Beruflich Dokumente
Kultur Dokumente
The Letter of Credit (LC) is a documentary credit payment instrument issued by the bank. The LC
guarantees that the seller shall receive full payment after the preset product delivery conditions are
met. In case, if the buyer fails to fulfill his commitment of abiding the payment, the bank covers the
outstanding amount to the seller. The LC is used as a secure tool for international transactions of
Export, since both the parties involved are operating from different countries and they do not know
about each other. The commercial letter of credit is the primary payment tool used in international
trade transactions. Principles that form LC are the doctrines that are the talisman that secure the
payment for both exporter and importer.
Major areas of monitory risk that an Exporter might possibly encounter are,
late payment or non-payment from the buyer
damage or loss of goods during transit
Risk of rejection of goods due to differing foreign regulations and standards
Foreign exchange and interest rate changes
Reimbursement transaction procedure under Letter of Credit:
Issuing bank transfers the LC to the nominated bank via swift message.
The issuing bank gives reimbursement authorisation to the reimbursing bank which issues an
undertaking for reimbursement and transfers through a swift message to the issuing bank.
Nominated bank advises LC to the beneficiary and in turn, the beneficiary presents his documents.
Documents are checked and the nominated bank after negotiating upon a complying presentation,
sends its claim to the reimbursing bank.
Reimbursing bank reimburses to the nominated bank in compliance with applicable terms and
conditions.
Nominated bank sends documents to the issuing bank.
After the settlement is arranged between those two banks, the issuing bank gets the credit amount
from the applicant and releases the original shipment documents.
Documents required for Import Letter of Credit to be submitted by the importer to the
importer's bank:
LC application Form
General Undertaking / Indemnity on Stamp Paper.
Recommended Board Resolution (for Companies) / Partnership Deed (for Partnership Firms)
OGL cum FEMA declaration
IE code (one time requirement)
Purchase order / Performa invoice
Insurance copy only on C&F/FOB basis
KYC report