The Direct Pay Standby Letter of Credit is a specialized banking instrument used when parties seek a secure, bank-guaranteed payment mechanism in commercial transactions. Unlike traditional standby letters of credit that serve as backup payment instruments, this direct pay version functions as the primary payment mechanism. It is particularly useful in high-value transactions or when dealing with new business relationships where payment security is paramount. Under Indian jurisdiction, these instruments are regulated by the Reserve Bank of India and must comply with both domestic banking laws and international banking practices. The document typically includes detailed drawing conditions, document requirements, and payment terms, providing a structured framework for secure commercial transactions. This instrument is commonly used in international trade, project finance, and large commercial contracts where direct bank-mediated payment is preferred over other payment methods.
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1. Letter Reference Number and Date: Unique identification number and issuance date of the SBLC
2. Issuing Bank Details: Complete name, address, and SWIFT code of the issuing bank
3. Beneficiary Details: Full name and address of the party in whose favor the SBLC is issued
4. Applicant Details: Full name and address of the party requesting the SBLC
5. Credit Amount: The maximum amount available under the SBLC and the currency
6. Expiry Date: The final date until which the SBLC is valid
7. Place of Expiry: Location where the SBLC expires and where documents must be presented
8. Form of Presentation: Specification of how and where documents should be presented
9. Drawing Terms: Conditions under which the SBLC can be drawn upon
10. Required Documents: List of documents that must be presented for drawing under the SBLC
11. Payment Terms: Specifications of how and when payment will be made upon compliant presentation
12. Governing Law and Jurisdiction: Statement that the SBLC is governed by Indian law and relevant international rules
13. Authorization: Authorized signatures and stamps of the issuing bank
1. Transferability Clause: Include when the SBLC needs to be transferable to another beneficiary
2. Partial Drawings: Include when multiple partial drawings are to be allowed
3. Revolving Terms: Include for SBLCs that automatically reinstate after each drawing
4. Special Conditions: Include when there are additional terms specific to the transaction
5. Confirmation Instructions: Include when another bank needs to add their confirmation to the SBLC
6. Assignment of Proceeds: Include when proceeds can be assigned to another party
1. Schedule A - Underlying Agreement Details: Details of the commercial contract or agreement that the SBLC is supporting
2. Schedule B - Drawing Certificate Format: Prescribed format for the beneficiary's drawing certificate
3. Schedule C - Document Presentation Requirements: Detailed specifications for required documents and their format
4. Appendix 1 - Bank Format Requirements: Specific formatting requirements for banking documents
5. Appendix 2 - Communication Procedures: Detailed procedures for communications between parties
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Construction
Energy and Utilities
Infrastructure
Real Estate
Telecommunications
Mining and Resources
Import/Export
Shipping and Logistics
Wholesale and Distribution
Relevant Teams
Treasury
Trade Finance
Finance
Legal
International Banking
Risk Management
Commercial Operations
Procurement
Banking Operations
Documentary Credits
Corporate Banking
Relevant Roles
Treasury Manager
Trade Finance Manager
Chief Financial Officer
Finance Director
Banking Relations Manager
International Trade Specialist
Credit Manager
Commercial Director
Procurement Manager
Contract Manager
Risk Manager
Finance Controller
Banking Operations Manager
Documentary Credits Specialist
Corporate Banking Officer
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