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Usance Lc Discounting for India

Usance Lc Discounting Template for India

A legally binding agreement governed by Indian law that outlines the terms and conditions under which a bank agrees to discount (purchase at a reduced value) a Usance Letter of Credit held by its beneficiary. The document details the discounting rate, payment terms, rights and obligations of parties, security arrangements, and compliance requirements in accordance with Indian banking regulations, particularly the Banking Regulation Act, 1949, and RBI guidelines. It includes provisions for risk mitigation, default scenarios, and dispute resolution while ensuring compliance with FEMA regulations for international trade transactions.

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Usance Lc Discounting

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What is a Usance Lc Discounting?

The Usance LC Discounting agreement is a critical trade finance document used when a beneficiary of a Letter of Credit (typically an exporter) wishes to receive immediate payment against a time-based (usance) LC by having it discounted by a bank. This document, governed by Indian banking and trade finance regulations, establishes the legal framework for the discounting transaction, including the calculation of discount rates, payment mechanisms, and risk allocation between parties. It's particularly relevant in international trade scenarios where Indian exporters seek to improve their cash flow by monetizing their LC receivables before maturity. The agreement ensures compliance with Reserve Bank of India (RBI) guidelines, FEMA regulations, and international banking practices while providing security to both the discounting bank and the beneficiary.

What sections should be included in a Usance Lc Discounting?

1. Parties: Details of the discounting bank and the beneficiary seeking discounting

2. Background: Context of the LC discounting arrangement and existing relationships

3. Definitions and Interpretation: Definitions of key terms and interpretation rules

4. Scope of Discounting Facility: Overview of the discounting facility and its general terms

5. Discounting Terms: Specific terms including discount rate, tenure, and payment mechanisms

6. Conditions Precedent: Conditions to be satisfied before discounting facility becomes effective

7. Representations and Warranties: Standard and specific representations by the beneficiary

8. Covenants: Ongoing obligations of the beneficiary

9. Payment Terms: Details of payment calculations, timing, and methods

10. Rights and Obligations: Specific rights and obligations of all parties

11. Events of Default: Circumstances constituting default and consequences

12. Remedies: Available remedies in case of default or breach

13. Indemnification: Indemnity provisions and coverage

14. Governing Law and Jurisdiction: Applicable law and jurisdiction for disputes

15. Notices: Communication methods and contact details

16. Miscellaneous: Standard boilerplate provisions

What sections are optional to include in a Usance Lc Discounting?

1. Security Arrangements: Additional security or collateral requirements - used when additional security is required beyond the LC

2. Multiple LC Provisions: Special provisions for handling multiple LCs - used when facility covers multiple LCs

3. Cross-Border Provisions: Special provisions for international transactions - used when LC involves foreign entities

4. Syndication Provisions: Provisions for multiple participating banks - used when multiple banks are involved in discounting

5. Force Majeure: Provisions for unforeseen circumstances - used when specifically requested or in high-risk jurisdictions

6. Anti-Money Laundering Compliance: Detailed AML provisions - used for high-value transactions or high-risk parties

7. Insurance Requirements: Specific insurance obligations - used when additional risk coverage is needed

What schedules should be included in a Usance Lc Discounting?

1. Schedule 1 - LC Details: Detailed information about the LC(s) being discounted including issuing bank, value, and maturity

2. Schedule 2 - Discount Calculation Method: Detailed formula and examples of discount calculations

3. Schedule 3 - Fee Schedule: Breakdown of all applicable fees and charges

4. Schedule 4 - Required Documents: List of documents required for discounting and their format

5. Schedule 5 - Authorized Signatories: List of authorized persons who can act on behalf of the parties

6. Appendix A - Standard Forms: Templates for various notices and requests under the agreement

7. Appendix B - Compliance Certificates: Format of compliance certificates to be submitted periodically

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

Manufacturing

Export-Import

Commodities Trading

Textile Industry

Automotive

Heavy Engineering

Agriculture and Food Processing

Pharmaceuticals

Relevant Teams

Legal

Finance

Treasury

International Trade

Trade Finance

Risk Management

Compliance

Credit

Operations

Banking Relations

Relevant Roles

Trade Finance Manager

Chief Financial Officer

Treasury Manager

Export Finance Manager

International Banking Officer

Credit Risk Manager

Compliance Officer

Legal Counsel

Finance Director

Banking Relationship Manager

Trade Operations Manager

Export Manager

Financial Controller

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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