LETTER of credit is a non fund based banking advance in which branch acts as a advisor or confirming position. Importers and Exporters are usually unknown to each other. In such cases they bring banking channel in between. A letter of credit is a commitment from the bank that they will pay the DUES of the IMPORTER/exporter in case the payment fails or goods received are not of the same quality as agreed upon. All Transactions are DONE between . 

Exporter >> Exporter Bank >>>> Importer Bank >>> Importer 

Letter of credit is a non fund based banking advance in which branch acts as a advisor or confirming position. Importers and Exporters are usually unknown to each other. In such cases they bring banking channel in between. A letter of credit is a commitment from the bank that they will pay the dues of the importer/exporter in case the payment fails or goods received are not of the same quality as agreed upon. All Transactions are done between . 

Exporter >> Exporter Bank >>>> Importer Bank >>> Importer