by issuing an irrevocable letter of credit ,a bank is conditionally guaranteeing a customer is trade debt .The letter of credit represent an obligation to pay,providing that the overseas supplier meets the terms of the credit ,including the provision of the documents of tide to the goods being shipped .
The lender must be satisfied of the buyer is ability to meet the liability on the due date and if any doubts persist about this ,than full or partial cash cover should be taken from the buyer at the times the letter of credit is issued .IT must be understand that once an irrevocable letter of credit is in existence ,all the overseas supplier has to do is meet its terms and conditions ,and the lender will be obliged to pay .
Monday, March 23, 2009
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