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Under Letter of Credit

• The buyer & seller enters into a business contract. The seller wants a Letter of Credit (LC) for guaranteed payment.

• The buyer applies to issuing bank (Bandhan Bank) for LC in favour of the seller.

• The buyer’s bank approves the buyer’s credit risk, issues the LC, and forwards it to the seller’s bank (advising bank).

• The seller’s bank authenticates the LC and advise the LC to the seller.

• The seller ships the goods and prepares the required documents (invoices, bill of lading, insurance certificate etc) in accordance with the terms and conditions of the LC.

• The seller presents required documents to their bank to check and forward the same to the LC issuing bank for payment.

• The seller’s bank will forward the documents to the LC issuing bank and claim the funds under the LC.

• The buyer’s bank examines the documents within 5 banking days and, if compliant, makes the payment or provides acceptance to make the payment on due date.

• The buyer’s account will be debited on payment date as per terms mentioned in the LC (sight/usance).

• The buyer takes delivery of the goods.

Under Documentary Collections

• The seller & buyer agree that payment be made on the basis of a documentary collection.

• The seller ships the goods & tenders the documents to their bank (remitting bank) along with a corresponding collection order.

• The seller’s bank forwards the documents along with its collection instructions to Bandhan Bank (collecting bank).

• The buyer’s bank notifies the buyer of the arrival of documents, for his payment or acceptance.

• In case of:

  • Documents against payment (DP) – the buyer pays the amount due.

  • Documents against acceptance (DA) – the buyer accepts the draft and gives an undertaking to pay on a later date (maturity date).

• After providing payment or acceptance of payment, the buyer receives the documents, which allows them takes possession of goods.

• The buyer’s bank remits the amount to the seller's bank, which then credits the amount to the seller’s account.

T&C apply