The Performance Standby Letter of Credit is a specialized banking instrument utilized when parties seek a reliable mechanism to secure performance obligations in commercial transactions. This document, governed by Indian law and banking regulations, represents an irrevocable commitment from a bank to pay upon evidence of non-performance. It differs from traditional bank guarantees by following international standby letter of credit practices (ISP98) while complying with Reserve Bank of India guidelines. The instrument is particularly valuable in cross-border transactions or high-value domestic contracts where the beneficiary requires a robust, independent payment undertaking from a creditworthy bank. The document typically includes specific conditions for payment, presentation requirements, and clearly defined trigger events, providing certainty and security to the beneficiary while ensuring the applicant's interests are protected through structured documentation requirements.
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1. Letter Reference Details: SBLC number, date, and bank's letterhead information
2. Beneficiary Details: Full name and address of the party in whose favor the SBLC is issued
3. Applicant Details: Full name and address of the party requesting the SBLC
4. Credit Amount: Maximum amount available under the SBLC and currency denomination
5. Underlying Transaction: Reference to the underlying contract or obligation being guaranteed
6. Bank's Undertaking: Clear statement of the bank's irrevocable undertaking to pay upon compliant presentation
7. Trigger Events: Specific conditions or events that will trigger payment under the SBLC
8. Presentation Requirements: Documents required to be presented for claiming payment
9. Expiry Details: Expiry date and place for document presentation
10. Form of Demand: Specified format for making a demand under the SBLC
11. Payment Terms: Timeframe and method of payment upon compliant presentation
12. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction
13. Applicable Rules: Reference to ISP98 or other applicable international rules
1. Transferability Clause: Include when the SBLC needs to be transferable to another beneficiary
2. Reduction Clause: Include when the SBLC amount can be reduced progressively based on certain milestones
3. Multiple Drawing Clause: Include when multiple drawings are permitted under the SBLC
4. Language Preference: Include when documents can be presented in languages other than English
5. Special Payment Instructions: Include when specific payment routing or methods are required
6. Force Majeure Clause: Include when specific force majeure provisions need to be addressed
7. Assignment Provisions: Include when proceeds of the SBLC can be assigned to third parties
1. Form of Demand: Template for the demand letter to be submitted by beneficiary
2. Required Documents Format: Templates or formats for supporting documents required for presentation
3. Underlying Contract Extract: Relevant excerpts from the underlying contract being guaranteed
4. Bank Details Appendix: Complete banking details for payment processing
5. Authorized Signatories: List of authorized signatories and specimen signatures if required
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Construction and Infrastructure
Manufacturing
Energy and Utilities
Telecommunications
Real Estate Development
Mining and Resources
Engineering Services
Defense Contracting
Technology Services
Transportation and Logistics
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Risk Management
Compliance
Operations
Commercial
Credit
International Banking
Project Management
Relevant Roles
Chief Financial Officer
Treasury Manager
Trade Finance Manager
Project Finance Manager
Legal Counsel
Contract Manager
Risk Manager
Commercial Director
Finance Director
Banking Relations Manager
Compliance Officer
Credit Manager
International Trade Specialist
Project Manager
Operations Director
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