SBLC in Bangladesh: Standby Letters of Credit, Overseas Guarantees and Bangladesh Bank Rules (2026)

SBLC in Bangladesh: the 2026 legal framework

An SBLC in Bangladesh is rarely just a piece of paper from a foreign bank. It is a foreign-exchange event regulated by Bangladesh Bank, a credit decision for the local lender, a documentary undertaking governed by international rules, and, if things go wrong, a dispute about whether a court will let it be paid. Standby letters of credit and overseas bank guarantees now support Taka loans to resident companies, bid and performance security for foreign contractors, repayment commitments for external borrowing and payment security for imports. Each use has its own approval route and its own failure points.

This guide explains the 2026 position for lenders, borrowers, foreign sponsors, contractors and issuing banks. It covers the rules that govern the instrument itself (ISP98, UCP 600 and URDG 758), the Bangladesh Bank framework under the Foreign Exchange Regulation Act 1947 and FEPD-1 Circular No. 32 of 2 September 2026, counter-guarantee structures, enforceability and legal opinions, the fraud exception and injunctions, fake-instrument risk, and a practical sequence for calling an overseas standby when a borrower defaults. Our broader guide to bank guarantees in Bangladesh covers domestic guarantees; this article concentrates on standbys and cross-border instruments.

Summary: Since March 2026, banks and finance companies in Bangladesh have had general permission to lend in Taka to resident companies against an overseas bank guarantee or SBLC, provided the instrument is unconditional, irrevocable and payable on first demand, the issuer is suitably rated, the borrower pays nothing for the support, and governing law and enforceability are legally vetted before disbursement. Outward SBLCs, counter-guarantee chains and project security each follow separate rules in FEPD-1 Circular No. 32 of 2 September 2026.

Key point: Bangladesh Bank permission is only one layer. An SBLC that satisfies the circular can still fail on a defective demand, an expired instrument, an unenforceable governing-law clause or a forged issuer. Lenders should test the document, the issuer, the regulatory route and the call process together, before any money is released.

At a glance

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Table of Contents

Why an SBLC in Bangladesh needs a two-track review

Every SBLC in Bangladesh sits on two tracks at once. The first is regulatory: because a standby moves foreign-exchange risk across the border, it engages the Foreign Exchange Regulation Act 1947 and Bangladesh Bank's instructions to authorised dealers. The second is contractual: the instrument is a promise by a bank to pay against documents, and whether that promise produces money depends on its wording, the rules it incorporates and the law that governs it. Many failed transactions pass one test and fail the other.

Bangladesh Bank describes its framework in these terms. The consolidated circular states that Taka credit to non-residents and foreign-controlled companies, credit to residents against guarantees or collateral held outside Bangladesh, foreign-currency loans and guarantees between residents and non-residents are all regulated under sections 3, 4, 5, 18 and 20 of the FER Act 1947.[1] [4] In the same paragraph it tells authorised dealers to follow internationally accepted best practice guided by the latest URDG, UCP and ISP when issuing guarantees, SBLCs and other payment commitments, subject to domestic law.[1]

That instruction is guidance on practice. It does not make an instrument subject to any rule set; only the instrument's own text does that.

How a standby differs from a bank guarantee and a documentary LC

Standby letters of credit grew up in markets where banks could not easily issue guarantees, so they borrowed the form of the letter of credit to deliver the function of a guarantee. In Bangladesh the commercial labels are used loosely. The legal analysis should start from what the instrument promises.

Three instruments, one independence principle

A commercial or documentary letter of credit is a payment mechanism: the seller expects to draw on it in the normal course by presenting shipping documents. A standby is a security device: the beneficiary relies on it and expects never to draw, because a drawing means the applicant has failed to pay or perform.[10] A demand guarantee performs the same security function in guarantee form. All three are built on the independence principle, which our guide to the letter of credit in Bangladesh explains for trade credits.

