Letter of Credit

[Former Member]

Dear Experts,

Can anybody explain me what is issuing bank, notifying bank,confirming bank, negotiating bank and opening bank. What is the meaning of revocable and irrevocable LC.

Thanks & Regards,

Reji

[Lakshmipathi · Accepted solution]

Issuing Bank

Importers bank who issues Letter of Credit favouring exporter of another country, authorising importer to import from the respective country

Notifying Bank

Issuing Bank has to inform the exporters Bankers notifying that the shipment can be made referencing the terms and conditions stipulated in L/C

Confirming Bank

If the opening bank is responsible for making payment and cannot do so, the confirming bank will pay.

Negotiating Bank

Negotiating Bank will receive the export documents and check whether the export documents are in line with L/C clause and if the documents are in line with terms and condition of LC, they will forward to issuing bank.

Opening Bank

The opening bank (the importeru2019s bank) will transmit the L/C to its branch or correspondent (the advising bank) closest to the exporter. The advising bank will notify the exporter that credit has been established in their name once they have received the L/C.

Revocable L/C

Under revocable letter of credit terms and conditions, the importer can amend or cancel any time without the approval of the exporter. Only few exporters will do business against this L/C

Irrevocable L/C

This is vice versa of revocable L/C. That is the importer cannot just like that cancel or amend the L/C without prior approval from the respective exporter. Almost all exporters globally do business against this L/C.

thanks

G. Lakshmipathi

[eduardo_hinojosa]

Hi,

Read the document 'Documentary Payments (SD-FT-LOC)', it's so useful

The link is: http://help.sap.com/printdocu/core/Print46c/en/data/pdf/SDFTLOC/SDFTLOC.pdf

Regards,

Eduardo