Letter of Credit Issuance | IDFC FIRST Bank

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Overview

A letter of credit is a written undertaking issued by a buyer’s bank to pay a supplier for goods or services if the documents presented comply with stated terms. Use it to negotiate better terms with overseas sellers and to add certainty in cross‑border trade. Initiate issuance and amendments online, use templates for repeat needs, book foreign exchange rates, and access a digital repository of copies and advices in one place.

Features & Benefits

Initiate issuance and amendments online with maker‑checker controls

Templates for repeat transaction reduce errors and save time

Book foreign exchange rates online when paying under letters of credit

Digital repository of letters of credit, messages and bank advices

Status tracking and alerts from application to document presentation

How it works

Understanding the process can simplify transactions and ensure smoother process. Here’s a step-by-step guide to how it operates.

1

The Buyer and seller enter into business contract. The seller needs a letter of credit to guarantee payment on due date.
2

Buyer applies to his bank (Issuing bank) for a LC in favour of the seller, basis buyer’s credit standing, his bank issues and forwards the LC to the seller’s bank (Advising bank) usually located in the same geography as the seller.
3

Seller’s bank will authenticate the LC and advise the LC to the seller. Seller then ships the goods, and prepares documentary requirements (invoices, bill of lading, insurance certificate etc.) in line with the terms and conditions of the LC.

4

Seller presents required documents to his bank to check and forward the same to the LC issuing bank for payment. Seller’s bank examines the documents for compliance with LC terms & conditions.
5

If the documents are correct, the seller’s bank will forward the ‘compliant documents’ to the LC issuing bank and claim the funds under LC.
6

Buyer’s bank examines documents within 5 banking days and if compliant makes the payment/acceptance to pay on the due date. If the documents are discrepant, the same is advised to the buyer for acceptance of the discrepancies.
7

The buyer’s account will be debited on payment date as per terms mentioned in the LC (sight/usance).The buyer takes delivery of the goods.

Schedule of Charges

Click here to view all charges

Letter of
Credit Issuance

Overview

Features & Benefits

How it works

Schedule of Charges

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