Letters of Credit
A Letter of Credit (LC) is a mode of payment used for the importation of visible goods.A Letter of Credit (LC) is a mode of payment used for the importation of visible goods.
A Letter of Credit (LC) is an acceptable mode of payment used for the importation of visible goods.
It is a written undertaking given by a Bank (issuing Bank) at the request of its customer (applicant), in which the Bank obligates itself to pay the exporter (seller/beneficiary) up to a stated amount within a prescribed time frame upon presentation of stipulated documents that conform to the terms and conditions of the documentary credit.
Parties to LC transaction are:
- Buyer/Importer/Applicant i.e the customer requesting LC to be issued.
- Seller/Exporter/Beneficiary i.e the Recipient of the LC.
- The Issuing Bank – which gives the written undertaking.
- Advising Bank/Seller’s Bank i.e the bank that advises the LC to the beneficiary.