Letter of Credit Basic Concepts | Process Flow | Parties Involved

[@ShuddhDesiBanking]

********************************************************************** For beginners in Trade Finance, the Gist of Trade Finance in simple language www.bankon.school/courses/international-trade-finance-certification ********************************************************************** Learn the ESSENTIALS of Letter of Credit and UCP 600!! Three Hours of power learning in simple language explained with examples/ Real life documents/ CDCS FAQs - www.bankon.school/courses/international-trade-finance-letter-of-credit-ucp-600 ********************************************************************** ********************************************************************************************** For full course on SWIFT MT and ISO 20022 MX Messages including Overview of SWIFT GPI www.bankon.school/courses/swift-mt-mx-iso-20022-message-types ********************************************************************************************** For a thorough and extensive understanding of Incoterms 2020 in easy words www.bankon.school/courses/incoterms-2020-training **********************************************************************

[@dnyaneshwardole4453]

It's Usefully Marketing Team

[@shyamnathmallinathan1259]

I appreciate the length you go to teach a complicated topic into a simple one

[@ShuddhDesiBanking]

Thank you! We try..

[@amoschokani2870]

This was refreshing.keep up the good works.

[@manishsharma-wz5jt]

Madam you have done a great job by making this topic simpler

[@faheemrasheed7774]

I have memorized it by heart... each and everything is crystal clear.... thanks a lot

[@ShuddhDesiBanking]

You're most welcome

[@vigneshsubramaniyam6537]

concepts explained as clean as a whistle

[@ShuddhDesiBanking]

Thank you. You can check out a list of detailed courses here www.shuddhdesibanking.net/

[@sathishvaradhan4228]

1000th Like is Mine! thanks for the informative video!

[@ShuddhDesiBanking]

Awesome! Thank you!

[@akinluaolamide2381]

Thanks for this

[@amitpawar-k3r]

GREAT EXPLANATION. VERY SIMPLE VERY STRAIGHT. THANKS A LOT.

[@ShuddhDesiBanking]

Welcome.

[@abidemimichael6263]

I love ❤️ it! Explanation with ease !

[@dennisanamoah5409]

Wonderful video !You are a genius.

[@ShuddhDesiBanking]

Thank you very much!

[@shatrujitsingh3556]

Thanks for explaining in such a easy words

[@16vaibhavikarnik93]

Explained in very easy manner thank you 😊 all my doubts and concepts are clear .

[@ShuddhDesiBanking]

You are welcome

[@pujamall1757]

Awsesom explanation

[@iontechindia6002]

Simple really very clearly explained

[@ayenioluwaseun7905]

An easy-to-understand video. Thank you very much

[@sayanbhattacharjee708]

An extremely complicated topic explained with ease.

[@fightorflight142]

Wonderful video

[@shanikaariyarathna4235]

excellent and interesting explanation this is. great !!!

[@ShuddhDesiBanking]

Glad you liked it!

[@aishaabrar9870]

Excellent maam, superb explanation

[@amolkumar6750]

Very useful videos..... Thank you Mam

[@ShuddhDesiBanking]

Thank you

[@poonamrao8629]

wonderfully explained!

[@chandanb4678]

Details provided are well understood, Much appreciated.

[@ShuddhDesiBanking]

Thank you so much! Please help us reach more people :)

[@mohammednizar1367]

Great! Explained in a simple way

[@ShuddhDesiBanking]

Glad you think so!

[@dilawaiz9792]

Waoooo superb explanations Its very helpful for me bcz today my paper

[@ShuddhDesiBanking]

Thank you 😊

[@mywish6722]

Thanks for the video

[@curiosapien]

Beautifully explained. Thank you.

[@ShuddhDesiBanking]

You're most welcome!

[@LexiKnight]

Wonderful video and the entire topic was explained in a very simple way. Kudos to you!

[@ShuddhDesiBanking]

Glad you enjoyed it!

[@ourfamily9397]

Thank you for sharing

[@ShuddhDesiBanking]

Thanks for watching!

[@ourfamily9397]

To help others is to help yourself.

[@vanisangishetty5757]

Absolutely beautiful explanation.

[@victoriakavishe3791]

Great Video, thank you so much.

[@ShuddhDesiBanking]

You are most welcome ☺️

[@anirban161280]

Darun content

[@revanthkrish6697]

Very useful and understandable video. Thank you so much for making me more clear :-)

[@MrFriends1111]

Good. Just to add that the buyers bank will collect cash margin or cash collateral against the issuance of lc to safe guard against any contingency arising at payment stage.

[@ShuddhDesiBanking]

Right. With pre-existing LC limit the margin percentage depends on the terms of sanction. In case of walk in customer its usually 110% of LC value including LC tolerance.

[@remideroccaserra5486]

Thank you so much for your stringent and clear explanation

[@Sablelicious]

very useful! able to understand complex stuff in layman's terms

[@ShuddhDesiBanking]

Thank you 😊

[@fabianlalruatfela2689]

Thank you from Mizoram

[@ShuddhDesiBanking]

Its a pleasure.

