Letter of Credit is issued by

Letter of Credit is issued by

A letter of credit is a record that guarantees the payment of buyers to the sellers. It is provided by the bank and ensures full and timely payment to the seller. If the buyer is not able to make such payments, then the lender covers the remaining or full amount on behalf of the buyer.

Letter of credit is issued by against a pledge of collateral or cash. Bank generally collects a fee which is percentage of the size / amount of the letter of credit.

Types of credit

A revocable letter of credit

Revolving letter of credit

A standby letter of credit

Irrevocable letter of credit

Eligibility criteria of letter of credit

Eligibility criteria of letter of credit is issued depends on several factors including repayment history, age of the individual, total work experience, business or sales turnover, and creditworthiness, etc..

• The age of the borrower should be between 24 years to 65 years of age.
• Proper license of export and import trading.
• The background of the promoter must be good in terms of repayment history and financial track record.
• The borrower should have a certificate of origin and inspection.
• Any company engaged in export and import trading can apply for a letter of credit.