Letter Of Credits

Banks issue letter of credits to ensure a healthy transaction between a buyer and seller without letting any to take place. Letters of credit are very useful in International trades. A seller is ensured through a letter of credit that if buyer doesn’t pay for the purchased goods within specified time, the bank will pay on behalf of buyer. This is also good for buyer as the bank keeps an eye on whether the purchased goods have been shipped to the customer or not. The supplier is only paid when bank gets the confirmation that goods have been delivered.
International trade using Letters of Credit function as per the guidelines of Uniform Customs and Practice of Documentary Credit of International Chamber of Commerce (UCP 600).