Save Rs 588 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

Letter of credit

Save Share

This query is : Resolved

Narendra (Querist)
Follow

01 April 2009 Sir,

Pls explain to me in details what is letter of credit and what is the role of it in export and import.

CA LOKESH KASAT, FCA, M.Com

CA LOKESH KASAT, FCA, M.Com (Expert)
Follow

01 April 2009 A binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be tranferred to the seller. Basically, a letter of credit gives the seller reassurance that he will receive the payment for the goods. In order for the payment to occur, the seller has to present the bank with the necessary shipping documents confirming the shipment of goods within a given time frame. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country, customs, or political instability.

Definition itself contains importance of it for the purpose of import and export.

Message likes : 1 times

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now