4.34

Endorsement by Banks under Back to Back LC

(a) Before opening the L/C, bank will ensure that Advance Authorisation holder has executed BG/LUT and an endorsement to that effect has been made on the Authorisation.

(b) Execution of BG / LUT shall not be required against transferable DFIA. After opening inland L/C, bank shall make following endorsement on Exchange Control and Customs copy of Advance Authorisation / DFIA:

"Value of this Advance Authorization / DFIA stands reduced by a sum of Rs. ___, being value of inland L/C No.___ opened today by authorization holder in favour of M/s ____ (name and address of indigenous supplier)."

(c) Authorisation shall be invalidated by bank for direct import only in respect of full quantity and value of an item being sourced indigenously.

(d) Original Letter of credit (L/C) may be retained by bank for negotiation and only non-negotiable copy of L/C may be given to indigenous supplier.

(e) Responsibility of bank shall be confined to making endorsement. Bank shall not be liable for any misrepresentation or false statement made by authorisation holder while requesting bank to make endorsement. Inland L/C opened by bank in favour of indigenous supplier shall not be cancelled for any reason whatsoever.

(f) Non negotiable copy of inland L/C together with photocopy of Advance Authorisation / DFIA duly carrying endorsements made by bank shall be sufficient for indigenous supplier to claim deemed export benefits. L/C issued shall be entitled to benefits given in paragraph 7.03 and 7.04 of FTP, as applicable.

(g) Where import of gold / silver is permitted as an input under this scheme, they can be sourced through nominated agencies (as given in under Schemes for Gems and Jewellery Sector in Chapter-4 of FTP) for supply against the Advance Authorisations issued. Before supply of material, nominated agencies should follow the same procedures given above under this paragraph.