ISP98 states the principle in its strongest form. Rule 1.06 describes a standby as an irrevocable, independent, documentary and binding undertaking when issued, whether or not it says so. Because it is independent, the issuer's obligation does not depend on its right to reimbursement from the applicant, on the beneficiary's right to payment under the underlying contract, or on the issuer's knowledge of performance or breach.[8] Because it is documentary, the issuer's obligation depends on presentation of the required documents and their examination on their face.

Which rules apply: ISP98, UCP 600 or URDG 758

Three ICC-linked rule sets compete for standby business, and the choice changes the practical result:

• ISP98. The International Standby Practices were developed under the Institute of International Banking Law and Practice, designated ICC Publication No. 590, and took effect on 1 January 1999.[8] They are written for standbys and apply only to them.[10]
• UCP 600. Article 1 extends the UCP to standby credits to the extent applicable, but many of its rules assume shipment documents and fit a standby poorly.[10]
• URDG 758. The Uniform Rules for Demand Guarantees took effect on 1 July 2010.[11] They are designed for demand guarantees and counter-guarantees, though some standbys incorporate them.

The differences are concrete. ISP98 treats notice of dishonour given within three business days of presentation as reasonable, with a three-to-seven-day band, while UCP 600 gives banks up to five banking days to examine.[9] [10] ISP98 expressly permits renewal and syndication, allows a standby to fix a time of day for expiry, and gives a beneficiary 30 days to present after a closure on a business day.[9] [10] URDG 758 requires a demand to be supported by a statement of the applicant's breach unless the guarantee excludes it, and gives the guarantor five business days to reject a non-complying demand.[11] [12]

For a lender in Dhaka, the practical rule is simple: insist that the instrument names one rule set, obtain the text and note every place the instrument varies it.

The Bangladesh Bank framework for an SBLC in Bangladesh

The governing instruction for an SBLC in Bangladesh is FEPD-1 Circular No. 32, dated 2 September 2026, a consolidated circular on loans, overdrafts, guarantees and external borrowings. It updates FE Circular No. 34 of 2 September 2025 by incorporating later circulars, repeals earlier instructions except the reporting instructions in the Guidelines for Foreign Exchange Transactions Volume 2, is issued under section 20(3) of the FER Act, and remains valid for one year, with later instructions read alongside it.[1] [3]

The general rule and the exceptions

The starting point is restrictive. Authorised dealers should not grant a Taka loan against overseas guarantees or collateral outside Bangladesh without prior Bangladesh Bank approval, applied for on Form-L with an explanation of the purpose, the period, the applicant's assets in Bangladesh, why an overseas guarantee is needed and how the loan will be repaid.[1] Non-trading credit against overseas security also needs prior approval where it falls outside the general permission.

The circular then opens several defined windows. The most important for lenders is the general permission in paragraph 3(2) for Taka finance against overseas BGs and SBLCs, introduced through FEPD-2 Circular No. 02 of 15 March 2026 and now consolidated.[1] Others cover export guarantees, counter-guaranteed guarantees for non-residents, project-authority guarantees and power-sector import security. Where a transaction falls outside a window, prior approval is required, and renewal of a guarantee that needed approval also needs approval.[1]

The wider foreign-exchange context, including repatriation and current-account rules, is covered in our note on foreign exchange regulations in Bangladesh.

Borrowing in Taka against an overseas SBLC

A foreign parent or sponsor that wants its Bangladesh subsidiary to borrow locally will often offer a standby from its own bank rather than lend directly. Since March 2026 this no longer needs case-by-case approval, and the permission applies to resident companies irrespective of ownership or controlling status.[1] [3] The trade-off is a set of conditions that lenders must evidence on file.

