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Performance Standby Letter Of Credit for India

Performance Standby Letter Of Credit Template for India

A Performance Standby Letter of Credit is a contingent payment instrument issued by a bank under Indian banking regulations, providing financial security against non-performance of contractual obligations. This document serves as an irrevocable undertaking by the issuing bank to pay a specified sum upon presentation of compliant documents evidencing default or non-performance. Operating under Indian law and typically incorporating international banking practices (ISP98), it provides a robust mechanism for securing performance obligations while offering beneficiaries a swift and independent path to compensation in case of default.

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What is a Performance Standby Letter Of Credit?

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.

What sections should be included in a Performance Standby Letter Of Credit?

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

What sections are optional to include in a Performance Standby Letter Of Credit?

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

What schedules should be included in a Performance Standby Letter Of Credit?

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

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

India

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
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

Industries








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