The Interest On Letter of Credit agreement is essential for establishing the financial terms between banks and their customers in trade finance transactions under Indonesian law. This document becomes necessary when a bank issues a Letter of Credit and needs to formalize the interest arrangements with the applicant. It typically follows Bank Indonesia's regulatory framework and includes detailed provisions on interest calculation methods, payment obligations, and default scenarios. The agreement is particularly important in Indonesia's growing international trade sector, where Letters of Credit are frequently used to facilitate cross-border transactions. The document must comply with Indonesian banking regulations, including Bank Indonesia Regulation No. 5/11/PBI/2003 on prudential principles and relevant provisions of the Indonesian Civil Code.
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1. Parties: Identifies the issuing bank and the customer (applicant) who will be paying the interest
2. Background: References the underlying Letter of Credit and establishes the context for the interest agreement
3. Definitions: Defines key terms used in the agreement, including interest calculation terms, banking terms, and relevant dates
4. Interest Rate: Specifies the applicable interest rate(s), whether fixed or floating, and the basis for calculation
5. Calculation Method: Details how interest will be calculated, including the day count convention and calculation periods
6. Payment Terms: Specifies when and how interest payments must be made, including payment instructions and currencies
7. Default Interest: Stipulates the additional interest rate applicable in case of late payment
8. Representations and Warranties: Standard declarations by the customer regarding their capacity and authority to enter into the agreement
9. Events of Default: Lists circumstances that constitute default and their consequences
10. Governing Law and Jurisdiction: Confirms Indonesian law as governing law and specifies jurisdiction for disputes
1. Security: Include when additional security or collateral is required for the interest payments
2. Currency Provisions: Include for cross-border transactions where interest may be paid in different currencies
3. Tax Provisions: Include when specific tax considerations need to be addressed, particularly for cross-border transactions
4. Force Majeure: Include when specific events beyond parties' control need to be addressed regarding interest obligations
5. Assignment: Include when either party needs the right to assign their rights or obligations
6. Amendments: Include when specific procedures for changing interest rates or terms need to be detailed
1. Interest Calculation Examples: Provides detailed examples of how interest will be calculated in various scenarios
2. Payment Schedule: If applicable, details the scheduled interest payment dates and amounts
3. Reference Rate Details: For floating rate arrangements, specifies the reference rate sources and adjustment mechanisms
4. Form of Interest Payment Notice: Standard form for notifying the customer of interest payment obligations
5. Details of Underlying Letter of Credit: Copy or key details of the Letter of Credit to which this interest agreement relates
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Retail
Commodities Trading
Shipping and Logistics
Energy and Resources
Agriculture
Construction
Relevant Teams
Legal
Finance
Treasury
Trade Operations
Risk Management
Compliance
Corporate Banking
International Banking
Credit Administration
Trade Finance
Relevant Roles
Trade Finance Manager
Corporate Banking Officer
Chief Financial Officer
Treasury Manager
Finance Director
Trade Operations Manager
Credit Risk Officer
Legal Counsel
Banking Relationship Manager
Import/Export Manager
Financial Controller
Compliance Officer
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