letter of credit

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credit, letter of,

commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer. The document is called a circular letter of credit when it is not addressed to any particular correspondent. In effect, a letter of credit is a draftdraft,
in banking, order by one party to another party to pay a stated sum to the person or firm in whose favor the draft is made. It is similar in form to the ordinary bank check. Often the drawer and the drawee of a draft are the same person.
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, save that the amount is merely stated as a maximum not to be exceeded. Letters of credit, mainly used by travelers, greatly simplify nonlocal business transactions. Those who issue such letters are usually so well known that any bank will honor the letter upon proper identification. Travelers' checks are a modified form of a letter of credit. They are issued in coupons, upon whose face a value is usually expressed in terms of the currency of a particular country. In the United States they are issued by express companies and banks. Circular letters of credit require that each payment, as it is made, be endorsed by the firm making payment so that other banks may know how much of the total credit has been used.

letter of credit:

see credit, letter ofcredit, letter of,
commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer.
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References in periodicals archive ?
During the workshop, O'Brien briefed participants on the most effective steps of agreeing the terms and conditions of international trade documentary credit, and highlighted international standards, guidelines and case studies related to managing letters of credit.
uCaCertificate for Documentary Credit Specialists (CDCSA) - this is designed primarily for documentary letter of credit practitioners, those in banks and major exporters/ importers that depend on expertise in this specialist field.
These credit facilities are to provide bonding commitments and fund the working capital and capex requirements of the company's projects; 36 per cent of the facilities are funded under Murabaha modes of financing, whereas 64 per cent limits are for multi-purpose bonds and documentary credits.
The seminar provided a comprehensive overview of best practices when examining documents under commercial documentary credits and examined the obligations and challenges faced by parties involved in the examination of documents, as well as detailed analysis of the application of the newly updated ISBP.
6--Consent of the issuer or the designated person in assignment of revenues of the letter of credit in paragraphs (c) and (d) is of great importance in the domestic and international documentary credits. In many situations acquiring the issuers consent is always it is always recommended, in order to better guaranteeing the rights of the revenue for the assignee.
He added that rebar imports will further drain foreign reserves, which have already dropped from $36 billion (at the end of 2010) to the current level of $13.6, Consequently, banks are restricting their use of documentary credits to importing strategic food stuffs.
His documentary credits include The Wright Challenge, Secrets of Jamestown, The Patent Files and Timelab 2000, an acclaimed collection of 200 history minutes hosted by Sam Waterston.
Indian firms trading with China would benefit from settling in RMB documentary credits as China would offer greater discounts because it would not have to hedge against the USD.
This edition incorporates new editions of the INCOTERMS (International Commercial Terms) and Uniform Customs and Practice for Documentary Credits from the International Chamber of Commerce, and changes like the dropping of the 2003 amendments to the Uniform Commercial Code (UCC) Article 2 by the Uniform Law Commission and American Law Institute and the adoption of the 2001 revision of Article 1 by state legislatures.
However, since documentary credits involve relatively higher banking fees and more complex documentary procedures, this option is not always appropriate.
The banks also opened documentary credits for businessmen to save currency.