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Letter of Credit (LC) is one of the payment methods for settlement of domestic and international trade transactions.
It is a written undertaking given by a bank (Issuing Bank) to the seller (beneficiary), at the request and on the instructions of the buyer (applicant), to pay at sight or at a determinable future date up to a stated sum of money, within a prescribed time limit and against compliant presentation of stipulated documents.
RHB Bank's Letter of Credit allows you to make payment only upon presentation of compliant documents by your supplier, documents you have agreed with your supplier at the beginning. The same documents spell out the terms and conditions you have agreed with your supplier. Thus, you are assured that your interests are taken care of in the process of purchasing goods. The Letter of Credit also allows you to take control of your payment terms and establish your credit worthiness as a buyer.
Letter of Credit provides the exporter with assurance that payment will be received if the terms and conditions of the Letter of Credit are met. Upon receipt of the Letter of Credit, the exporter will ship the goods in accordance with the terms and conditions of the Letter of Credit and present documents to reflect compliance. Documents presented will then be checked for compliance and payment is guaranteed by the buyer's bank. Thus the exporter can prepare for shipment or even source materials required to manufacture the goods for shipment upon receipt of the Letter of Credit.
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Over-The-Counter Letter of Credit (OTCLC) is a Letter of Credit facility offered to customers who require Letter of Credit issuance on ad hoc basis, secured against fixed deposit or cash margin as collateral.
Standby Letter of Credit allows you to cover financial obligations to your beneficiary in the event of payment default after the beneficiary has secured due performance. Standby Letter of Credit represents a simple form of security to your beneficiary and does not require proof of non-performance other than a simple claim. Standby Letter of Credit is similar to a bank guarantee where the bank will guarantee payment in the event default, eliminating buyer's risk of non-payment.
Standby Letter of Credit provides the beneficiary with assurance that payment will be received in the event of applicant default. Standby Letter of Credit represents a simple form of security to you and does not require proof of default other than a simple claim. Standby Letter of Credit is similar to a bank guarantee where the bank will guarantee payment in the event of default, eliminating buyer's risk of non-payment.
A Transferable Letter of Credit (TLC) is a Letter of Credit (LC) that specifically states it is transferable and may be made available in whole or in part to another beneficiary (second beneficiary) at the request of the beneficiary (first beneficiary).
TLC allows your supplier (first beneficiary) to make available in part or in whole the TLC to one or more second beneficiaries. This enables your supplier to transfer part or all of his rights and obligations to the second beneficiary (actual supplier). The first beneficiary does not need to issue a Letter of Credit to the second beneficiary and only need to transfer the TLC, varying certain terms and conditions. Goods are shipped directly from the second beneficiary to the buyer in this instance.
TLC allows you to make available in part or in whole the TLC to one or more second beneficiaries. Thus you will be able to free up your funds and credit facilities in fulfilling your duties as a middleman. This gives you added financial maneuverability. You will also be able to control the trade transaction better as amount, latest shipment date, expiry date and several other terms are changed. The second beneficiary also receives added comfort in receiving a TLC issued by a bank.
Back to Back Letter of Credit (BBLC) allows your supplier to secure the delivery of goods from the actual supplier. The BBLC (sometimes referred to as the Baby or Slave LC) is issued on the strength of the Master Letter of Credit (Master LC) issued by you and its terms differ in varying degrees from the Master LC. This allows greater flexibility and variation in terms and conditions compared to the Transferable Letter of Credit.
BBLC allows you to purchase goods required in the Master LC from your ultimate supplier. The Slave LC will contain the salient points of the trade such as goods description and shipment details. However, the identity of the ultimate buyer and the actual purchase price will not be made known to the ultimate supplier.
Documentary Collection is a payment mechanism by which an exporter uses the services of banks to obtain payment from an importer. It provides a compromise between open account terms and payment in advance. Banks do not guarantee payment but only provide service to collect funds as instructed.
Import Documentary Collection (also known as Inward Documentary Bill for Collection (IBC)) allows you to obtain the necessary commercial and financial documents before you make payment to your supplier. Documents are sent to the importer through the exporter's bank (remitting bank) to the importer's bank (collecting bank).
