Reply To: How can a bank open a letter of credit for a client of a global trade finance co

[Adharsh]

You (the buyer) and your foreign supplier entered into a contract for the importing machinery for use in factory manufacturing. According to the terms of the agreement, the buyer must issue a Letter of Credit (LC). To create a Note of Credit, you can contact your bank. Your bank (or another opening bank) opens a letter of credit, and the machinery’s foreign vendor is the intended beneficiary. A credit note is a guarantee provided to your buyer’s bank by your banking partner (not you) on their behalf. According to the terms and circumstances stated in the letter of credit, the amount covered by the LC is transferred. You receive assistance from the bank’s concerned officer in completing out the relevant paperwork to open an LC.