A Letter of Credit (LC) is a conditional undertaking given by a bank (issuing bank) on behalf of a buyer or applicant to pay a seller/beneficiary against stipulated documents, provided all terms and conditions are complied. A letter of credit is the safest and most convenient means of payment for exports in all domestic and international trade. Global IME Bank Limited offers inland and foreign letters of credit of two types:
Sight LC: The Letter of Credit which needs to be settled/ retired within 5 banking days after the sight of the documentary bill following the date of presentation provided that the documents credit compliant.
Usance LC: The Letter of Credit which needs to be settled/retired in a specific future date only after acceptance of the presented documents
Import Letter of Credit Cycle
- The buyer and seller negotiate the deal for purchase/sell of goods/ services and approach the LC issuing bank to open an import letter of Credit (LC).
- The issuing bank issues the Letter of Credit and sends it to the advising bank for advising the LC to the beneficiary, the advising bank advises the LC to beneficiary for shipment of goods.
- The exporter/seller exports the goods as per the terms and conditions of the LC and submits the relevant documents as stated in the LC to the negotiating/nominated bank
- The negotiating bank forwards the original documents to issuing bank for payment under LC
- The issuing bank obtains the payment from the applicant/buyer and sends the payment to the negotiating bank to further credit the payment to the beneficiary/seller.
- The issuing bank provides the LC documents to the applicant/buyer for the release of goods from the customs.