DOCUMENTARY COMPLIANCE FOR PROHIBITED PARTIAL SHIPMENTS WITH MULTIPLE TRANSPORT DOCUMENTS

Vidhyadhar Hasabnis was in a fix. At stake was USD 25000 as well as significant reputational loss for the bank.

Vidhyadhar was part of the Trade relationship team of Pragmatic Bank Ltd, a new-generation private sector bank with branches all over India. Vidhyadhar himself handled several customers who were exporters. These accounts were the desired accounts within the bank since they provided both fee and Net Interest Income in addition to revenue from FX conversion.

Recently, he had been successful in onboarding Velite Exports, one of the largest exporters in Chennai. The company was a trader of multiple commodities with a turnover of close to INR 750 crs, the majority of which was exports. Onboarding Velite had been a feather in his hat, since the bank had been chasing the customer for quite some time. Though they had agreed to the customer's requirements for pricing and account services, the discussion would always get stuck at one particular point. Velite exports only against either 100% advance or against a Letter of Credit (LC). The LCs were mostly on sight payment terms, with very few instances of usance payment. Velite preferred the LC mechanism under the Uniform Customs and Practice for Documentary Credits (UCP 600), since it de-risked the payment settlement process, with the LC issuing bank undertaking payment subject to compliance with the LC terms.