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4 A BFM LETTER OF CREDIT
What is a Letter of Credit (LC) in international trade?
A Letter of Credit is a written undertaking by a bank (issuing bank) on behalf of the buyer (applicant) to pay the seller (beneficiary) a specified amount, provided the seller presents documents that comply with the terms and conditions of the LC.
What is the maximum credit period allowed under a usance LC for imports into India?
RBI permits usance LCs up to 180 days from shipment date.
Who are the primary parties involved in a Letter of Credit transaction?
The primary parties are the applicant (importer/buyer), the issuing bank, the beneficiary (exporter/seller), and the advising bank; additionally, a confirming bank and negotiating bank may be involved.
What is a deferred payment LC and how does it differ from an acceptance LC?
Deferred payment LC has no draft drawn; acceptance LC requires bill of exchange.
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