The six conditions

Paragraph 3(2) of Circular No. 32 makes the financing subject to credit norms, prudential parameters and six conditions:[1]

• Instrument. The overseas BG or SBLC must be unconditional, irrevocable and payable on first demand.
• Issuer. It must be issued by a non-resident bank or institution rated by a recognised international agency at least at the equivalent of "BB Rating Grade 1–2" under Annex-2 of BRPD Circular No. 16 of 30 October 2018, and acceptable under the lender's own credit policy, risk appetite and country-risk standards.
• No charges to the borrower. No fee, commission, charge or economic benefit of any kind may be payable by the resident borrower, directly or indirectly, for the overseas instrument.
• Legal vetting. Governing law, dispute resolution and enforceability must be clearly established and legally vetted before disbursement.
• Reporting. Bangladesh Bank must be informed immediately if the instrument is liquidated or invoked because of the borrower's payment default.
• Credit and renewal. The lender must assess the borrower's soundness and repayment capacity from audited accounts and cash flow; a renewed SBLC may be kept under lien only if turnover, profitability, cash flow and account conduct have improved.

Lenders must also keep records of the guarantee documents, relationship evidence, legal opinions and use of funds, available to Bangladesh Bank on request.[1] That record-keeping duty is what turns the legal opinion from a closing formality into a supervisory document.

The fee prohibition in practice

The no-charge rule is broad and should shape the deal. A parent's bank will charge the parent for issuing the standby; the risk arises when that cost is passed down. Management fees, structuring fees paid to an affiliate, mark-ups in intra-group pricing or deductions from loan proceeds can all be challenged as indirect benefits for the instrument. Ordinary loan interest and the lender's own documented facility charges are different in character, but the facility documents should separate them clearly and the borrower should represent that no prohibited payment has been made or promised.

Finance companies and the AD route

Where a finance company lends, the overseas BG or SBLC must be routed through an authorised dealer and issued under paragraph 11 of the circular, against back-to-back overseas guarantees or equivalent cash deposits.[1] In practice the finance company relies on a local AD bank's undertaking backed by the foreign instrument, not on a document sent directly from abroad. The closing checklist should show that chain.

What happens to the money after a call

The circular also fixes the foreign-exchange character of the proceeds. The liquidated value is reported as equity investment under chapter 9 of GFET Volume 1, depending on the arrangement between borrower and foreign guarantor. Alternatively, if the underlying arrangements provide for it, the amount may be reported as loan proceeds, in which case any future repayment by the borrower needs prior approval from Bangladesh Bank's Foreign Exchange Policy Department-2.[1] The reimbursement agreement between parent and subsidiary should decide this before signing; improvising it after a call creates repatriation problems later. Sponsors weighing equity against intra-group debt should read our analysis of foreign loans in Bangladesh.

Outward SBLCs issued by Bangladeshi banks

The reverse flow, where a Bangladeshi bank issues a standby in favour of a foreign beneficiary on behalf of a resident, is more tightly controlled because it creates an external liability that the bank may have to pay in foreign currency.

Repayment commitments for foreign borrowing

For repayment commitments in the form of bank guarantees, standby LCs or otherwise, authorised dealers must apply to Bangladesh Bank for specific permission on behalf of the borrower. The circular explains why: if the bank pays, the external loan effectively becomes a local loan, and risk arises if the non-funded liability lacks adequate collateral.[1]

The application must show that credit norms and single-borrower limits are met, that eligible collateral covers the commitment, that at least 25 per cent of the commitment amount is held in cash margin or unencumbered encashable deposits, that the bank has made a proper credit assessment with conditional board approval (or management approval for a foreign bank), and that the Invest Bangladesh Authority has approved the external borrowing.[1] By contrast, corporate, personal and third-party guarantees that involve no commitment by an authorised dealer need no Bangladesh Bank permission where the external loan has been approved by the Invest Bangladesh Authority.[1]

Export, supplier-credit and power-sector standbys

Authorised dealers may issue performance bonds or guarantees for Bangladeshi exporters in favour of overseas buyers without prior approval, subject to tender, bona fides, export-ban and track-record conditions, and remittance on invocation is permitted subject to reporting.[1] [3] Guarantees for suppliers' credit generally need prior permission, with a carve-out for repayment guarantees to the International Islamic Trade Finance Corporation for short-term buyers' credit of up to 180 days.[1] Banks may also issue a bank guarantee or standby LC as payment security to foreign suppliers for emergency imports by government power and energy entities, subject to ministry approval and a sale contract.[1]

Counter-guarantees and project SBLCs for foreign contractors

Most cross-border guarantee business in Bangladesh runs through chains. A foreign contractor's bank issues a counter-guarantee or standby to a Bangladeshi bank, which issues its own guarantee to the employer or project authority. Each link is a separate, independent undertaking, and a call at the bottom of the chain usually triggers a call at the top within days.

