Letter of Credit (LOC)

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Guidelines for opening letter of credit

An application agreement for opening of L/C which is duly stamped as required under Indian stamp Act should be got signed by the borrower. In case of borrower being a partnership or limited company, the said agreement for opening of L/C should be got signed by all the partners in the case of former and by duly authorized persons in case of the letters.
2. The application cum agreement should be filled in all respect with attention to the3 terms and conditions of the credit. Conditions imposed must be documentary i.e. those which can be evidenced from documents.
3. Generally L/Cs’ are irrevocable and without recourse.
4. The applicant must possess an import-export code number allotted by ITC authorities (wherever applicable).
5. Correct name and address of the beneficiary in full should be collected in t5he L/C application so that the same could be incorporated in the L/C.
6. If the credit is covering an import transaction, the bank has to verify whether the goods covered under the credit and to be imported are falling under Open General License (OGL).
7. The L/C should stipulate a condition that the bill of lading should indicate the name and address of the importer in India and also the authorized dealer opening the credit (wherever applicable).
8. If import is on cash basis, payment terms should be such as that the remittance is completed within 6 months from the date of shipment, except when payment up to 15{3f6fc27b7d854a6d11d1a3aff0be80f521428168aac3c68744a82bcc1a5c181a} of value of imports are withheld, exceeding six months to ensure guarantee of performance.