Basics of Letter of Credit
Posted: Jan 25, 2017
A letter of credit simply defined as a written instrument that is provided by the bank at the request of its customers, the buyer, whereby the bank ensures to pay the beneficiary for goods or services, provided that the exporter presents all documents called for, exactly as required and meet all other terms and conditions set out. It is the most important segment of non-fund based business for banks and it is too called as documentary credit. It is a financial tool that can be very useful in some situations. It usually has three fields.In the first field, there is a beneficiary, the company or the person who will be paid. The second is the buyer of the services or goods, the one who needs it. Lastly, the third is the issuing bank, the institution providing the letter of credit. This is most often used in international trade, where they are governed by the Uniform Customs and Practice for Documentary Credits. The beneficiary may request payment to an advising bank, which is a bank where the beneficiary is a client, rather than directly to the beneficiary.Document Needed:-
The document that the providing bank will accept are specified, the beneficiary must present documentation of completion of their part in the transaction to the issuing bank. This often includes:-
Yield 4 Finance (P) Ltd. involves the use of our letter of credit and guarantee facilities with numerous institutions.