The first one is known as a commercial letter of credit. It involves a payment which is made directly wherein the bank that issues the letter of credit will need to pay the seller or the beneficiary. The second kind of letter of credit is known as a standby letter of credit where a secondary payment is made.
An Export Letter of Credit, which is also referred to as documentary credit, is a contractual agreement on the part of the the issuing bank, on behalf of an importer, promising to pay the beneficiary or exporter provided conditions specified in the Letter of Credit have been satisfied. The issuing bank will typically use intermediary banks to
The different types of Letters of Credit offered by banks in India are as follows: Documentary. A documentary LC is an obligation by the issuing bank to pay the agreed amount to the beneficiary (usually the seller) on behalf of the applicant (buyer) upon receipt of specified documents. Sight LC or Usance Credit.
Introduction. It has been argued that a form of documentary credit (also known as a letter of credit) has been in existence for thousands of years and dated back to Babylonian times in Mesopotamia (present-day Iraq)[ref] Rufus Trimble (The Law Merchant and the Letter of Credit, 1947) [/ref], when Babylon was a key centre on the Silk Road, the ancient trade route between the Mediterranean Sea Letters of credit are assurances or guarantees to sellers that they will be paid for a large transaction. They are particularly common in international or foreign exchanges. Think of them as a
A “draft” must be issued and signed by the beneficiary of the credit and must indicate a date of issue. If the credit indicates, as a “drawee” of a draft, the Swift code of a bank, the “draft” may indicate such Swift code or the bank’s full name. If the credit is available by “negotiation” with a nominated bank or “any bank
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    • lc full form bank