The basic requirements to be fulfilled from the Exchange Control angle in the case of merchanting trade or intermediary trade transactions are that the transactions should not involve foreign exchange outlay from India except for the normal transit period not exceeding one month; both the legs of the intermediary trade transaction are financed through the opening of Letters of Credit (with drafts drawn under them being of even tenor) and such credits are on back to back terms. If the Letter of Credit to be opened in favour of the overseas supplier is not backed up by a letter of credit from the overseas buyer, an advance remittance for the full value should have been received from the overseas buyer. Authorised dealers are accordingly authorised to open letters of credit on behalf of their clients, who should be genuine traders in goods and not mere financial intermediaries, in accordance with the basic requirements spelt out in this paragraph and to effect remittances under such letters of credit. They should watch foreign currency receipts from these transactions and for this purpose should maintain suitable records.