A Backstop Letter of Credit is commonly used in financial transactions where additional payment security is required beyond a primary payment mechanism. This document is particularly relevant in scenarios such as refinancing arrangements, project finance transactions, or large commercial contracts where a backup payment guarantee is essential. The Backstop Letter of Credit, governed by Indian law and banking regulations, typically includes detailed provisions regarding the triggering events, drawing conditions, and documentation requirements. It must comply with Reserve Bank of India guidelines while also adhering to international banking practices such as UCP 600. The document is structured to clearly establish the rights and obligations of all parties involved, including the issuing bank, beneficiary, and applicant, and includes specific provisions for execution, amendment, and termination of the credit facility.
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1. Letter Reference and Date: Unique reference number and date of issuance of the Letter of Credit
2. Issuing Bank Details: Complete name, address, and SWIFT code of the issuing bank
3. Beneficiary Details: Full name and address of the beneficiary of the Letter of Credit
4. Applicant Details: Full name and address of the party requesting the Letter of Credit
5. Credit Amount: The maximum amount available under the LC, currency, and any tolerance levels
6. Form of Credit: Specification that this is a Backstop Letter of Credit and its irrevocable nature
7. Expiry Details: Expiry date and place of the Letter of Credit
8. Drawing Terms: Conditions and documentation required for drawing under the LC
9. Payment Terms: Timing and method of payment upon presentation of compliant documents
10. Governing Law: Statement that the LC is governed by Indian law and UCP 600
11. Authorization: Authorized signatures and bank stamps
1. Transfer Provisions: Include when the LC needs to be transferable to another beneficiary
2. Revolving Terms: Include when the LC is revolving rather than single-use
3. Confirmation Instructions: Include when confirmation by another bank is required
4. Special Conditions: Include any transaction-specific conditions or requirements
5. Force Majeure Clause: Include specific force majeure provisions beyond standard UCP 600 provisions
6. Anti-Money Laundering Compliance: Include specific AML requirements if dealing with high-risk jurisdictions
1. Schedule 1 - Form of Demand: Standard format for making a demand under the Letter of Credit
2. Schedule 2 - Required Documents: Detailed list of documents required for presentation
3. Schedule 3 - Fee Schedule: Details of all applicable fees, charges, and commission
4. Appendix A - Underlying Transaction Details: Summary of the transaction or facility being backstopped
5. Appendix B - Bank Operational Instructions: Specific instructions for processing and handling the LC
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Project Finance
Infrastructure
Manufacturing
Energy
Construction
Import/Export
Retail
Telecommunications
Real Estate
Mining
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Risk Management
Compliance
Corporate Banking
International Banking
Credit Administration
Operations
Relevant Roles
Trade Finance Manager
Corporate Banking Officer
Credit Risk Manager
Treasury Manager
Finance Director
Chief Financial Officer
Banking Operations Manager
Relationship Manager
Documentary Credits Specialist
Compliance Officer
Legal Counsel
Project Finance Manager
International Trade Specialist
Transaction Banking Manager
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