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Forfeiting is a mechanism of financing exports: By discounting export receivables Evidenced by bills of exchange or promissory notes Without recourse to the seller (viz. exporter) Carrying medium to long term maturities On a fixed rate basis (discount) Up to 100 percent of the contract value.
The word `forfeits is derived from the French word `a forfeit which means the surrender of rights. Simply put, Forfeiting is the non-recourse discounting of export receivables. In a forfeiting transaction, the exporter surrenders, without recourse to him, his rights to claim for payment on goods delivered to an importer, in return for immediate cash payment from a forfeiter. As a result, an exporter in India can convert a credit sale into a cash sale, with no recourse to the exporter or his banker.