Upon the collecting bank's receipt of documents, the collecting bank will deliver the documents to the importer against payment for sight bills or against acceptance for usance bills. The importer will be able to take possession of the goods with the custody of the documents acquired through payment or acceptance. RHB Bank is able to take on the roles of the remitting and collecting banks in this instance.
Export Documentary Collection (also known as Outward Documentary Bill for Collection (OBC)) allows you to send your shipping documents through a remitting bank (exporter's bank) for onward transmission to the collecting bank (importer's bank). Your shipping documents will be delivered to the buyer upon payment of the sight bill or acceptance of the usance bill. Hence you will retain control of the goods until your buyer pays or accepts to pay at maturity of the bill. You may also require the collecting bank to avalise the drafts where the collecting bank will guarantee payment at maturity. RHB Bank is able to take on the roles of the remitting and collecting banks in this instance.
RHB offers Enhanced Export Collection Services in addition to the existing efficient service to expedite receipt of export proceeds
The Enhanced Export Collection Services, in collaboration with one of our correspondent agents, is a premium service offered to qualified collection customers and it includes the following value-added services in addition to the existing efficient service to expedite receipt of export proceeds:
As speed and accuracy are important elements in international trade settlements, the additional value-added services will enable customers to track the movements of the collection bill as well as improve their collection management.
Bank Guarantee is a financial instrument where the bank guarantees a stated sum of money to the beneficiary upon non-performance of the applicant's obligation and performance. RHB Bank will assist in issuing guarantees on your behalf to support your business activities. Guarantees include bid, tender, performance, advance payment, customs, utilities and security deposit guarantees. Bank guarantees in nature are separate transactions from the contracts they relate to.
OTCBG is similar to the normal bank guarantee issued by the Bank except that it is issued at the counters on behalf of those companies and individuals against cash margin or fixed deposit as collateral. The security / collateral will be 100% cash margin in Ringgit / foreign currency through earmarking of Multi Currency Account or Fixed Deposit placed with the Bank in the currency of the OTCBG.
If your goods imported under Letters of Credit have arrived at the port before shipping documents have been processed through the banking system, RHB Bank can issue a Shipping Guarantee which allows you to take possession of the goods from the shipping company or agent in the absence of the original Bill of Lading.
Under usance Documentary Collection, the buyer's bank is only responsible to deliver the inward documents to the buyer against the buyer's acceptance of the drafts. The buyer's bank does not guarantee payment of the above bill at maturity and the onus is on the buyer to make good on the payment. Under RHB Bank's IBC Avalisation, RHB Bank will guarantee payment upon maturity giving assurance to the seller.
RHB Bank facilitates your export transactions by advising Letter of Credits issued by your buyer's banks in your favor. Letters of Credit are advised to you promptly. RHB Bank's extensive network of correspondent agents allows us to authenticate and advise the same Letters of Credit in the most efficient manner. This ensures the authenticity of the Letter of Credit and enables the exporter to prepare for the shipment with confidence.
If your buyer's bank is not our correspondent, we will arrange an agency arrangement to facilitate trade between your buyer and yourselves. Once received, RHB Bank will select the most expedient method of delivering the Letters of Credit to you.
Letters of Credit issued by unfamiliar banks located in unfamiliar regions may pose a risk to the exporter. Payments may not be guaranteed if the bank's credit worthiness is questionable or the bank is located in an unstable country.
RHB Bank can help the exporter mitigate bank and country risks by adding confirmation to your Letter of Credit. Adding RHB Bank's confirmation to the Letter of Credit allows RHB Bank to guarantee payment to the exporter upon presentation of compliant documents. Therefore RHB Bank eliminates bank and country risk and the exporter is assured of payment at all times.
Silent Confirmation is a product where RHB Bank adds its payment guarantee to Letters of Credit, which does not require confirmation. Under this product, RHB Bank guarantees to pay the beneficiary in the event of non-payment by the Letter of Credit Issuing Bank upon presentation of compliant documents and shall be on without recourse basis to the beneficiary.
The customer shall be required to present documents for negotiation or discounting similar to the existing Letter of Credit negotiation/ discounting procedures.
