Introduction
A letter of credit is an undertaking of the issuing bank (and in the case of a confirmed Letter of Credit, the confirming bank) to pay, accept or negotiate a bill of exchange up to the extent of credit amount within the L/C validity and against stipulated documents. The two basic forms of Letters of Credit are revocable and irrevocable. Depending on the payment conditions the Letter of Credit may be Sight, Time or Conditional. The purpose of the LC is to provide the facility for NCB customers to meet their import/export obligations to overseas and/or local suppliers and buyers. A letter of credit is established at the request of the applicant to fulfill the agreement between the buyer (the applicant) and the seller (the beneficiary) for the supply of merchandise or to provide services against some specific documents to be routed through Banks.

Product Feature
1- Characteristics and Benefits : There are two forms of letters of credit: Revocable: Can be amended or cancelled without prior consent of the beneficiary. Irrevocable: Cannot be amended or cancelled without the consent of all parties. There are three classes of L/Cs depending on the payment conditions: Sight: To pay or negotiate the documents value upon presentation of documents in accordance with the L/C terms and conditions. Time: To accept or pay on the due date against presentation of stipulated documents in compliance with the L/C terms and conditions. Conditional: To pay as per stipulated payment terms against the presentation of documents. Special Types of L/Cs: Red Clause L/C: A letter of credit containing a clause authorizing the advising or confirming bank to pay an amount in advance to the beneficiary, before presenting any document that may be required within the terms of the L/C. Transferable L/C: A transferable L/C gives the right to the original (first) beneficiary to transfer whole or part of the L/C value to one or more second beneficiary(s). Back to Back L/C: This is a type of L/C established at the request of a beneficiary of a credit, against the L/C in his favor. The beneficiary of the first L/C offers the L/C in his favor as a security for opening another L/C. Revolving L/C: A revolving L/C is where the amount of the L/C is renewed or reinstated in accordance with the L/C terms. Local L/C: The L/Cs described above can be accommodated in local L/Cs except that the applicant and beneficiary are both addressed locally and generally the delivery of goods or services is made locally (within the Kingdom). Standby L/C: This is a type of guarantee for the payment of an exporters (the beneficiary) un-settled/un-paid bill(s) by the importer (the applicant) on the due date, by a direct payment or collection bill settlement, supported by the stipulated documents.