• Q. Counter guarantee – what should be its validity period? Will it be in order if both guarantee and counter guarantee expire on the same day?
• Q. Whether any documents are required to be enclosed to the proposal recommending assumption of primary exposures, viz. issuance of guarantee, adding confirmation, etc.
• Q. What action is to be taken by the branch, if the particulars of the counter guarantee differ from those required under the standard formats laid down by our bank or if the CG contains any onerous clauses?
• Q. Proposals for adding confirmation to the L/C at the request of the beneficiary only - can they be entertained?
• Q. Is it necessary, and if so why the negotiation should be restricted to SBI, in respect of LCs confirmed by us?
• Q. Whether the time limit for realization of export proceeds can be extended beyond 180 days?
• Q. Whether amendments made to an LC subsequent to its confirmation are automatically covered by the confirmation?
• Q. Is it incumbent upon the confirming bank to add its confirmation to the subsequent amendment to an LC confirmed by it, when so requested by the issuing bank?
• Q. Need the following types of proposals be submitted to Foreign Department ?

Q. Counter guarantee – what should be its validity period? Will it be in order if both guarantee and counter guarantee expire on the same day?
A. It should be ensured that the counter guarantee (CG) expires atleast 15 days later than the expiry of Guarantee. Eg: When guarantee is valid upto 31.01.04, CG has to expire on or after 15.02.2004.The reason being, in the event of invocation of a guarantee issued at the request of a foreign bank, we in turn will invoke the counter guarantee (CG) issued by them. As the guarantee can be invoked till the last day of the validity of the guarantee, we need to have enough time to invoke the counter guarantee.

Q. Whether any documents are required to be enclosed to the proposal recommending assumption of primary exposures, viz. issuance of guarantee, adding confirmation, etc.
A. Only the prescribed format, complete in all respects, should be forwarded to FD. No documents need to be enclosed to the proposal. Ensure that none of the columns are blank.
Counter Guarantees / Standby Letters of Credit, original LCs, etc., received from the applicant foreign banks must to be scrutinized by branches before sending the proposals to FD, to ensure that these are in order in all respects.

Q. What action is to be taken by the branch, if the particulars of the counter guarantee differ from those required under the standard formats laid down by our bank or if the CG contains any onerous clauses?
A. The matter should, forthwith, be taken up with the requesting foreign bank to get the aberration corrected. If the foreign bank is unwilling / unable to do so for genuine reasons and if branch still wants to go ahead in spite of the deviation(s) after obtaining concurrence of the appropriate authority, the same must be got vetted by the Law Department at the controlling office to safeguard the bank’s interest.

Q. Proposals for adding confirmation to the L/C at the request of the beneficiary only - can they be entertained?
A. Such requests i.e. only from the beneficiaries should not be entertained. Request for adding confirmation to the L/C must be received from the LC issuing bank. The reason being - in terms of Article 9 - b of UCPDC - ICC 500, the confirming bank steps into the shoes of the issuing bank, as far as the beneficiary is concerned. Further, LC confirmation fee may not be adequate compensation for taking such risks.

Q. Is it necessary, and if so why the negotiation should be restricted to SBI, in respect of LCs confirmed by us?
A. The LC must be restricted to our bank for negotiation to protect our interest, as ensuring compliance to LC terms may be cumbersome if all conditions are not fulfilled while negotiation is undertaken by some other bank. Also, in addition to earning LC confirmation fee, Bank will increase bill business without concomitant increase in liability there under.

Q. Whether the time limit for realization of export proceeds can be extended beyond 180 days?
A. In terms of FD Circular No. 2004/01 dated 06.01.2004, all exporters (including status holders) are allowed to write off and extend the period of realization beyond 180 days or further period as applicable, provided, the aggregate value of such export bills does not exceed 10% of the export proceeds due during the calendar year and such export bills are not a subject of investigation by Enforcement Directorate / Central Bureau of Investigation. For full details, a reference to the Circular may be made.

Q. Whether amendments made to an LC subsequent to its confirmation are automatically covered by the confirmation?
A. When confirmation is added to an LC, it extends to / covers only the terms and conditions as they were at the material time. Any subsequent amendment requires the opening bank’s specific request to the confirming bank for extending confirmation to such amendments also.

Q. Is it incumbent upon the confirming bank to add its confirmation to the subsequent amendment to an LC confirmed by it, when so requested by the issuing bank?
A. Not obliged to do so.
In terms of Article 9 – d- ii of UCPDC – ICC 500, a confirming bank may choose to advise an amendment to the beneficiary without extending its confirmation and if so, must inform the issuing bank and the beneficiary without delay.