The Letters Of Credit



The purpose of red clause in a documentary credit is to enable the beneficiary to obtain pre-shipment advances from the advising or confirming bank, at the expense of the beneficiary, but under the responsibility of the issuing bank. A Letter of Credit is a written undertaking given by a bank (Stanbic Bank), at the request of a buyer (applicant) to pay the seller (beneficiary) of goods that conform to the specified terms and conditions within a prescribed period. Nominated Bank is an international bank in the exporter's country that is authorized by Indian bank to receive or negotiate the documents and pays the amount to the exporter under the line of credit.

With the right kind of letter of credit, you can expand your business to far-flung locales and make your small business a little bit bigger. Letters of credit are great but be warned - very few are right the first time because the supplier (that's you) often misread them or don't produce the correct documents to support the letter of credit.

Which the bank may incur on account of making payment under the stand by letter of credit. Advising Bank: The advising bank advises the beneficiary and helps him to use the letter of credit. Step 2: There will be advising bank (mostly international bank) for beneficiary or seller that will receive the Letter of Credit been issued by the issuing bank of the buyer.

If the buyers credit history is not so strong they may be able to use a factoring facility, combined with a trade finance facility to secure the transaction. Draw: Presentation of original letter of credit and other required documents in accord within letter of credit terms.

Confirming Bank: Agrees to honor letter of credit issued by another institution and receives reimbursement from that institution. Letter of credit is an important instrument for benefeciary international transactions. The negotiating bank: The negotiating bank handles the ins and outs of actually getting the seller paid, and works on the beneficiary's side of the transaction as a go-between.

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