CAIIB BFM UNIT 4

L.C (Letter of Credit) is an undertaking by a bank , on behalf of the buyer(importer), to the

beneficiary(seller) of the credit that it would honour bills drawn in terms of the credit.
Irrevocable Letter of Credit: Cant be amended or cancelled by the opening bank without the
consent of all the concerned parties.
Revocable Letter of credit: Can be revoked at any time by the opening bank without the
consent of the parties.
Standby Letter of Credit: One bank advises another bank to pay only if a transaction agreed to
by the opener of the credit with the beneficiary is not performed.
Revolving Letter of Credit: On payment of bill the LC shall be reinstated by the value of the bill
negotiated but within the original value of the LC and before its validity. The validity of such LCs
should not be more than one year.
Red Clause Letter of credit: When the opening bank requests the advising bank to give loan to
the exporter for the purpose of export.
Green Clause Letter of Credit: When the Red Clause credit provides for the grant of storage
facilities at the port of shipment.
Back to Back Letter of Credit: When an inland L/C is backed by the Foreign Letter of Credit for
supply of goods by the manufacturer to the exporter for onward exporting the goods to foreign
contry.
Demand/sight bill under import LC shall be crystalised if not retired by the customer on the
10th day from the date of receipt thereof by converting the foreign currency
amount in to rupees at the Banks Bill selling rate. (Crystalisation)
OGL(Open General License) refers to the list of items mentioned in the foreign trade policy
which can be imported freely.

URR -525 UNIFORM RULES FOR BANK TO BANK REIMBURSEMENTS

INFOTERMS : ICC published a set of international rules for the interpretation of trade terms known
as INCOTERMS

There are 39 articles in the UCP 600, as compared to 49 in the earlier version .

DOCDEX has been set up for settling differences among banks in the interpretation of the code.