7.13 The exporter may alternatively avail the facility of a back to back inland letter of credit from the banks. An Advance Licence holder, except for an intermediate supply, may approach a bank for opening an inland letter of credit (LC) in favour of an indigenous supplier.

Before opening the LC, the bank will ensure that the necessary BG / LUT has been executed by the Advance Licence holder and an endorsement to that effect has been made on the licence. However, execution of BG / LUT shall not be required in case endorsement of transferability has been made on the licence or the conditions of BG / LUT is waived by the licensing authority. After opening the inland LC, the bank shall make the following endorsement on:

(i) The Exchange Control copy of the Advance Licence for Physical Exports / Deemed Exports / Annual Requirement;

(ii) The Customs copy of the Advance Licence for Physical Exports / Deemed Exports / Annual Requirement; and

(iii) On the DEEC book (Part-i)

"The value of this Advance Licence for Physical Exports / Deemed Exports / Annual Requirement stands reduced by a sum of Rs. ________ , being the value of the inland LC No.________ opened today by the licensee in favour of M/s ________ (name and address of the indigenous supplier)".

This facility will be available for the purpose of opening the LC in one bank and one branch in respect of any one item of import under the licence but the whole quantity and value of the item shall be operated from the same branch of the bank. However, for any other item in the same licence, the licence holder may open a separate LC in any other branch or bank subject to the condition that each of the item shall be operated to the full quantity and value in that branch of the bank. A licence holder may also open LC in installments as per his convenience subject to the condition that the licence holder shall source the full quantity and value of an item in one branch of the bank. The licence shall be invalidated by the bank for direct import only in respect of the full quantity and value of the item being sourced indigenously.

The original Letter of credit (LC) may be retained by the bank for negotiation and only the non-negotiable copy of the LC may be given to the indigenous supplier.

The responsibility of the bank shall be confined to making the endorsement. The bank shall not be liable for any misrepresentation or false statement made by the licensee while requesting the bank to make the endorsement. The inland LC opened by the bank in favour of the indigenous supplier shall not be cancelled for any reason whatsoever.

The non negotiable copy of inland LC together with the photocopy of the Advance Licence along with DEEC duly carrying endorsements made by the bank shall be sufficient for the indigenous supplier to claim deemed export benefits. LC issued against DFRC shall, however, be entitled only to benefit given in paragraph 10.2(b) of Policy, whereas LC for other categories shall be entitled to benefits given in paragraph 10.2 (b) and (c) of the Policy.

(Above para has been amended vide Public Notice No. 6(RE-2000) / 1997-2002 dt. 7-4- 2000)