IN LOCAL SCENARIOS:
Sr No | Parameter | Guarantee | Stand-by Letter of Credit |
1 | Governing Law | Local law | UCP 600 or ISP 98 - Same Rules acepted by all members of ICC |
2 | Format | Long draft by legal experts and contains legalese | Simple and easy to understand, text can be a one pager. |
3 | Nature of Document | Subject to clarification by legal department | Bankers can easily interprete the UCP rules |
4 | Claim Process | Validity of the claim to be confirmed by lawyers | Validity of the claim can be ascertained by bankers. |
5 | Purpose | Very rigid and a linear product. | Flexible and can be customised easily |
6 | RBI recognition of aplicable ICC Rules | URDG 758 of ICC not yet approved by RBI | UCP and ISP approved by RBI |
7 | Risk Undertaking | Demand format not specified. | Demand is defined and the contents of the claim can be pre-determined. |
8 | Payment by | Issuer | Paying bank or the issuing bank |
9 | Stamp Duty | Stamp duty varies statewise | As per the local practice |
10 | Dispute | Dispute settled by court. | Dispute referred to courts only if the banks fail to resolve |
11 | Issuance of instrument | Physical | By SFMS ( RBI electronic platform ) or physical |
12 | Authentication of instrument | Manual process of verifying signature of issuers | Not required if issued electronically |
13 | Fields for instruction | Running text often subject to dispute. | Defined fields for each instruction even manually as appearing in electronic transmission SFMS |
14 | Transferability | Non Transferable | Transferable |
15 | Expiry | At issuer's counter | Alllows the paying bank to be of customer's choice |
16 | Presentation | Original Guarantee generally required by issuer | SBLC not to be presented to issuing bank while making claim |
17 | Advising of Instrument | Issuer sends directly to beneficiary | Advised by beneficiary's bank |
18 | Issuing Entity | Any entity can issue |
As of date only Banks can issue in India
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IN INTERNATIONAL SCENARIO:
Sr No | Parameter | Guarantee | Stand-by Letter of Credit |
1 | Governing Law | URDG or specified jurisdiction or Local Laws of issuing bank country | UCP 600 or ISP 98 - Same Rules acepted by all members of ICC |
2 | Format | Long draft by legal experts and contains legalese | Simple and easy to understand, text can be a one pager. |
3 | Nature of Document | Subject to clarification by legal department | Bankers can easily interprete the UCP rules |
4 | Claim Process | Validity of the claim to be confirmed by lawyers | Validity of the claim can be ascertained by bankers. |
5 | Purpose | Very rigid and a linear product. Mainly confined to non performance / financial | Wide Range; Flexible and can be customised easily |
6 | RBI recognition of aplicable ICC Rules | URDG 758 of ICC not yet approved by RBI | UCP and ISP approved by RBI |
7 | Risk Undertaking | Demand format not specified. | Demand is defined and the contents of the claim can be pre-determined. |
8 | Payment by | Issuer | Paying bank or the issuing bank |
9 | Stamp Duty | Stamp duty varies statewise | As per the local practice |
10 | Dispute | Dispute settled by court. | Dispute referred to courts only if the banks fail to resolve |
11 | Issuance of instrument | Physical or swift | SWIFT |
12 | Authentication of instrument | Manual process of verifying signature of issuers | Not required since issued electronically |
13 | Fields for instruction | Running text often subject to dispute. | Defined fields for each instruction even manually as appearing in electronic transmission SFMS |
14 | Transferability | Non Transferable ; URDG Permits assignment | Transferable; ISP permits transfer to more than one beneficiary |
15 | Expiry | At issuer's counter; Where not issued under URDG, some countries do not recognise expiry date. | Clear cut; Alllows the paying bank to be of customer's choice |
16 | Presentation | Original Guarantee generally required by issuer | SBLC not to be presented to issuing bank while making claim |
17 | Advising of Instrument | Issuer sends directly to beneficiary | Advised by beneficiary's bank |
18 | Issuing Entity | Any entity can issue | As of date only Banks can issue |
19 | Irrevocable | Yes | Yes |
20 | Amendment | With Beneficiary Consent | UCP - With beneficiary consent; ISP - Automatic amendment permitted |