What is a letter of credit in India?

A Letter of Credit (LC) is a legal document that is issued by the bank that acts as an irrevocable guarantee in making payment to a beneficiary. When an individual fails to perform the required obligations, the bank pays. In this article, we look at the various types of letter of credit available in India.

How can I prepare for LC draft?

The entire process under LC consists of four primary steps:

1. Step 1 – Issuance of LC.
2. Step 2 – Shipping of goods.
3. Step 3 – Providing Documents to the confirming bank.
4. Step 4 – Settlement of payment from importer and possession of goods.

How to write a sample letter of credit?

10+ Sample Letter Of Credit. A credit letter is a bridge between the creditor and the customer. The motive behind writing a credit letter could be different, for example you are requesting for credit, or demand of credit that is payable, approve or deny loan or application for a credit card.

How to get overseas letter of credit in India?

The Overseas Letter of Credit should always be advised through an Indian Bank, preferably it should be confirmed. The individual has to check the bank charges, whether to openers account or the beneficiaries account.

How is a letter of credit used in international trade?

A letter of credit is very frequently used in international trade. An importer requests a bank to sanction a commitment in writing, which is known as the letter of credit, and in the letter, it is mentioned that the importer will pay the right amount to the exporter.

How much does a letter of credit cost?

The cost of a letter of credit usually ranges from 0.25 to 2 % depending on the type of letter of credit margin, customer credit rating, tenure and other such factors. Being usually used for large international exports and transactions, often loans can be taken to procure such letter of credit from the concerned bank.