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Letters of credit are the most effective means of securing payment in international trade with independent credit backing and offer buyers and sellers a degree of security from commercial risks.
In a letter of credit:
- An importer (buyer)’s bank conditionally guarantees payment to the exporter providing documents submitted by the exporter comply with
all the conditions specified.
- An exporter (seller) receives the conditional guarantee of payment from another bank opening the letter of credit on behalf of the importer. It may also be possible to receive the additional guarantee of another bank known as “confirmation”
NCB offers various types of letters of credit
According to the method of settlement, there are various types of letters of credit:
Sight letter of credit
It is most commonly used credit which provides payment to the beneficiary immediately after presentation of stipulated documents.
Deferred payment letter of credit
The seller receives the payment at a later date after presentation of stipulated documents. The buyer gains possession of documents (and thereby of the goods and services) before the amount is debited to its account
Red clause letter of credit
The seller can obtain an advance payment for an agreed amount to finance the manufacture or purchase of goods that are going to be shipped under letter of credit.
Revolving letter of credit
The seller receives the payment in fixed installments for goods dispatched at specified intervals.
Standby letter of credit
The purpose of this credit is the same as of a guarantee and the beneficiary receives the payment upon presentation of simple demand.
Our Trade experts will provide you with prompt and professional advice on the structure and type of letter of credit to meet your business requirement. We also ensure that the letters of credit are processed faster, allowing settlement without delay through our overseas correspondent banking network.