Presentation

On
Back To Back L/C
By
Md.Ashikollah
ID#51427032
Banking & Insurance
EMBA
University of Dhaka

Presentation Outline
Introduction
Back To Back L/C
Salient points of Back to Back L/C
Back to Back L/C Scenario
Benefits
Conclusion

Introduction
Back to Back L/C is issued on behalf of a customer
against the security of Export L/C for procurement of
raw materials either locally or from abroad and makes
timely shipments.
The customer is entitled to open BTB L/C less then
the face value of the Export LC.
More than one BTB import LC can be issued against
one or more export LCs.

Back To Back L/C

It is backed by Export L/C or Master L/C.

Master L/C serves here as the collateral.
The advising bank of the Master L/C becomes the
issuing bank of the second letter of credit.
Beneficiary of the Master L/C becomes applicant of
BL/C.

Salient points of Back to Back L/C

A Back to Back L/C is opened against an
irrevocable export L/C .
It will be opened on usance basis covering usance of
not more than 180 days.
The payment is normally to be made from the
proceeds of export bill after realization.
The validity of this L/C should not be extended
without corresponding acceptable extension of the
validity of export L/C.

Back to Back L/C Scenario

Benefits

Allows flexibility in varying the terms and conditions

from the Master LC to suit the second beneficiary
The identity of the buyer and actual purchase price will
not be known to the ultimate supplier and vice versa
Minimizes the risks of non-delivery or late shipment by
the ultimate supplier as the Slave LC guarantees payment
upon presentation of compliant documents
Governed by International Chamber of Commerce rules
Can be issued to ultimate suppliers worldwide in major
currencies in the form of SWIFT, telex, courier and
registered mail

Conclusion
A back-to-back letter of credit can be used as an
alternative to the transferable letter of credit rather
than transferring the original letter of credit to the
supplier.

Any Question?

Thank You