Letter of credit

Letter of credit

A letter of credit is an undertaking from the issuing bank to pay against a complying presentation in favour of the exporter. A letters of credit is a documentary payment form. The banks deal with the documentation and not the goods. The LC is subject to publication UCP 600 2007 Revision by the International Chamber of Commerce.

NORVIK BANKA offers its clients the opportunity to make payments using LCs:

For importers:

  • Issuing of LCs by order of our clients-importers to provide payment in favour of exporter
  • Issuing of LCs to the foreign correspondent banks with a request for confirmation in favour of the foreign suppliers (exporters)

For exporters:

  • Advising on LCs to our clients (exporters)
  • Confirmation of LCs issued by foreign banks, incl. Russian banks

For intermediaries:

  • Opening of transferable LCs
  • Transfer of LCs

What type of LC does the supplier require?

When in buying goods you have a concluded commercial contract providing for an LC to secure the payment, you should ask the bank to issue an irrevocable confirmed or unconfirmed LC.

What collateral can you offer to the bank?

Considering that LCs are credit instruments, the bank assesses the customer from a credit risk viewpoint. Therefore, the bank asks for cash cover; otherwise, the client can apply for the opening of the a credit line that can be secured by real estate, other assets of the company, third persons´ guarantees, etc.

LC opening

The client fills in a file_pdfDocumentary credit application and submits it with the copy of the commercial contract to the bank.

The application is examined. In the event of a positive decision, the LC is opened on a cover basis or on the account of the credit line facility.

Advising on LC

The bank advises on LCs to the customer without any liabilities on the bank´s part. Upon receiving of the LC the client (exporter) accepts the delivery according to the terms of the LC. The exporter submits the transport and other documents in strict conformance with the LC. The bank takes the documents, examines them and sends them by post to the issuing bank. The bank credits the exporter´s account with the proceeds received from the issuing bank.

Confirmation of export LC

Following the request of the issuing bank or the client, the bank may add its confirmation in addition to the obligations of the issuing bank. In this case, the exporter will accept the confirming bank´s, i.e. NORVIK BANKA´s, risk and will receive payment from it in compliance with the terms of the LC.

Discounting of LC

In the event that there is LC with a deferred payment an exporter may apply to NORVIK BANKA asking to discount the LC, i.e. to make payment against documents before the specified date. NORVIK BANKA examines the request and informs the client about the decision. In the event of a positive decision, the bank stipulates the terms of the discount including the discount rate.