What do you mean by issuing letter of credit? Explain.

1.	What do you mean by issuing letter of credit? Explain.
Answer» To issue Letter of Credit (L/C): A letter of credit is a document from a bank guaranteeing that the seller will receive full payment at specified time if all the delivery conditions are fulfilled by the seller. These letters are generally needed in international transactions where buyers and sellers are unknown to each other. The bank collects certain deposit or some guarantee of similar amount from the person before issuing such letter. The bank earns commission by providing this service.

Answer»

To issue Letter of Credit (L/C):

A letter of credit is a document from a bank guaranteeing that the seller will receive full payment at specified time if all the delivery conditions are fulfilled by the seller. These letters are generally needed in international transactions where buyers and sellers are unknown to each other.
The bank collects certain deposit or some guarantee of similar amount from the person before issuing such letter. The bank earns commission by providing this service.

Discussion