Back-to-back guarantees for non-residents

Paragraph 11 lets an authorised dealer issue a guarantee, bid bond or performance bond in foreign currency on behalf of a non-resident in favour of residents without prior approval, if it holds a back-to-back guarantee from an overseas bank covering the amount and is satisfied of its bona fides. Where the beneficiary wants Taka, the local guarantee may be issued against a Taka-equivalent foreign-currency counter-guarantee with cover for exchange-rate movement.[1] A non-resident may alternatively fund a margin account through nostro remittances; a foreign-currency guarantee issued on that basis is settled in Taka equivalent if invoked.[1]

Foreign-controlled companies operating in Bangladesh can obtain Taka or foreign-currency guarantees for local authorities against acceptable foreign back-to-back guarantees, with exchange-rate cover and KYC, AML and CFT diligence.[1] Every other guarantee on behalf of a foreign-owned company or non-resident in favour of residents needs prior approval, with an explanation of how the bank will be reimbursed if it is invoked.[1]

Resident partners of foreign tender winners

FEPD-1 Circular No. 31 of 27 August 2026 added a route for foreign companies that win international tenders for Bangladeshi projects. Authorised dealers may issue guarantees or SBLCs in foreign currency on behalf of resident entities acting as strategic partners, local agents or authorised representatives, in favour of government bodies, state-owned enterprises and procuring entities.[2]

Four conditions apply: the contract must permit such security; the resident must have a documented bona fide relationship with the foreign awardee; the bank's exposure must be covered by collateral or counter-security; and the arrangements must provide for reimbursement of the resident's costs and liabilities, including how the foreign company will settle any amount paid on invocation.[2] Claims are ordinarily settled in Taka equivalent, but may be paid in foreign currency through RTGS where the tender documents require it.[2] The local partner should treat the reimbursement clause as its main protection, ideally backed by a counter-SBLC from the foreign company's bank.

Joint ventures and non-resident beneficiaries

For guarantees on behalf of joint ventures or consortia between resident entities and foreign partners, the issuing bank must be satisfied that the foreign partners provide proportionate collateral such as bank guarantees or SBLCs.[1] Where a non-resident international agency requires a guarantee from a non-resident contractor on a project it finances in Bangladesh, an authorised dealer may issue it against a 100 per cent counter-guarantee from a reputed international bank or 100 per cent cash collateral received from abroad.[1]

URDG 758 adds a link-by-link rule worth checking: according to commentary on the rules, the same rejection and preclusion regime applies when a guarantor makes a demand under a counter-guarantee.[12] Encashment disputes in these chains are analysed in depth in our guide to bank guarantee encashment in Bangladesh.

Enforceability: governing law, forum and the Contract Act

Circular No. 32 requires governing law, dispute resolution and enforceability to be "clearly established and legally vetted" before disbursement.[1] Those are three different questions. Governing law tells you which law interprets the promise. The forum clause tells you where to sue or arbitrate. Enforceability asks whether a judgment or award from that forum can actually be turned into money against the issuer's assets, and whether the payment can lawfully reach Bangladesh.

Choosing the law and the forum

Most overseas standbys are governed by the law of the issuer's place of business, often English or New York law, and many name the courts of that place. URDG 758 contains default law and jurisdiction provisions in articles 34 and 35 that apply unless the guarantee provides otherwise.[12] A Bangladesh lender that accepts foreign law and a foreign forum is accepting that any refusal will be litigated abroad. That is often the right commercial answer, because the issuer's assets are there, but it should be a conscious choice reflected in the credit paper.

