Standby Letter of Credit (SLC)

• SLC is similar to Guarantee.

• In USA , Japan due to legal position, banks are unable to issue guarantees, bonds.

• Instead, SLCs are used.

Standby Letter of Credit (SLC)

• Issuer bank at request of applicant agrees that

• Beneficiary will be paid before L/C expiry • Upon presentation of • a. demand for payment and• b. document evidencing applicant’s non-

performance

Standby Letter of Credit (SLC)

• In this arrangement,

• Beneficiary gets payment when

• applicant fails to pay

• or fails to perform

Standby Letter of Credit (SLC)

• SLC acts as

• Advance payment guarantee or

• Performance guarantee or

• Secure payment of outstanding invoices

Standby Letter of Credit (SLC)

• SLC can be subject to

• UCP 600 or

• ISP 98 ( Publication 590 )

International Standard Banking Practice – ISBP

• First introduced in 2002 - 645

• Updated in 2007 – 681

• Revised in 2013 – 745E

International Standard Banking Practice – ISBP

• ISBP is companion to UCP and to be read in conjunction.

• Does not amend UCP.

• Reflects worldwide standard practices.

International Standard Banking Practice – ISBP

• There are 291 articles/paragraphs

• Divided in 15 sections.

Bank Payment Obligation – BPO

• UR-BPO ( Pub 750E) introduced in July 2013.

• Has 15 articles.

• BPO relates to underlying trade transactions –

• using Transaction Matching Application - TMA

BPO means –

• irrevocable & independent undertaking

• Of Obligor bank to pay or incur deferred payment obligation or pay at maturity

• Specified amount

• To recipient bank

• On submission of data sets reqd by Established Base Line

• Resulting in data match