The Letter of Credit Promissory Note is a specialized financial instrument commonly used in Indian trade finance transactions where enhanced payment security is required. This hybrid document combines the unconditional payment promise of a promissory note with the security of a bank-guaranteed letter of credit. It is particularly useful in high-value trade transactions, both domestic and international, where sellers require additional payment security beyond a standard letter of credit. The document must comply with the Negotiable Instruments Act, 1881, Banking Regulation Act, 1949, and relevant RBI guidelines. It typically includes details of the underlying trade transaction, payment terms, document requirements, and bank obligations. This instrument is especially relevant when dealing with new trading partners or in industries where payment security is paramount.
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1. Date and Place of Execution: Specific date and location where the promissory note is executed, essential for determining jurisdiction and validity period
2. Parties Identification: Complete details of the maker (promisor), payee (beneficiary), and the issuing bank
3. Unconditional Promise: Clear statement of unconditional promise to pay a certain sum of money
4. Amount and Currency: Specific amount in figures and words, including currency denomination
5. Payment Terms: Details of when and how the payment will be made, including maturity date and payment method
6. Letter of Credit Details: LC number, type, and essential conditions of the letter of credit
7. Place of Payment: Specific location or bank branch where the payment is to be made
8. Signing and Attestation: Space for signatures of all parties and witnesses
1. Security Arrangements: Details of any collateral or security provided, used when the LC is secured by specific assets
2. Transfer Rights: Terms regarding transferability of the LC, included when the LC is transferable
3. Interest Clause: Details of interest payment if applicable, used when interest is chargeable on the principal amount
4. Force Majeure: Conditions for non-performance due to extraordinary circumstances, included in high-value or international LCs
5. Dispute Resolution: Specific procedures for handling disputes, recommended for high-value transactions
1. Schedule A - Documents Required: List of documents required for LC activation and payment
2. Schedule B - Payment Schedule: Detailed payment schedule if payments are to be made in installments
3. Schedule C - Security Details: Detailed description of any collateral or security provided
4. Appendix 1 - Bank Details: Complete banking information for all parties involved
5. Appendix 2 - Terms and Conditions: Standard terms and conditions of the issuing bank
Relevant legal definitions
Advising Bank
Applicant
Banking Day
Beneficiary
Bill of Exchange
Confirming Bank
Credit
Documents
Draft
Drawing
Event of Default
Expiry Date
Finance Documents
Force Majeure
Governing Law
Holder in Due Course
Interest Period
Interest Rate
Issuing Bank
Letter of Credit
Maker
Material Adverse Effect
Maturity Date
Negotiating Bank
Negotiation
Payment Obligation
Place of Payment
Presentation
Promissory Note
Reimbursing Bank
Security
Security Documents
Shipping Documents
Sight Payment
Specified Currency
Terms and Conditions
Trade Documents
Transaction
Transfer
UCP 600
Applicant
Banking Day
Beneficiary
Bill of Exchange
Confirming Bank
Credit
Documents
Draft
Drawing
Event of Default
Expiry Date
Finance Documents
Force Majeure
Governing Law
Holder in Due Course
Interest Period
Interest Rate
Issuing Bank
Letter of Credit
Maker
Material Adverse Effect
Maturity Date
Negotiating Bank
Negotiation
Payment Obligation
Place of Payment
Presentation
Promissory Note
Reimbursing Bank
Security
Security Documents
Shipping Documents
Sight Payment
Specified Currency
Terms and Conditions
Trade Documents
Transaction
Transfer
UCP 600
Clauses
Promise to Pay
Payment Terms
Letter of Credit Terms
Security
Default
Interest
Bank Obligations
Document Presentation
Force Majeure
Notice Requirements
Transfer Rights
Assignment
Governing Law
Jurisdiction
Dispute Resolution
Representations and Warranties
Events of Default
Remedies
Amendment
Severability
Entire Agreement
Stamp Duty
Documentation Requirements
Bank Communications
Compliance with Regulations
Indemnification
Costs and Expenses
Payment Terms
Letter of Credit Terms
Security
Default
Interest
Bank Obligations
Document Presentation
Force Majeure
Notice Requirements
Transfer Rights
Assignment
Governing Law
Jurisdiction
Dispute Resolution
Representations and Warranties
Events of Default
Remedies
Amendment
Severability
Entire Agreement
Stamp Duty
Documentation Requirements
Bank Communications
Compliance with Regulations
Indemnification
Costs and Expenses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Wholesale Trade
Retail
Commodities Trading
Shipping and Logistics
Agriculture
Energy and Resources
Relevant Teams
Finance
Legal
International Trade
Treasury
Risk Management
Compliance
Trade Operations
Commercial Banking
Credit Administration
Relevant Roles
Trade Finance Manager
Finance Director
Chief Financial Officer
Import/Export Manager
Treasury Manager
Banking Relationship Manager
Credit Manager
Financial Controller
Trade Operations Officer
Compliance Officer
Legal Counsel
Risk Manager
Commercial Banking Officer
International Trade Specialist
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