How can I audit LC?
Here are some of the details that I would suggest you check:
- Is your company’s name spelled correctly and is the address correct?
- Was it necessary for the LC to be confirmed and, if so, is the confirming bank acceptable?
- Is the amount and currency of the LC correct?
- Is the tenor of the draft acceptable?
What is letter of credit in banking?
A letter of credit is a document sent from a bank or financial institute that guarantees that a seller will receive a buyer’s payment on time and for the full amount. Letters of credit are often used within the international trade industry. Banks collect a fee for issuing a letter of credit.
What is confirming bank in letter of credit?
In a letter of credit transaction, the confirming bank, also known as the confirmer, is a bank that, at the request of the issuing bank, agrees to perform the principal duties of the issuing bank.
Which bank decides correctness of documents in LC?
In a confirmed credit, the advising bank adds its guarantee to pay the seller to that of the buyer’s issuing bank. Once the advising bank reviews and confirms that all documentary requirements are met, it will pay the seller.
What is bank audit process?
A Bank audit is a routine examination of the records and services of the organization to ensure whether they are in compliance with the laws and standards of the industry. Banks have to get many types of audits done such as statutory audit, revenue audit, concurrent audit, etc.
What is LC and types of LC?
There are various types of letter of credit (LC) that prevails in trade transactions. They are Commercial, Export / Import, Transferable and Non-Transferable, Revocable and Irrevocable, Stand-by, Confirmed, and Unconfirmed, Revolving, Back to Back, Red Clause, Green Clause, Sight, Deferred Payment, and Direct Pay LC.
What are the charges for letter of credit?
The cost of a letter of credit usually ranges from 0.25 to 2 % depending on the type of letter of credit margin, customer credit rating, tenure and other such factors. Being usually used for large international exports and transactions, often loans can be taken to procure such letter of credit from the concerned bank.
What is the risk of confirming bank?
A beneficiary will usually request confirmation when it has concerns with (a) the risk of the issuing bank (e.g., the ability of the bank to honour its undertaking), (b) country risk (e.g., the payment risk of the country where the issuing bank is domiciled), and/or (c) documentary risk (e.g., they require another bank …
Can LC issuing bank be negotiating bank?
Negotiating bank is one of the main parties involved under Letter of Credit. Negotiating Bank,is the one who negotiates documents delivered to bank by beneficiary of LC. Negotiating bank is the bank that verifies documents and confirms the terms and conditions under LC on behalf of beneficiary to avoid discrepancies.
How can I get LC limit from bank?
You can approach your bank to open a Letter of credit. The concerned officer at bank helps you in filling up necessary application to open an LC. Since the LC is opened on the basis of your purchase contract, a copy purchase order / export contract has to be produced with along with other required documents.