The Cash Collateralized Letter of Credit agreement is essential for businesses engaged in international trade within the Indian jurisdiction, particularly when traditional unsecured credit facilities are not suitable or available. This document type is commonly used when an importer needs to provide upfront cash collateral to secure a Letter of Credit issuance, typically ranging from 100% to 110% of the LC value. The agreement comprehensively covers the mechanics of the LC operation, collateral management, rights of the issuing bank, and compliance requirements under Indian banking regulations and international practices (UCP 600). It's particularly relevant in scenarios where the bank requires additional security or when the applicant's credit standing necessitates cash backing, making it a crucial tool for risk management in international trade finance.
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1. Parties: Identification of the applicant, issuing bank, and beneficiary
2. Background: Context of the LC issuance and brief description of the underlying transaction
3. Definitions: Definitions of key terms used throughout the agreement
4. LC Terms and Conditions: Fundamental terms of the Letter of Credit including amount, validity, and purpose
5. Cash Collateral Arrangements: Details of the cash collateral requirement, deposit terms, and maintenance
6. Bank's Rights and Security: Bank's rights over the cash collateral and security interest provisions
7. Representations and Warranties: Standard representations and warranties from the applicant
8. Applicant's Covenants: Ongoing obligations of the applicant regarding the LC and collateral
9. Events of Default: Circumstances constituting default and consequences
10. Bank's Rights on Default: Bank's rights and remedies upon occurrence of an event of default
11. Fees and Charges: LC fees, charges, and payment terms
12. Notices: Communication procedures between parties
13. Governing Law and Jurisdiction: Applicable law and jurisdiction for dispute resolution
1. Foreign Exchange Provisions: Required when LC involves cross-border transactions or foreign currency
2. Additional Security: Used when additional security beyond cash collateral is required
3. Tax Provisions: Detailed tax clauses needed for international transactions or specific tax implications
4. Electronic Communications: Optional section for handling electronic submissions and communications
5. Force Majeure: Added when specific force majeure provisions beyond standard terms are required
6. Transferability: Include when LC needs to be transferable to other beneficiaries
1. Schedule 1 - LC Application Form: Standard form for LC application details
2. Schedule 2 - Cash Collateral Details: Specific details of cash collateral amount, account, and maintenance requirements
3. Schedule 3 - Fee Schedule: Detailed breakdown of all applicable fees and charges
4. Schedule 4 - Required Documents: List of documents required for LC drawing
5. Appendix A - Standard LC Format: Template of the LC to be issued
6. Appendix B - Authorized Signatories: List of authorized signatories for the applicant and their specimen signatures
Authors
Relevant legal definitions
Clauses
Relevant Industries
International Trade
Manufacturing
Import/Export
Retail
Wholesale
Commodities Trading
Textile Industry
Heavy Industries
Agricultural Products
Electronics and Technology
Pharmaceuticals
Automotive
Relevant Teams
Legal
Finance
Treasury
International Trade
Risk Management
Compliance
Operations
Credit
Corporate Banking
Trade Operations
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Trade Finance Manager
Import/Export Manager
Risk Management Officer
Legal Counsel
Company Secretary
Credit Manager
Banking Relationship Manager
Compliance Officer
International Trade Specialist
Financial Controller
Operations Director
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