming the charge instruction before the client sends the payment, particularly when the invoice must be settled for an exact amount. This helps avoid having to reconcile a short payment caused by intermediary or bank charges.

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