There are instances when goods arrive at the port of destination, and the buyer is unable to take possession as the transport documents are made to the order of RHB Bank or consigned to RHB Bank. In these instances, the buyer approaches the bank to endorse the transport documents to the buyer's order to enable the buyer to take possession of the goods. As the endorsement is done prior to payment of the consignment, it is termed as Advance Endorsement.
Bilateral Payment Arrangement (BPA) is a system for settlement of monetary obligations arising from trade transactions between two countries conducted via Letter of Credit. It is an arrangement where central banks or monetary authorities of participating countries agree to pay each other or guarantee payments for its imports.
Effectively, central banks or monetary authorities guarantee payments in domestic currencies to their exporters. BPA was initiated by Bank Negara Malaysia in 1991 and has 15 countries (as at June 2012) under its care including:
BPA enables the importer and exporter to venture into new and emerging markets.
Assignment of Proceeds under Letter of Credit (AoPLC) is a service offered to Letter of Credit (LC) beneficiaries to assign their LC proceeds to the ultimate supplier. A request for an assignment of proceeds would take place when the beneficiary of the LC (i.e. a middleman in a trade transaction) is required to provide payment assurance to its ultimate supplier. This is an alternative to having the LC transferred or having to issue a back to back LC to the ultimate supplier.
RHB Bank has launched the Chinese Renminbi (RMB) Trade Products and Payment Services to cater for any Malaysian enterprises or companies who have trade related (import or export of goods) and services with Eligible Enterprises in Mainland China.
Together with our valued Chinese Partner banks, RHB Bank is now able to serve the local community in ensuring that they are able to access to highly reliable and professional cross border settlement services to cater for any requirements of Malaysian individual and corporate customers who have dealings with their counterparts in Mainland China in RMB.
The People's Bank of China, together with other relevant authorities in China had officially announced that the extension of the scope of CNY cross-border trade settlement from twenty (20) provinces / autonomous region / centrally administrative cities in Mainland China to ALL PROVINCES in Mainland China which covers 22 provinces, 5 autonomous region and 4 centrally administrative cities as follows:-
Note : Geographical coverage has extended to entire nation
With this announcement, any enterprise in the relevant provinces and cities in China can now settle their merchandise imports and service trade transaction in RMB, while an expanded list of Eligible Enterprises in China will be able to accept their merchandise exports in RMB.
The RMB Trade Products and Payment Services offered by RHB Bank are as follows:-
For Remittance of RMB, RHB Bank offers competitive foreign exchange rates, both in CNY and CNH. For further information on foreign exchange rates, please click here.
The BPO is an irrevocable undertaking given by one bank to another bank that payment will be made on a specified date, after a specified event has taken place. This "specified event" is evidenced by feeding the relevant data elements taken from a range of associated open account documentation such as purchase orders, commercial invoices, bills of lading, etc. into a shared Transaction Matching Application (TMA) which then generates a "match" report to show that the description of goods shipped matches precisely to the description of goods ordered.
The BPO places a legal obligation on the issuing bank to pay the recipient bank subject to the successful matching of compliant data. In short, the BPO delivers business benefits and security equivalent to those previously obtained through a commercial letter of credit, whilst at the same time eliminating the drawbacks of manual processing typically associated with traditional trade finance.
The governing rule for BPO is International Chamber of Commerce (ICC) Uniform Rules Bank Payment Obligations (URBPO) ICC Publication no 750.
Requires a facility to be established with RHB Bank and collateral maybe required.
On due date of the BPO, payment by the Bank of an amount under any BPO shall constitute an advance ("Advance") / financing ("Financing") by the Bank to the Borrower of the amount so paid (or, if such amount is denominated in another currency, the equivalent thereof in Ringgit Malaysia)and the Borrower shall, be obliged to repay immediately upon the Bank's payment under the BPO (notwithstanding that demand for repayment thereof may not have been made on the Borrower) failing which the Bank shall be entitled to exercise all rights upon such default, including payment of interest thereon at the applicable Default Rate of 3.5% plus Base Lending Rate (both before as well as after judgment or demand) until full settlement and as stated in the letter of offer issued by the Bank for the BPO facility.
