Document background
A Bank Letter of Comfort is commonly used in Indian business transactions where a formal guarantee is either not required or not preferred, but some form of assurance is needed regarding a company's financial standing or capabilities. This document is particularly relevant in scenarios involving international trade, project financing, or significant business transactions where the beneficiary seeks comfort about the financial stability of their business partner. While not as binding as a bank guarantee, the Letter of Comfort carries significant weight due to the reputation of the issuing bank and is governed by Indian banking regulations, particularly the Banking Regulation Act, 1949, and RBI guidelines. The document typically outlines the bank's relationship with the primary obligor, the scope of comfort provided, and any specific limitations, serving as a middle-ground instrument between a reference letter and a guarantee.
