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Under Letter of Credit (LC)

• The buyer & seller enter into a business contract. The seller wants a Letter of Credit (LC) to guarantee payment.

• The buyer requests to his Bank i.e., issuing Bank to issue an LC in favour of the seller.

• Issuing Bank checks the credibility of the buyer , issues & forwards the LC to the seller’s bank (advising bank).

• The seller’s bank will authenticate the LC & advise the LC to the seller.

• The seller ships the goods, & prepares documentary requirements (invoices, transport documents, insurance certificate etc.) in line with the terms & conditions of the LC.

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

• The seller’s bank will forward the documents to the LC issuing bank & claim the funds under the LC as per LC terms.

• The buyer’s Bank examines the documents within 5 banking days & if compliant, makes the payment/acceptance of payment on the due date.

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

• The buyer takes the delivery of the goods.

Under Documentary Collection

• The seller & buyer agree to conduct business & agree that payment be made on the basis of a collection documents.

• The seller ships the goods & tenders the documents to his bank together with a corresponding collection order.

• The seller’s bank forwards the documents along with its collection instructions to the buyer’s Bank.

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

• In case of:

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

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

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

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

T&C apply