• letter-of-credits

    LETTER OF CREDITS

    Definition

     A Letter of Credit is a written instrument issued by a bank, at the request of its customer – the Importer (Buyer), whereby the bank promises to pay the Exporter (Beneficiary) for goods or services, provided that the Exporter presents all documents called for, exactly as stipulated in the Letter of Credit, and meet all other terms and conditions set out in the Letter of Credit.

     

    A Letter of Credit is also commonly referred to as a Documentary Credit. 

     

    We shall study about this article further, in detail, in our next post.

     

    Keep reading!!

  • standby-credit

    STAND-BY LETTER OF CREDIT

    A Standby Letter of Credit (SBLC) is a written obligation of an issuing bank to pay a defined sum of money to a beneficiary on behalf of their customer in the event that their customer fails to fulfil a contractual commitment to the beneficiary.  It is important to note that regardless of any disputes between its customer and the beneficiary the bank is obliged to pay upon first demand.

    Did you know that – “Standby L/cs originated in the United States as it was not possible to issue BGs there. This was because the banking legislation in U.S. forbids banks to assume guarantee obligations on behalf of their clients. To circumvent this rule, the U.S. banks created the SBLC.”!!!

     

  • letter-of-credit

    Letter of Credit (L/c)

    Also, known as Documentary Credit, an L/c is an undertaking by the buyer’s bank to pay a specific amount of money to the seller on due date, subject to compliance of all terms and conditions of the L/c (like submission of documents, adherence to time lines, etc).

    There are various parties to an L/c. For e.g. Applicant, Issuing Bank, Beneficiary, Advising Bank, Negotiating Bank, Confirming Bank etc.

    There are various types of L/cs. For e.g. Sight & Usance L/c, Confirmed L/c, Transferrable L/c, Back-to-back L/c, Red Clause L/c etc.

    Did you know that – “Just the fact that the applicant has accepted the discrepancies, does not mandate the L/C Issuing bank to honour the presentation and make payment of the L/C “!!!

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