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LC: Letter Of Credit


Basic Combination : Issue & Adjustments. The term LC refers to Letter Of Credit in Shipping & Trading Business. So this includes a basic understanding of how to ISSUE and ADJUST the limits that are set to the different fields.

How it works! A LC A/c when created in a bank needs certain criteria to be full fill – which have some basic formula and the process flow of ISSUE along with its ADJUSTMENT are understood below.

A bank contains four headings as displayed in table below :

Incoming Contract / Sales

Incoming LC / Sales LC

Remarks

B2B

Yes

Yes

Back To Back: when certain Incoming LC is already with us before the Outgoing LC is being issued; we open the Outgoing LC purely on B2B for a particular contract.

F2B

Yes

No

Front To Back: when No Incoming LC is with us for a particular contract, but we have their sales contract with us then we can use this F2B Limit for issuing of LC against the Purchase Contract.

TRF

-

-

In Last suppose we are about to get the payments for the old issues and currently we want to clear out the bank limit to actual, we use this TR Financing and it’s like a credit system within the Limits.

Other/ Margin Money

No

No

If we don’t have any Incoming LC or any Sales Contract, then some time for Purchase we need to open a LC, so bank might give permission to open the LC on this limit which is purely cash transaction.



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