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Friday, 21 September 2012

Different types or kinds of letter of credit






Following are the various kinds of letter of credit

1. Revocable L.C :-
A recoverable L.C can be cancelled or modified without the consent of all the parties.

2. Irrevocable L.C :-
It can not be cancelled or modified without the the consent of all the concerned parties.

3. Confirmed L.C :-
The confirmed letter has the protection of the credit standing of the importers as well as the exporters bank. The exporters bank gives undertaking to honour the drafts.

4. Unconfirmed L.C :-
The intermediately bank forward the L.C to the beneficiary but does not takes any liability.

5. Fixed L.C :-
It is issued for a fixed amount, it is exhausted when the total amount is received.

6. Revolving L.C :-
The amount of this L.C is automatically renewed or revived when the draft is drawn under it is paid.

7. Documentary L.C :-
The drafts drawn under this L.C is accompanied by different documents, relating to the merchandise.

8. Special L.C :-

This L.C is restricted in its operations to a particular intermediately bank written in L.C. This bank acts as advising as well as negotiating bank.

9. Without Resource L.C :-

The L.C under which the drawer of the draft is not liable to holder if the draft is not honoured.

10. Red Clause L.C :-
The L.C authorizes the intermediary to grant an advance to the seller before shipment. The advance may be for packing and handling.

11. Green Clause L.C :-
This is an improvement over the red clause L.C. In addition it also allows the storage in the name of the opening bank.

12. Transferable L.C :-
Under this L.C the beneficiary has the right to give instructions to the intermediary bank to make the L.C available in the whole or in part to second beneficiary.

13. Buy To Back L.C :-
This L.C achieves much the same purpose as a transferable L.C. In this L.C beneficiary is not actual supplier. He produces his own L.C to his bank.

14. Freely Negotiable L.C :-
Under this L.C the beneficiary is allowed to get the documents negotiated through any bank. But negotiating bank may differ from the advising bank.

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