BANKING AFFAIRS

Detailed explanation-1: -A Letter of Credit is a contractual commitment by the foreign buyer’s bank to pay once the exporter ships the goods and presents the required documentation to the exporter’s bank as proof. As a trade finance tool, Letters of Credit are designed to protect both exporters and importers.

Detailed explanation-2: -Trade finance (TF) is an important part of the transaction services offered by most international banks. It is a payment instrument and at the same time effectively manages the risks associated with doing business internationally.

Detailed explanation-3: -A usance or deferred letter of credit is a type of letter of credit used often in trade finance whereby the issuing bank must make payment by a preset date. Once a sale contract is agreed upon between a buyer and a seller, the buyer can request that a letter of credit be used to secure the transaction.

Detailed explanation-4: -A Letter of Credit (LC) is a bank document that acts as a contractual commitment by a foreign buyer’s bank to the exporter that the buyer will transfer the agreed payment amount once the goods are shipped.