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 “!!!