[@ca.rahulkumarrathod9587]

Well explained👍. If possible, please explain with the practical example/case study. Like what documents are required in a set of documents with images and what are the terms of conditions?

[@ShuddhDesiBanking]

We have detailed courses on Trade Finance you can check them out here www.bankon.school/s/store/courses/description/International-Trade-Finance-Letter-of-Credit-UCP-600

[@hemaakkiraju4458]

Very helpful video.. Thanks for explaining in a simple understanding way.. 😊

[@ShuddhDesiBanking]

Most welcome 😊

[@kapiljoshy2348]

Thanks for sharing this

[@ashanirathnayake3674]

Thank you so much

[@Ankita-pg7hq]

What is advising bank and what is negotiate bank?

[@sujithsantosh3101]

Top notch

[@Raghavendrareddy]

superb explanation. expecting more videos from this channel. Please make some videos on Balance sheet & ratio analysis.

[@ShuddhDesiBanking]

Thank you so much. We are trying our best. Encouragement like this makes us so happy :)

[@suhasishi739]

Too Good.. Very simple language..

[@sadhanapatil745]

Hello mam, please explain difference between advising bank and advising through bank.

[@tusharsharma3979]

Sir, is it necessary to have that much balance or credit to transfer any type of LC or SBLC or Back to Back LC, from my account to others account in the domestic or international trade?

[@ShuddhDesiBanking]

Sorry for the late reply. There should not be any hard and fast rule that you need to have 100% balance in your account to transfer a LC. But that will depend on individual bank guidelines.

[@ananthalakshmiragi4446]

Do you have any video on accounting entries at all stages n which msgs are generated at what point

[@ShuddhDesiBanking]

No, not exactly the way you are asking, but we have these which you can check out - kzbin.info/aero/PL8luW2QdVFktZk3Dwdaq5GaAh_XttO6wK

[@sajjadkabirmdsharifulalam8652]

Great tutorial

[@ShuddhDesiBanking]

Thank you so much!

[@happylifetricks]

Thanks! Can you upload Types of LC please

[@ShuddhDesiBanking]

Noted.Will upload soon.

[@happylifetricks]

@@ShuddhDesiBanking thanks Mam!!

[@bilalsaleh4266]

super clear thanks

[@ShuddhDesiBanking]

Welcome 👍

[@PVRAAKESH]

Superb

[@archanamuthukrishnan6465]

Hello mam Very nice video and I have joined as QA in Trade finance project trying to learn its basics.I have a doubt mam , so based upon conract between seller and buyer first seller sends Documentry collections and then buyer send LC ? which takes place first?? Can you please clarify

[@ShuddhDesiBanking]

Hi Archana, documentary collections and documentary credit(LC) are two separate payment methods. In a contract involving LC, both parties first agree on the main conditions to be included in the LC by drafting the sample LC. Then the importer instructs his bank to issue the actual LC. Please go through both the Documentary collection video and the LC Basics video to get the detailed idea.

[@mdjavedalam2333]

Mam how can send the documents with swift in case of LC case.

[@gothrix266]

Another great video! thank you! :)

[@omarsaleh7085]

How about, for any reason, if the shipment received is not matching with the submitted documents by the seller or exporter after payment being released?

[@prateekvardhanvlogs]

Mam LC with FOB incoterm is safe or not

[@AJ-ll9kz]

It is applied always by importer ? Who does the lc payment ? What does tenure of LC Means ?

[@ShuddhDesiBanking]

Yes, LC is always applied by importer. LC payment is done by the LC issuing bank, which in turn takes the payment from the importer. Tenor means the number of days the importer gets to pay the lc bill.

[@AJ-ll9kz]

@@ShuddhDesiBanking payment by issuing bank is done from credit limit given by the same bank ? What if afterwards issuing bank is not able to recover from importer .?

[@ShuddhDesiBanking]

@@AJ-ll9kz yes the payment is done from the non fund based limit enjoyed by the importer. A percentage of lc amount is kept as margin by the bank which acts as security. But that practically does not guarantee payment by importer. If importer fails to pay ultimately its called 'lc devolvement' . It is a sort of npa and bank will follow its due course of action for recovery. Hope this clears your doubts.

[@AJ-ll9kz]

@@ShuddhDesiBanking yes Thank u so much 🙏

[@AJ-ll9kz]

@@ShuddhDesiBanking what does bank take in form of margin / security ? Can u also pls expalin DRUL FACILITY ?

[@mahytabmohamed4788]

Thanks alot ☺️

[@ShuddhDesiBanking]

Most welcome 😊

[@raufnoori4855]

"Madam, sorry, I have a question. Does the seller's bank send the original documents to the buyer's bank or scanned copies? If they send the originals, through which channel are they sent? If they send scanned copies, through which channel, and are scanned copies accepted by the buyer and customs?"

[@sabithap70]

One doubt Mam....on exporter' side. If the bill submitted by the exporter has some discrepancies..what the bank will do.??? Should the bank still negotiate it under LC or under nonLC??

