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Letter of Credit
Letter of credit (LC) is a financial instrument used in domestic and cross-border trade. It is a written commitment by the buyers’/ importers bank (LC issuing bank) to the seller/ exporter's bank to pay on due date to the seller on presentation of credit compliant documents as per the terms of the LC.
Letter of Credit can help you to –
Expand your business in new geographies
Negotiate better pricing and terms with sellers as letter of credit ensures payment
Enhance working capital efficiency & cash flows
Reduce the risk of non-performance of the seller and ensure timely supply of goods
A letter of credit can have multiple clauses, which may take a lot of time to formalise. ICICI Bank offers a unique facility for instant generation of draft letter of credit.
- Available for both customers and non-customers of the bank
- No dependency on sellers/ seller’s bank to provide the draft LC format
Unlock speed & efficiency with ICICI Banks’ Instant LC draft generation.
I agree that by clicking on 'Submit', I authorise ICICI Bank and its representatives to contact me by telephone, e-mail, using Short Messaging Service (SMS) with respect to products/ facilities hereby applied for.
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How does a Letter of Credit work?
- Step 1 - You (the buyer) and the supplier sign a contract stating that payment will be made on the basis of Letter of Credit
- Step 2 - You approach ICICI Bank to issue a Letter of Credit in supplier’s favour
- Step 3 - ICICI Bank issues the Letter of Credit, advised by its own branch or correspondent bank in supplier’s country
- Step 4 - Advising Bank advises Letter of Credit to the supplier
- Step 5 - The supplier receives the Letter of Credit, sends the shipment of goods and deliver’s documents to its own bank
- Step 6 - Supplier’s bank sends the documents to ICICI Bank for payment
- Step 7 - You now pay the amount due to ICICI Bank, and get the documents in turn
Types of Letter of Credit
Sight Letter of Credit |
The issuing bank makes the payment once the documentation is received in order |
Usance Letter of Credit |
The issuing bank accepts the draft once all documentation received is in order, and agrees to pay on the maturity date |
Standby Letter of Credit |
This is typically used to ensure that the applicant will meet the payment or contractual obligations. A Bank Guarantee can also serve the same purpose. |