If the issuer refuses to pay and the lender instead sues in Bangladesh, it must then enforce a Bangladeshi judgment abroad. The opposite problem, enforcing a foreign judgment in Bangladesh against a local counter-guarantor, depends on narrow statutory routes discussed in our note on how to enforce foreign law in Bangladesh.

Where the Contract Act fits

Bangladeshi law characterises a guarantee through the Contract Act 1872. Section 126 defines a contract of guarantee as a contract to perform the promise, or discharge the liability, of a third person in case of his default, and names the parties surety, principal debtor and creditor.[5] That framework governs the local reimbursement, counter-indemnity and recourse relationships. It does not convert an independent standby into an accessory guarantee whose liability rises and falls with the underlying debt. Bangladesh courts have consistently treated bank guarantees and letters of credit as independent of the underlying contract.[6]

A standby is also not a negotiable instrument in the sense of the Negotiable Instruments Act 1881, which deals with promissory notes, bills of exchange and cheques. Its transferability depends on its own terms and the incorporated rules; ISP98, for example, permits transfer only of the full drawing right.[10]

What the legal opinions should cover

The lender's file should contain two opinions. Counsel in the issuer's jurisdiction should confirm the issuer's capacity and authority, the signatories' authority, the validity and enforceability of the instrument under its governing law, the effect of the chosen forum, and any sanctions, insolvency or resolution regime that could delay payment. Bangladeshi counsel should cover the borrower's authority, the facility and security documents, the Bangladesh Bank route, the fee prohibition, the reporting obligations and the treatment of proceeds. A Bangladesh-law opinion should never be presented as an opinion on foreign law.

Drafting and presenting a demand that will be paid

"Payable on first demand" does not mean payable on any demand. The beneficiary must present exactly what the instrument requires, where and when it requires it. Most refusals of a genuine SBLC in Bangladesh trace back to presentation errors, not to issuer default.

Map the call mechanics at signing

At closing, prepare a one-page call schedule: the beneficiary's exact name, the issuer's branch and address for presentation, permitted channels (paper, SWIFT, email), the form of demand and any statement or certificate, the signatory requirements, the currency and maximum amount, partial-drawing rules, the expiry date and time zone, and the rule set incorporated. ISP98 treats each branch acting in a separate capacity as a separate person, so presenting to the wrong office can be fatal.[9]

Keep the demand language objective. A statement that the borrower has failed to pay a stated sum under a named facility is easy to produce. A requirement for a court judgment, an applicant's countersignature or the issuer's satisfaction with the default is inconsistent with first-demand security and may also fail the circular's "unconditional" condition.[1]

Expiry, renewal and extend-or-pay demands

A standby that expires before the loan matures leaves the lender with an unsecured claim. The facility should require renewal a set number of days before expiry and make failure to renew an event of default allowing a drawing. ISP98 expressly accommodates renewal, and the circular allows a renewed standby to remain under lien if the borrower's performance has improved.[10] [1]

Under URDG 758, an "extend or pay" demand lets the guarantor suspend payment for up to 30 calendar days, and the guarantor may refuse to extend even if the applicant instructs it to.[11] Lenders using URDG-based instruments should diarise that window.

Fraud exception and injunctions against an SBLC in Bangladesh

A borrower facing a call will sometimes ask a Bangladeshi court to stop it. The law here is settled at Appellate Division level but contested in the High Court Division, and the outcome depends heavily on who is restrained and in which forum.

The Appellate Division rule

The leading authority remains Uttara Bank v Macneill & Kilburn, 33 DLR (AD) 298. Applying it in Kamrul Ashraf Khan v BCIC in July 2025, a Division Bench of the High Court Division held that there cannot be any injunction on a bank guarantee, and that the only exception is fraud of which the bank has notice.[6] The same independence reasoning applies to letters of credit and standbys. A dispute about whether the borrower is really in default is not fraud.

