A Reverse Letter of Credit (RLoC) is a crucial financial instrument used in international trade transactions under Indian jurisdiction. It is particularly utilized when there's a need for a structured payment mechanism where the buyer's bank provides a commitment to pay the seller's bank, creating a secure chain of payment obligations. This document type is governed by Indian banking laws, including the Banking Regulation Act, 1949, and Reserve Bank of India guidelines, while also adhering to international banking practices such as UCP 600. The RLoC includes comprehensive details about credit terms, conditions, document requirements, and payment mechanisms, making it essential for international trade transactions where multiple banks are involved in the payment chain. It's commonly used in situations where the seller requires additional payment security or when complex international trade financing structures are needed.
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1. Letter Details and Date: Opening details including reference number, date, and addresses of all parties
2. Credit Amount and Currency: Specification of the credit amount, currency, and any tolerance limits
3. Form of Credit: Whether irrevocable or confirmed, and other fundamental characteristics
4. Expiry Date and Place: Clear statement of when and where the credit expires
5. Available With/By: Specifies the nominated bank and method of availability (sight, deferred payment, etc.)
6. Beneficiary Details: Complete information about the beneficiary bank and ultimate beneficiary
7. Required Documents: Comprehensive list of documents required for presentation
8. Shipment Terms: Details of shipment, latest shipment date, and partial shipments if applicable
9. Payment Terms: Specific conditions and timing of payment
10. Bank Charges: Allocation of various banking charges between parties
11. Special Conditions: Any specific conditions or requirements particular to this credit
12. Governing Law and Jurisdiction: Specification of applicable law and jurisdiction
1. Revolving Credit Terms: Include when the credit is revolving, specifying reinstatement terms
2. Red Clause Provisions: Include when advance payment facilities are required
3. Transfer Conditions: Include when the credit needs to be transferable
4. Back-to-Back Arrangements: Include for back-to-back credit structures
5. Insurance Requirements: Include when specific insurance arrangements are needed
6. Special Security Provisions: Include when additional security measures are required
7. Force Majeure Clause: Include when specific force majeure provisions are needed beyond standard terms
1. Schedule A - Commercial Invoice Requirements: Detailed specifications for commercial invoice presentation
2. Schedule B - Transport Document Requirements: Specific requirements for bills of lading or other transport documents
3. Schedule C - Product Specifications: Detailed description of goods or services covered by the credit
4. Schedule D - Document Checking Guidelines: Specific instructions for document examination
5. Appendix 1 - Bank Authorization Forms: Required bank forms and authorizations
6. Appendix 2 - Supporting Agreements: Related agreements referenced in the main credit
7. Appendix 3 - Specimen Signatures: Authorized signatures for all relevant parties
Authors
Relevant legal definitions
Clauses
Relevant Industries
International Trade
Manufacturing
Import-Export
Banking and Financial Services
Commodities Trading
Wholesale Distribution
Industrial Equipment
Raw Materials
Consumer Goods
Agriculture
Relevant Teams
Trade Finance
International Banking
Legal
Treasury
Risk Management
Compliance
Trade Operations
Credit Administration
Documentary Credits
International Trade
Relevant Roles
Trade Finance Manager
International Banking Officer
Documentary Credits Specialist
Treasury Manager
Import-Export Manager
Trade Operations Officer
Compliance Officer
Credit Risk Manager
Banking Relationship Manager
Chief Financial Officer
Finance Director
Legal Counsel
Trade Finance Analyst
Banking Operations Manager
International Trade Specialist
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