The customer may be required to submit a list of local suppliers to the bank for approval. The approved suppliers' list may be reviewed by the bank and subject to change from time and time.
Under Transaction Matching Services, the Bank acts only as a Buyer's Bank, Seller's Bank or Submitting Bank in facilitating the submission of data as instructed herein and have no obligation to examine the documents or data beyond the exercise of reasonable care. The data may be provided through hard copy documents or other electronic means for the purpose of submission through SWIFT Trade Services Utility (TSU) application in respect of an underlying trade transaction.
The Bank does not assume any liability or responsibility for:
The Bank assumes no liability or responsibility for any consequences arising out of delay and/or loss in transit of any messages or other errors arising in the transmission or communication by TSU.
The BPO Confirming Bank adds its undertaking to honour BPO subject to a Dataset Match submitted. The Confirming Bank therefore removes the risks of non-payment by the Obligor Bank and other risk associated with the country of the Obligor Bank. The BPO Confirming Bank guarantee payment of the BPO in the event the Obligor Bank fails to remit proceeds as per payment terms specified in the Bank Payment Obligation governed by ICC Uniform Rules for Bank Payment Obligations (URBPO) ICC Publication no 750.
The bank shall guarantee payment of the BPO in the event the Obligor Bank fails to remit proceeds as per payment terms specified in the Payment Obligation Segment of an Established Baseline governed by ICC Uniform Rules for Bank Payment Obligations (URBPO) ICC Publication no 750.
Notwithstanding the aforesaid, we shall not be liable under this Guarantee in any of the following circumstances:
Level 5, 75, Jalan Tun HS Lee,
50000 Kuala Lumpur
Telephone: (603) 2053 1499 / 1346 / 1326
Import Section : (603) 20531406
Export Section : (603) 20531405
Bankers Acceptance : (603) 20531468
Bank Guarantee : (603) 20531408
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Kepong Baru, 52100 Kuala Lumpur
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Bandar Baru Sg Buloh, 47000 Selangor
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Jln Tengku Ampuan Zabedah D9/D,
Section 9, 40100 Shah Alam, Selangor
Telephone: (603) 5519 8910 / 8911 / 8912
(603) 5512 4834
(603) 5880 9050
Facsimile: (603) 5880 4390 / 4577
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Jalan 52/2 New Town Centre,
46200 Petaling Jaya, Selangor
Telephone: (603) 7954 5595 / 5590
Facsimile: (603) 7957 9324
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47500 Subang Jaya, Selangor
Telephone: (603) 5638 1514
Facsimile: (603) 5636 5278
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IOI Boulevard, Jln Kenari 5, Bandar Puchong Jaya,
47100 Puchong, Selangor
Telephone: (603) 8079 0217
Facsimile: (603) 8070 5104
1st Floor, Unit A6, No. 22A,
Jalan Tiara 2A/KU1, Pusat Perniagaan BBK,
41150 Klang, Selangor
Telephone: (603) 3342 8422
Facsimile: (603) 3342 9144
Level 1, Persiaran Raja Muda Musa,
42000 Port Klang, Selangor
Telephone: (603) 3165 9844
Facsimile: (603) 3167 6533
No.1, Jalan Taming Kanan 2,
Taman Taming Jaya, 43300 Balakong,
Telephone: (603) 8961 1193
