Letter of Credit is a written commitment to Pay given by Buyer or Importer’s Bank (issuing Bank) to Exporter or Suppliers Bank (accepting or paying Bank). In other words LC is a Bank guaranteeing that Buyer would pay certain amount after certain period of time only if terms and conditions mentioned on Letter are fulfilled. In case the Buyer is not able to pay its supplier then issuing Bank would pay the Supplier on behalf of the Buyer.
Bank usually perform a credit assessment for its customers Credit before issuing LC as it becomes Bank liability to pay supplier in case if Buyer is not able to make payment on Time.
LC is used mostly in International trade and in domestic market as well. It is internationally recognised guarantee of payment document used to bring trust and facilitate trade transactions.
Letter of Credit is of various types:
5 things to know about Letter of Credit format are
Is suppliers Credit the Most Trending thing now?
Yes it is.
After RBI banned Letter of Undertaking (LOU) backed Buyer’s Credit,currentlythe best available option with Importers to avail Import financing is Suppliers Credit.
It is almost similar to Buyer Credit but thekey difference is that in Suppliers Credit, Letter of Credit is required (mandatory).
24 Feb 2020 05:08 PM
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07 Feb 2020 03:19 PM
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27 Jan 2020 02:13 PM
Well devaluing a currency can give a thrust to the exports and reduce the trade deficit but for any economy which has higher imports, the consequences can be on the negative too.
16 Jan 2020 05:08 PM
Pegged exchange rate is the fixed rate at which the currency is converted from one to another. The rate is fixed by the monetary authority to order to stabilize the rate of exchange at a predetermined ratio of another currency which is more stable an
10 Jan 2020 06:00 PM
As markets are technology driven, the rise in foreign exchange transaction has done at the touch of a button making it the largest financial market in terms of volume.
03 Jan 2020 04:24 PM
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