Banking Term: Letter of Credit (LC)

Find important banking term that is useful in upcoming banking exam.

Banking Term: Letter of Credit (LC)

  • Letter of Credit is an order from bank to a bank abroad authorizing payment to a person named in the letter of particular sum of money or upto a limit of a certain sum.
  • Letters of Credit are often required by exporters who wish to have proof that they will be paid before they ship goods, or wish to minimize delay in payment for goods.
  • Letter of credit, unlike bills of exchange, is not negotiable, but being cashable at the known bank, are immediately acceptable to the seller in the exporting country.

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