Foreign Buyer or Overseas Client Not Paying? How Indian Exporters Recover Money & Clear Bank Export Compliance

1. The Short Answer

2. What to Do in the First Week

1. Collect the file: contract or purchase order, proforma and commercial invoices, shipping bill, bill of lading or airway bill, inspection certificates, and every email and WhatsApp with the buyer. For services: the statement of work, delivery emails, and the client's use of the work.
2. Check your payment terms. Under a letter of credit, your claim may be against the bank that issued it, so act within the LC's deadlines. Under documents against payment (D/P), check whether the buyer actually took the documents.
3. Check where the goods are. If they are still at the port or in a warehouse uncleared, you may be able to reroute, resell or reimport them. Speed matters because port charges grow.
4. Write to your bank (the authorised dealer that handled the shipping bill) explaining the delay.
5. Notify ECGC if you have a policy, within the time the policy sets.
6. Ask the buyer to confirm the amount in writing. An email admitting the dues is valuable evidence everywhere.

3. Your Bank, EDPMS and the RBI Deadline

Under FEMA, an exporter must realise and bring the full export value into India within a set period. Every shipping bill is tracked in the RBI's Export Data Processing and Monitoring System (EDPMS) through your bank until the money arrives. When a bill stays unrealised past the deadline, your bank follows up with you and reports it.

The deadline itself has been moving. Under the current FEMA framework it is generally nine months (from shipment for goods, and from the invoice for services), with a longer period for exports invoiced or settled in rupees. But the RBI changed this period several times in 2025 and 2026, and the rule that applies can depend on your shipment date. Ask your bank in writing which deadline applies to each open bill.

What your bank can do for you, if you show genuine reasons and effort:

• Extend the time for realisation.
• Accept a reduced amount if you settle with the buyer for less.
• Close the bill through a write-off in specified cases, for example when the buyer has been declared insolvent or the amount is uncollectable despite legal efforts, within the limits and documents the RBI rules require.

In every one of these, the bank needs evidence that you tried to recover. A lawyer's demand notice, the buyer's replies, ECGC correspondence and any legal action you took make up that evidence. An exporter who simply lets a bill sit unrealised risks being placed on the caution list, which makes future exports much harder.

4. ECGC Cover and GST

ECGC

If you or your bank has ECGC export credit cover, the policy, not general law, sets the rules. Most policies require you to report overdue payments within a fixed time, take reasonable recovery steps, and consult ECGC before agreeing a settlement or writing off part of the debt. Missing these steps is a common reason claims run into trouble, so read the policy's default and claim clauses the day a payment is late. Recoveries after ECGC pays a claim are usually shared with ECGC.

GST for service exporters

For services, zero-rated export status depends on receiving payment in convertible foreign exchange (or rupees where the RBI permits). If you exported under a Letter of Undertaking without paying IGST and the payment does not arrive within the period the GST rules allow, you may have to pay the IGST with interest. IT and consulting exporters should involve their CA early.

5. The International Legal Notice

An advocate's demand notice from India, written in clear English, is the standard first step. Overseas buyers often take it seriously because it signals that you are ready for arbitration or proceedings in their own country, which they would rather avoid. A strong notice:

• names the correct legal entity (check the buyer's company registry, not just the trading name);
• lists each invoice, shipment or deliverable, the payment terms and the amount due in the contract currency;
• refers to the contract's governing law, dispute resolution and arbitration clause, if any;
• sets a clear deadline, usually 14 to 30 days for overseas parties; and
• states the next steps: arbitration, proceedings, and reporting to your insurer.

Send it by email to the buyer's official addresses and by an international courier with tracking. You can send an official legal notice to a foreign buyer or international client through LegalRecovery.in, our online notice service, and keep the delivery records for your bank and ECGC file.

6. Where Can You Sue? It Depends on the Country

If the notice is ignored, read your contract first. An arbitration clause is usually your best route: India, the US, the UK, the UAE, Singapore and most trading nations are parties to the New York Convention, so an arbitral award can be enforced against the buyer's assets abroad. Without arbitration, you may be able to sue in India (if part of the cause of action arose here, such as where payment was due) and then enforce the decree abroad, or sue in the buyer's country.

In practice, for an undisputed debt the most effective step is often a demand letter from a local lawyer in the buyer's country, followed by that country's own fast debt procedures. In the UK, for example, an unpaid undisputed company debt of £750 or more can support a statutory demand and a winding-up petition. Our team coordinates with partner lawyers abroad where needed. For IT and service clients overseas, see also our guide for IT and agency clients who don't pay.

7. If the Buyer Has Gone Bust

If the buyer has entered insolvency or liquidation in its country, you usually cannot sue it any more. Instead, file a proof of debt or claim with the buyer's administrator, liquidator or trustee before their deadline, notify ECGC, and give your bank the insolvency documents. These documents are often what your bank needs to close or write off the shipping bill under the RBI rules. Keep a copy of your legal notice and the buyer's replies with them: together they show you did everything reasonable to recover.

8. Protect the Next Shipment

• Secure payment terms for new or slow-paying buyers: advance payment, a confirmed letter of credit, or D/P rather than open account.
• Credit insurance through ECGC or a private insurer, with buyer limits checked before shipping.
• An arbitration clause naming a seat and institution (for example SIAC or a seat in India), English as the language, and the governing law.
• Interest on late payment and a clear invoice dispute window, so the buyer cannot raise quality complaints months later.
• Check the buyer in its company registry and through a credit report before extending open credit.

For overseas clients of services, you can also send a notice to an international client for unpaid payments as soon as an invoice goes overdue.

9. Frequently Asked Questions