Standby Letter of Credit || Trade Hunt Management

Course Details

Bank
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Standby Letter of Credit

By Sudhakar Sanjeevi
16/Dec/2025
1 Students

Course Description

A Standby Letter of Credit (SBLC) is a bank-issued undertaking that guarantees payment or performance on behalf of a customer if the customer fails to meet contractual obligations. Unlike a documentary letter of credit used for routine trade payments, an SBLC functions primarily as a risk mitigation and assurance tool. It is commonly used to secure obligations such as loan repayments, advance payments, performance guarantees, and service contracts.

An SBLC is payable upon presentation of specified documents, typically a simple demand and statement of default, making it efficient and reliable. Most SBLCs are governed by ISP98 or, in some cases, UCP 600. Widely used in international trade, project finance, and commercial transactions, SBLCs provide confidence to beneficiaries, reduce counterparty risk, and enhance trust between parties, while enabling banks to support trade and business activities securely.