URR 725: Bank-to-Bank Reimbursements
The bank that pays never sees the documents. URR 725 is the rulebook for that leg of the credit.
When an Indian exporter's bank negotiates documents under a USD credit issued in, say, Dubai, it wants its money in dollars from a bank that holds the issuing bank's dollar account, often in New York. That third bank is the reimbursing bank. It pays the negotiating bank's claim and debits the issuing bank, without ever seeing the documents.
The ICC rules for this leg are the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, ICC Publication No. 725, in effect from 1 October 2008. They replaced URR 525 to bring the language in line with UCP 600 and apply only when the reimbursement authorisation expressly says so.
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Parties and Instruments
- Issuing bank
- The bank that has issued the credit and the reimbursement authorisation under it.
- Reimbursing bank
- The bank instructed or authorised to provide reimbursement under the reimbursement authorisation. Usually the issuing bank's correspondent in the currency's home market.
- Claiming bank
- The bank that honours or negotiates the credit and presents a reimbursement claim. It can be the nominated bank or a bank acting for it.
- Reimbursement authorisation
- The issuing bank's instruction or authorisation to the reimbursing bank to pay claims. It is independent of the credit.
- Reimbursement undertaking
- A separate, irrevocable undertaking by the reimbursing bank, given at the issuing bank's request, to honour the claiming bank's claim. Without one, the reimbursing bank has no obligation to pay.
- Reimbursement claim
- The claiming bank's request to the reimbursing bank for payment, by teletransmission or original letter.
The Rules That Get Tested
Independence
Rule
The reimbursing bank is not bound by or concerned with the credit's terms
URR 725
Art. 3
Obligation to pay
Rule
None, except under a reimbursement undertaking it has issued
URR 725
Art. 4
Certificate of compliance
Rule
The issuing bank must not require one in the reimbursement authorisation
URR 725
Art. 6(c)
Expiry
Rule
A reimbursement authorisation should not carry an expiry date; the credit's expiry is disregarded
URR 725
Art. 7
Processing time
Rule
Maximum three banking days following the day of receipt of the claim
URR 725
Art. 11(a)
Back value
Rule
Not processed
URR 725
Art. 11(b)
Future-dated claims
Rule
Not to be sent more than ten banking days before the reimbursement date
URR 725
Art. 11(c)
Charges
Rule
For the account of the issuing bank, unless the authorisation says otherwise
URR 725
Art. 16
| Point | Rule | URR 725 |
|---|---|---|
| Independence | The reimbursing bank is not bound by or concerned with the credit's terms | Art. 3 |
| Obligation to pay | None, except under a reimbursement undertaking it has issued | Art. 4 |
| Certificate of compliance | The issuing bank must not require one in the reimbursement authorisation | Art. 6(c) |
| Expiry | A reimbursement authorisation should not carry an expiry date; the credit's expiry is disregarded | Art. 7 |
| Processing time | Maximum three banking days following the day of receipt of the claim | Art. 11(a) |
| Back value | Not processed | Art. 11(b) |
| Future-dated claims | Not to be sent more than ten banking days before the reimbursement date | Art. 11(c) |
| Charges | For the account of the issuing bank, unless the authorisation says otherwise | Art. 16 |
Reimbursing bank roles, charges and timelines. No signup.
How URR 725 Fits With UCP 600
UCP 600 Article 13 covers the same leg from the credit's side. If the credit says reimbursement is subject to URR, the claiming bank must look to URR. Either way, the issuing bank stays responsible: if the reimbursing bank does not pay on first demand, the issuing bank must reimburse, plus any loss of interest.
The design keeps document risk and payment risk apart. The claiming bank decides compliance under UCP 600; the reimbursing bank only checks the claim against the authorisation. A claiming bank that pays against discrepant documents and claims anyway can be asked by the issuing bank to refund.
How CCFE Tests This
- check_circle"Does the reimbursing bank examine the documents?" No. It never receives them.
- check_circle"Who bears the reimbursing bank's charges?" The issuing bank, unless the authorisation says they are for the beneficiary. The trap option is the claiming bank.
- check_circle"How long does the reimbursing bank have to process a claim?" Three banking days. Candidates mix this with UCP 600's five banking days for document examination.
- check_circleDefinition swaps between reimbursement authorisation (from the issuing bank) and reimbursement undertaking (from the reimbursing bank).
FAQs
What is URR 725?expand_more
ICC's Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, Publication No. 725, effective 1 October 2008. They govern how a reimbursing bank pays claims under a credit.
What is a reimbursing bank in a letter of credit?expand_more
The bank the issuing bank authorises to pay the claiming bank, usually the issuing bank's correspondent holding its account in the credit's currency.
How many days does a reimbursing bank get to pay a claim?expand_more
A maximum of three banking days following the day it receives the claim, under URR 725 Article 11(a).
Is the reimbursing bank bound by the terms of the LC?expand_more
No. The reimbursement authorisation is independent of the credit, and the reimbursing bank is not concerned with the credit's terms even if they are referred to.
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