Document background
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.
