STEP BY STEP ROLE PLAY OF LC IN TRADE FINANCE - For Your Read

The standard bank procedure for a Letter of Credit (LC) typically involves the following steps:




Request for LC: The importer requests their bank to issue an LC in favor of the exporter, stating the terms and conditions of the LC.


Issuance of LC: The importer's bank issues the LC to the exporter's bank, which then forwards it to the exporter. The LC will state the terms and conditions of the transaction, such as the amount, documents required for payment, and the deadline for presentation.


Shipment of Goods: The exporter ships the goods to the importer, and then prepares the required documents for presentation to the bank.


Presentation of Documents: The exporter presents the required documents to their bank, which then checks them for compliance with the terms and conditions of the LC.


Payment: If the documents are in compliance with the terms and conditions of the LC, the exporter's bank sends the documents to the importer's bank for payment. The importer's bank checks the documents and if they are in order, the bank releases the payment to the exporter.


Discrepancies: If there are any discrepancies in the documents, the bank may refuse to pay until the issues are resolved.


Closeout: After the payment is made, the LC is closed out and the banks involved settle their accounts.


It's worth noting that the specific procedures may vary depending on the banks involved and the terms and conditions of the LC.

Arasan, Trade Finance Consultant +919345516057

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