Letter of Credit (LC)

Question BankCategory: Finance & EconomyLetter of Credit (LC)
Neha Sharma asked 4 years ago

What is LC, Letter of credit, who can issue LC and what are uses of Letter of credit.(lc)

2 Answers
Ajay answered 4 years ago

LC stands for Letter of credit. LC is issued by bank of importer to the bank of exporter to ensure payment against imported goods.

Ashok Kumar answered 4 years ago

Letter of credit i.e. LC is the back bone of international business. While doing business with dealer of other country, there is always a risk on the part of both buyer and seller. Buyer is always worried whether goods will be received or not and seller have a risk that payment will be received or not. LC is the instrument which reduce this risk for both buyer and seller.
Letter of Credit is also known as Documentary Credit. Letter of Credit is not a cheque or BG but a conditional undertaking where payment will be made only on compliance of specific conditions like documents which needs to be presented along with seller’s claim of payment.
LC is issued by bank of buyer(importer) to bank of seller (exporter) that payment will be issued on compliance of conditions mentioned in LC. Click Here to read more about Letter of Credit.
Thanks.

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