Question

Describe a letter of credit for international agreements.

min 80 words

Answer 1

Letter of credit is most commonly used payment medium between two parties involved in trade and they involve their respective banks as well. There are two types of banks involved in the transaction:

1) Issuing Bank ( From Buyer's side)
2) Confirming Bank (From Seller's side)

The seller ships the goods to the buyer and shows relevant documents of quantity shipped to the issuing bank which then releases the money to the confirming bank which again checks the relevant docs related to letter of credit and finally releases money to the seller.
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