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DRAWEE UNDER LC AVAILABLE BY ACCEPTANCE

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QUESTION

Dear Mr. Old Man

I need your kind advice on the below situation:

An usance LC of 180 days has been issued by RBL Bank, India to Axis Bank, Dubai (direct RMA)

Field 41 D: AXIS BANK, BY ACCEPTANCE

Field 42 C: DRAFTS AT 180 DAYS FORM THE DATE OF SHIPMENT

Field 42 A: DRAWEE: RBL BANK LTD, MUMBAI, INDIA (ISSUING BANK)

Please note that

* There is no Reimbursing Bank in the LC
* AXIS BANK, India is going to confirm the LC.

Now, Axis Bank is requesting an Amendment in 41 D as AXIS BANK BY NEGOTIATION I/O EXISTING

or

42 A TO BE AXIS BANK , DUBAI

We are the beneficiary and having account with AXIS BANK , DUBAI. Is the Amendment really required?

As our customer is SAIL (Government of India) and requesting for an amendment is a difficult task?

I shall be grateful if you could explain the above.

Thanks a lot in Advance!

Regards

Srividhya
—-

ANSWER

Hi,

If LC is available with AXIS BANK by acceptance, drafts must be drawn on AXIS BANK (drawee), not on RBL BANK (the issuing bank).

So, if AXIS BANK is willing to confirm and accept to honour the complying documents, it should request the issuing bank to amend the LC as follows:

42a (Drawee): AXIS BANK

The issuing bank must know that AXIS BANK is not in position to accept drafts drawn on other bank (issuing bank). If the issuing bank refuses to amend the LC as above suggested, AXIS BANK may refuse to confirm the LC.
So, the beneficiary should approach AXIS BANK to determine whether it is willing to confirm the LC available with itself by acceptance. If yes, it can request the issuing bank to amend the LC as suggested.

Kind regards,

Mr. Old Man

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2 Comments

  1. trang

    November 5, 2019 at 10:42 am

    Hi,
    We have one letter of credit, drawee is the issuing bank, however the LC allows the reimbursing bank. So is it reasonable that drawee in the bill of exchange will be issuing bank?
    Thanks

    Reply

    • Mr Old Man

      November 6, 2019 at 2:56 am

      Hi,

      Yes.
      According to Article 9 (c) URR 725, an issuing bank should not require a sight draft to be drawn on the reimbursing bank.

      Kind regards

      Reply

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