Question

What is letter of credit, negotiating bank etc?

Answer 1

In a letter of credit transaction, the bank that:

receives and examines the seller´s documents for adherence to the terms and conditions of the letter of credit,gives value to the seller, so long as the terms of the credit have been met, andforwards them to the issuing bank (the buyer´s or importer bank).

Depending upon the of credit, the negotiating bank will either credit or pay the seller/exporter immediately under the terms of the letter of credit, or credit or pay the exporter once it has received payment from the issuing bank. Seeadvising bank; issuing bank.




In modern business practice, a letter of credit(LC) also known as a Documentary Credit, is a written commitment by a bank issued after a request by an importer (foreign buyer) that payment will be made to the beneficiary (exporter) provided that the terms and conditions stated in the LC been met, as evidenced by the presentation of specified documents

Answer 2

Answer:

Letters of credit are usually negotiable. The issuing bank is obligated to pay not only the beneficiary, but also any bank nominated by the beneficiary. Negotiable instruments are passed freely from one party to another almost in the same way as money.