Letter of Credit/ Back to Back Letter of Credit

A Letter of Credit is a written undertaking given by a Bank of behalf of its customer to pay up to a certain amount to a supplier of another country within prescribed time limit, or fulfillment of the terms and conditions stipulated in the credit. This is a recognized process of doing international/local trading business.


  • Goods to be imported should be acceptable as per Islamic Shari’ah (Halal) and should be permissibleto import as per the laws of the land.
  • Bank may request for IRC, Trade License, TIN, VAT Registration Certificate, Membership Certificate from Chamber of Commerce, Proforma Invoice//Indent, Insurance Cover Note etc. to scrutinizing.
  • Bank may take all required forms, agreements & Charge documents signed by the applicant like L/C application form, Guarantee form, Mudaraba/HPSM Agreement etc.
  • Bask should take ‘Irrevocable Letter of Authority’ from the applicant while issuing the L/C.
  • Bank may ask the customer to deposit the amount of L/C Margin to his operative accountas per sanction advice.
  • Bank can take Service Charge/ Ujrat Bill Wakalah (Wakalah fee) from the applicant to open the L/C.
  • Bank can realize all correspondent charges, Telex, SWIFT, Courier charges etc. from applicant’s operative account.
  • Bank can also realize ‘Discrepancy’ charges if the documents are found discrepant and notify the same to the applicant.
  • After arrival of full set of Documents, Bank may inform the same to the applicant and ensure the L/C payment through Murabaha Import Bill and/or Trust Receipt (TR).

Back to back L/C is a type of Import L/C either in Inland or in Abroad, which is opened against lien on valid export L/C.

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