Facsimile: (603) 8961 1225
2784 & 2785, 2nd Floor,
Taman Inderawasih, Jalan Chain Ferry,
13600 Prai, Penang
Telephone: (604) 399 7790 (Hunting Line)
Facsimile: (604) 399 5922 / 5807
1st Floor, 44, Lebuh Pantai,
Telephone: (604) 261 1108
(604) 263 3028 / 0920
Facsimile: (604) 263 8840
1st Floor, 104-106,
Jalan Pengkalan, Taman Pekan Baru,
08000 Sungai Petani, Kedah
Telephone: (604) 422 8437 / 8451
Facsimile: (604) 424 8734
1st Floor, No. 2, 4 & 6 (Malay Town),
Jalan Putra Square 1, Putra Square,
25200 Kuantan, Pahang
Telephone: (609) 505 7020 / 7021
Facsimile: (609) 505 7019
1st Floor, No.59, Jalan Sultan Ismail,
20200 Kuala Terengganu, Terengganu
Telephone: (609) 6232119
Facsimile: (609) 622 3826
1st Floor, No. 782 – 786,
Jalan Tok Hakim, 15000 Kota Bharu,
Telephone: (609) 747 8672 / 1114
Facsimile: (609) 747 1180
Lot 2, 4, 6 & 8, First Floor,
Jalan Tun Sambanthan, 30000 Ipoh
Telephone: (605) 243 4029 / 4028 / 2867 / 2869
Facsimile: (605) 255 4934
68 & 70, First Floor,
Jalan Kota, 34000 Taiping
Telephone: (605) 805 5639 / 1782
Facsimile: (605) 805 9813
No. 19, 21 & 23, 1st Floor,
Jalan Merdeka Taman Melaka Raya,
Telephone: (606) 286 2516 / 2518 / 2517
Facsimile: (606) 286 2519
9, Jalan Abdullah, 84000 Muar,
Johor Darul Takzim
Telephone: 606) 952 2293
Facsimile: (606) 952 9503
No. 10 & 11, Jalan Dato Abdul Rahman,
70000 Seremban, Negeri Sembilan
Telephone: (606) 763 3863
Facsimile: (606) 767 9348
89, 2nd Floor, Jalan Rahmat,
83000 Batu Pahat, Johor Darul Takzim
Telephone: (607) 432 4755
(607) 433 5253
Facsimile: (607) 431 1077
18 & 20, 1st Floor, Jalan Dato' Rauf,
86000 Kluang, Johor Darul Takzim
Telephone: (607) 771 2177
(607) 773 4342
Facsimile: (607) 772 4094
1st Floor, No. 7 & 9,
Jalan Dedap 18, Taman Johor Jaya,
81100 Johor Bahru, Johor
Telephone: (607) 355 0659
Facsimile: (607) 355 1091
1st Floor, No. 62, 64 & 66,
Jalan Bendahara 12,
Taman Ungku Tun Aminah,
81300 Skudai, Johor
Telephone: (607) 554 6695
Facsimile: (607) 554 6706
1st Floor, No. 10,
Pusat Perdagangan, Jalan Bandar,
81700 Pasir Gudang, Johor
Telephone: (607) 255 2031
Facsimile: (607) 255 2037
Level 2, Lot 363, Jalan Kulas,
93400 Kuching, Sarawak
Telephone: (082) 274 837 / 839
Facsimile: (082) 274 842
No. 31, Jln Tuanku Osman,
96000 Sibu, Sarawak
Telephone: (084) 312 882
(084) 329 669
Facsimile: (084) 334 284
2nd Floor, Lot 362, Block 9,
Jln Nakhoda Gampar,
98000 Miri, Sarawak
Telephone: (085) 426 128
Facsimile: (085) 425 128
C-03-05 / 08, 3rd Floor, Block C,
Warisan Square, Jln Tun Fuad Stephens,
88000 Kota Kinabalu, Sabah
Telephone: (088) 528 718 / 705
Facsimile: (088) 528 702
(088) 528 703
Block L, DBKK No. 1, 2 & 3,
Lorong KK Taipan 3, Inanam New Township,
88450 Kota Kinabalu, Sabah
Telephone: 088) 438 673
Facsimile: (088) 438 671
1st Floor, Lot 64 - 66, Block 7,
Prima Square, Mile 4, North Road,
90000 Sandakan, Sabah
Telephone: (089) 213 843
(089) 218 925
Facsimile: (089) 217 572
Ground & 1st Floor,
Lot 5 Block 27, Fajar Complex,
Jalan Mahkamah, Town Extention II,
91000 Tawau, Sabah
Telephone: (089) 763 922
(089) 779 673
(089) 742 888
Facsimile: (089) 772 152
Level 3, Tower 3, RHB Centre,
Jalan Tun Razak, 50400 Kuala Lumpur
Telephone: (603) 9280 6086 / 6090 / 7265 / 7254 / 6182 / 6323 / 6769
Facsimile: (603) 9280 6213
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