The section 7A split

Where the underlying contract has an arbitration clause, applicants increasingly rely on section 7A of the Arbitration Act 2001, which allows interim measures in support of arbitration. In Pubali Traders v Ministry of Food and Disaster Management, decided in December 2025, a Division Bench held that the Arbitration Act is a special law prevailing over the general law and followed Summit Bibiyana Power v Bangladesh in restraining encashment pending a challenge to an award.[7] Other benches have refused section 7A relief on the Uttara Bank line.[6] Until the Appellate Division resolves the split, a section 7A application should rest on fraud or non-compliance evidence, not on the arbitration clause alone.

Why a Bangladeshi order rarely stops a foreign standby

An order of a Bangladeshi court binds parties within its jurisdiction. It may restrain a local beneficiary from presenting a demand, or a local bank from paying under its own guarantee, but it does not bind a foreign issuer paying under a standby governed by foreign law. A restrained beneficiary in Dhaka may face a dilemma if the standby expires during the order. Lenders should diarise expiry, seek variation of any interim order promptly, and ask the issuer for an extension. The procedural rules for temporary relief are covered in our note on temporary injunctions in Bangladesh.

Fake SBLCs, leased instruments and verification

The standby has a second life as a vehicle for fraud. Promoters offer "leased" or "monetised" SBLCs from prime banks, promise funding against them, and collect upfront fees. Regulators abroad have warned for years that "prime bank" programmes using terms such as "standby letter of credit" and "bank guarantee" are scams, often claiming backing from well-known institutions and operating "by invitation only".[13] The ICC's Financial Investigation Bureau has exposed purported standbys for amounts as large as one billion euros, identifying red flags such as incorrect banking terms, poor drafting and requests for access codes.[14]

For a Bangladeshi borrower, a fake SBLC in Bangladesh is not just a commercial loss. Fees paid abroad for a non-existent instrument may breach foreign-exchange rules, and a lender that disburses against an unverified document faces both credit loss and regulatory criticism. Three rules prevent most problems:

• Authenticate bank to bank. Accept an SBLC only through an authenticated SWIFT message from the issuer to the lender or its correspondent, never a PDF or courier copy alone.
• Verify the issuer independently. Check the issuing branch, its rating and its correspondent relationships through sources the borrower did not supply.
• Refuse upfront fees. Genuine standbys are issued by the applicant's own bank against its credit; a broker who sells access to someone else's standby is a warning sign.

Trade-finance fraud with a criminal dimension is addressed in our guide to LC fraud in Bangladesh.

Calling an overseas SBLC: step by step

When a borrower defaults on a Taka facility secured by an overseas standby, speed and precision matter more than anything else. The sequence below reflects how TRW approaches a call for lenders.

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Payment by the issuer does not release the borrower from any unpaid balance. Where the standby covered only part of the exposure, recovery of the remainder will usually proceed through the money-loan regime explained in our guide to the Artha Rin Adalat. Commercial claims between parties to cross-border guarantee arrangements may also fall within the new commercial courts discussed in our note on the Commercial Courts Act in Bangladesh.

SBLC, demand guarantee and documentary LC compared

The table compares the three instruments as they are used in Bangladeshi transactions. On a phone, scroll it sideways.

Mistakes to avoid with an SBLC in Bangladesh

The errors we see most often are avoidable at the term-sheet stage:

• Treating the circular as an approval. General permission removes the need to apply; it does not certify the instrument, the issuer or the loan.[1]
• Accepting a "first demand" heading with conditional text. Read the whole instrument; a requirement for proof of breach or a judgment undoes the label.
• Letting the parent recharge the issuance fee. Any direct or indirect cost to the resident borrower for the overseas support is prohibited.[1]
• Ignoring the tenor mismatch. A one-year standby behind a five-year loan needs an enforceable renewal mechanism.
• Relying on a Bangladesh-law opinion for foreign-law enforceability. Each jurisdiction needs its own qualified counsel.
• Leaving proceeds classification until after a call. Decide equity or loan treatment in the reimbursement agreement.[1]
• Forgetting the regulator. Invocation for payment default must be reported to Bangladesh Bank immediately.[1]

TRW's banking and finance practice structures and reviews these instruments before signing, and our banking and finance litigation practice acts when a call is disputed.