[@ShuddhDesiBanking]

In most cases practically if the discrepancy is something that cannot be rectified..its discounted as nonLc..its a practice followed in many Indian banks

[@bhimtamrakar3937]

please practical work on LC?

[@santoshkumar-jv1ix]

Thank u

[@jyotijoshi7369]

Mam Is negotiation always for Sight bills and not usance bills. Pls clarify.

[@ShuddhDesiBanking]

Any advance done by a bank on a LC bill is called negotiation. It may be sight bill or usance bill.

[@jyotijoshi7369]

@@ShuddhDesiBanking mam, My confusion is still not clear. kindly clarify the same in light of Article 6(b) of UCPDC which says that A credit must state whether it is available by sight payment, deferred payment, acceptance or negotiation.

[@ShuddhDesiBanking]

You are getting confused by the definitions of the various terms you mentioned. Sight payment - payment at sight by LC issuing bank, it does not mean that any kind of advance has to be made deferred payment - payment after x number of days without any supporting Bill of Exchange Acceptance - payment after x number of days with a supporting bill of exchange Negotiation - advance of the LC receivable amount UCP 600 Article 2 defines negotiation as ' purchase by the nominated bank of drafts ...., BY ADVANCING OR AGREEING TO ADVANCE FUNDS TO THE BENEFICIARY ON OR BEFORE THE BANKING DAY ON WHICH REIMBURSEMENT IS DUE TO THE NOMINATED BANK' So, ANY advance before the actual maturity date of the LC bill is negotiation. It may be sight bill or usance bill. Hope this clears your doubt.

[@jyotijoshi7369]

@@ShuddhDesiBanking Mam, my doubt is related to defination of Negotiation which says "purchase of draft". Purchase is of sight bills and not usance bills(UB are discounted). Then doesn't it mean that Negotiation is of sight bill only? Kindly clarify. Regards.

[@ShuddhDesiBanking]

@@jyotijoshi7369 Have you ever worked in trade finance? If yes, then you should be knowing the accounting entries happening in a bank while a bill negotiation. There are two types of accounts that can get debited in a bill negotiation. BE(LC) account and FCSB(LC) account. BE(LC) stands for Bill of exchange under LC i.e for usance bills, FCSB(LC) stands for Foreign currency sight bill account under LC. Both fall under bank negotiation accounts. Purchase & discounting are usually used to denote non LC bills, whereas the word negotiation is used for LC bills. For further clarification please refer Gary Collyer books who is regarded as the godfather of trade finance rules.

[@theerthrajV3]

what happened team. where are yours in detail leactures on UCP600 and LC. Please start , we need it .

[@ShuddhDesiBanking]

You can find all our detailed courses here. www.bankon.school/s/store/courses/description/International-Trade-Finance-Letter-of-Credit-UCP-600

[@books4uforever]

Thanks

[@ShuddhDesiBanking]

Welcome : )

[@abdulshabbir8565]

Can we have something on similar lines for treasury module please

[@ShuddhDesiBanking]

www.bankon.school/s/store/courses/description/Foreign-Exchange-treasury-operations-rates

[@m24recordertrading54]

@Bankers 🏦 Cafe sir , I am selling onion from Maharashtra to Bengal Buyer is giving 50% advance and 50% after reaching to his home. He is telling me to sign agreement that we both will have to give some security Can inland LC work in two states

[@spattankudishwetha]

What is SFMS ?

[@ShuddhDesiBanking]

Structured Financial Messaging System

[@binodkumarsingh4504]

We have one Question on Calculation on LC Limit. Annual Imports 2200 Lacs ,Fixed Cost Rs 70 Lacs ,Insurance 30 Lacs,Custom Duty Rs 200 Lacs ,Lead Time 2 months,Usance months Please Calculate No of LC required, LC Frequency and LC Limit. Please give solution

[@ShuddhDesiBanking]

Annual imports 2200 lacs. Monthly imports 2200/12 = Rs 183.33 lacs. Lead time 2 months, Usance not provided. Therefore LC limit requirement 183.33 X 2 = Rs 366.66 Lacs No of LC required 2200/183.33= 7 (approx) LC frequency 12 months/7 months = 51 days (approx)

[@binodkumarsingh4504]

@@ShuddhDesiBanking Thanks a lot Sir.Sir Please make a Video on Assessment of LC and BG

[@mariya3149]

@@ShuddhDesiBanking y

[@AJ-ll9kz]

Lc toh non fund hai toh payment ka flow kyu ayega ?

[@rudraprasad25]

Non fund because bank does not advances any fund to the customer.

[@chriscyril785]

The negotiation proceeds will be credited to seller only after confirmation from the Lc issuing bank, u need to modify ur video

[@guulamrasool1368]

Noman zafar Roll no. 65095 BBA 8th eve B

[@prashantsaxena2430]

Exemplary Explanation

[@ShuddhDesiBanking]

Thank you so much :)