3-1- Local L/C is one kind of payment and is one of bank’s services which is requested by applicant and established by bank. This credit supposed for ordering or purchasing goods or services from one seller to seller’s benefit. These credits can pay by cash (liquid) or by credit (trust).
3-2- In order to make limits, responsibilities and duties of contract’s sides clear and using identical legal basis between bank and costumer, collection of international chamber of commerce terms (Incoterms) will extrapolate.
3-3- Local L/C opens as irrevocable credit.
3-4- Minimum amount for local L/C opening is 500 millions of Rials and opening less than this amount currently is not possible.
3-5- Credit opening duration for purchasing all type of goods, raw materials and services, is based on agreement between buyer and seller. After payment of related charges it is acceptable to prolong this duration for local L/C opening
3-6- Minimum amount of deposited fund for L/C opening from buyer depends on the whole proforma invoice cost and credit amount and cooperation duration of bank and buyer and specified item by item. However it could not be less than 10% of the total amount of L/C opening. Guarantee for the rest of credit fund is acceptable for bank in one or more of the following authorized guarantee forms, based on current disciplines of bank. It would be at least equal to 120% of the total amount of credit opening cost. [Guarantees forms are: real estate mortgage, blocking time deposit into bank's profit , debentures with government guarantee, other bank’s guarantee , coverage of authorized insurance companies (by buyer’s expense ) and other mortgages (securities) acceptable for BIM. ]
3-7- Paying prepayment to seller (based on contract or proforma invoice conditions) also is possible for bank, as equal as to pre-received money from buyer in time of L/C opening. In case that shipment or services has not performed or credit has expired, it’s required that seller executor bank guarantee the principle and its benefit is equal to profit rate of social service section loans in the same year.
3-8- Amount of commission of service offering for L/C opening for the first 3 months totally amounts to 0.002 of the whole credit cost, and for each additional month 0.0005 of the whole credit cost.
3-9- Expenses related to mail service , tax stamps, telex or SWIFT should paid by buyer.
3-10- Different procedures of executive actions for local L/C opening described as below:
Flowchart of operation and related form were offered in enclosure of this guide.
3-10-1- Buyer refers to one BIM’s branch and receive all required forms for local L/C opening, including: L/C opening application form and credit opening terms and conditions from.
3-10-2- Buyer should study credit opening terms and conditions paper and fill L/C opening application form ,then he should sign and stamp them. Buyer submits these forms with proforma invoice issued by seller to that branch.
3-10-3- after documents were filled out and offered by buyer, branch comprehensively controls them and compares with seller’s proforma invoice information and other related documents and also with current rules and disciplines. In case of any problem or ambiguity in received documents two sides will figure it out. It is also necessary for seller to accept receiving purchase cost by opening local L/C and he must have clearly mentioned it in his issued proforma invoice.
3-10-4- with respect to proforma invoice price, credit time , type of goods or services and other related parameters , bank appoints amount of deposit and buyer settles appointed fund to bank’s account by bank’s declaration.
3-10-5- with respect to credit conditions, type of goods or services, amount of deposit and other related parameters, bank assigns type and amount of guarantee for payment of remained credit cost and buyer embarks to provision of assigned guarantee(s).
3-10-6- local L/C is opened to seller’s benefit with respect to entered information in credit opening forms and seller’s proforma invoice. It serves to seller via executor bank.
3-10-7- seller’s declaration for acceptance of reception of served credit and its conditions is passed to bank via executor bank and finally delivered to buyer.
3-11- increasing or decreasing in credit cost, to prolong credit deadline and every modification in its conditions or revocation of credit need to or offer written agreement between seller and buyer. Bank will perform required actions after reception of related charges under current bank’s rules and disciplines.
3-12- offering dealing deeds from seller, by which executor bank is authenticated for determining for payment of the whole or part of credit cost to seller is defined as following:
- Goods delivery (services completion) to buyer declaration
- Invoice issued by seller
- Certificate of origin: (depends on buyer request)
- Technical inspection report (depends on buyer request)
- General inspection report
- Bill of lading for goods shipment (expense statement for service performance)
- Insurance certificate (depends on buyer request)
3-13- After reception of abovementioned documents was done, they are controlled and confirmed. Executor bank of seller requests for bank’s approval and finally embarks to paying price of invoice to seller.
3-14- Simultaneous with payment of invoice price to seller by executor bank of seller, and its declaration to bank, bank immediately requires buyer to settle the remained credit cost to bank’s account.
3-15- In case of any suspension from buyer in provision of remained credit cost, bank will calculate and receive the profit of that price from buyer. This profit should be paid from payment date to executor bank of seller up to reckoning time and delivering related documents from buyer.
3-16- If buyer could not provide the remained credit cost (invoice cost) and request for provision of credit cost by facilities from bank, bank can confirm his request and provide the desired cost maintaining bank’s rules and disciplines and in one Islamic contraction form. This payment will receive in installment form. If any interruption occurs between invoice cost payment to executor bank of seller and buyer’s request, in addition to the profit of related contract, penalty of satisfaction delay (subject of article No. 3-15) also will be calculate and received from buyer.