What to watch in 2026 and 2027

Three developments will shape practice for anyone relying on an SBLC in Bangladesh. First, Circular No. 32 is valid for one year from 2 September 2026, so a replacement consolidated circular is due by September 2027, and interim circulars will be read with it.[1] The March 2026 permission for Taka lending against overseas SBLCs is new, and Bangladesh Bank may refine the rating threshold or reporting format once it has seen how lenders use it.

Second, Circular No. 31 is likely to increase the number of SBLCs issued on behalf of local partners of foreign contractors, and with it the number of disputes about reimbursement when those instruments are called.[2] Third, the conflict in the High Court Division over section 7A restraints on encashment awaits Appellate Division resolution; the answer will affect every guarantee and standby that sits beside an arbitration clause.[6] [7]

Frequently asked questions

What is an SBLC in Bangladesh?

A standby letter of credit is a bank's irrevocable, independent undertaking to pay a beneficiary against a compliant demand, usually when the applicant fails to pay or perform. In Bangladesh its issue or acceptance across the border is regulated by Bangladesh Bank under the FER Act 1947 and FEPD-1 Circular No. 32 of 2 September 2026.[1] [8]

Can a Bangladeshi bank lend in Taka against an overseas SBLC?

Yes. Banks and finance companies have general permission to extend admissible Taka finance to resident companies against overseas BGs or SBLCs, provided the instrument is unconditional, irrevocable and payable on first demand, the issuer meets the rating threshold, the borrower pays nothing for the support, and the other conditions in paragraph 3(2) are met.[1]

Does a foreign-owned company qualify for the general permission?

Yes. The permission applies to resident companies irrespective of ownership or controlling status, subject to credit norms and the listed conditions.[1] [3]

Can the Bangladeshi subsidiary pay its parent for arranging the SBLC?

No. No fee, commission, charge or economic benefit of any kind may be payable by the resident borrower, directly or indirectly, in respect of the overseas instrument.[1]

Does a Bangladeshi bank need approval to issue an SBLC for a foreign loan?

Yes. Repayment commitments by authorised dealers for external borrowing need specific Bangladesh Bank permission, with at least 25 per cent of the amount in cash margin or encashable deposits and Invest Bangladesh Authority approval of the loan.[1]

Should an SBLC be issued under ISP98 or UCP 600?

ISP98 is written for standbys and deals with renewals, notice periods, closures and transfer in ways UCP 600 does not. UCP 600 applies to standbys only to the extent applicable. Most practitioners prefer ISP98 for a pure standby.[9] [10]

Can a Bangladeshi court stop payment under an SBLC?

Rarely. Following Uttara Bank v Macneill & Kilburn, the courts treat fraud of which the bank has notice as the only exception, though some benches have granted section 7A restraints linked to arbitration. An order in Bangladesh does not bind a foreign issuer.[6] [7]

How are claims under project guarantees settled?

Claims under guarantees and SBLCs in favour of local project authorities are ordinarily settled in Taka equivalent, with foreign-currency payment through RTGS where the tender documents require it.[1] [2]

What must a lender do when it calls an overseas SBLC?

Confirm the default, prepare a demand that matches the instrument exactly, present it through the authorised channel before expiry, notify Bangladesh Bank immediately where the call follows a payment default, and record the proceeds as equity or loan as the arrangements provide.[1]

How can I tell whether an SBLC is genuine?

Insist on an authenticated SWIFT message from the issuing bank, verify the issuer independently and treat offers to lease or monetise standbys for an upfront fee as red flags.[13] [14]