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Advising Bank AND Confirming Bank: Prepared By:-Bhakti Thakkar

The advising bank advises the beneficiary of the letter of credit and acts as a correspondent to the issuing bank. It may or may not offer to negotiate documents or pay the beneficiary on behalf of the issuing bank. The confirming bank adds an undertaking to pay the beneficiary on behalf of the issuing bank if the documents presented conform to the letter of credit. The letter of credit process involves 9 steps including the buyer and seller agreeing to terms, the buyer applying for a letter of credit from the issuing bank, and the documents being checked by the advising and issuing banks before payment is made.

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80 views6 pages

Advising Bank AND Confirming Bank: Prepared By:-Bhakti Thakkar

The advising bank advises the beneficiary of the letter of credit and acts as a correspondent to the issuing bank. It may or may not offer to negotiate documents or pay the beneficiary on behalf of the issuing bank. The confirming bank adds an undertaking to pay the beneficiary on behalf of the issuing bank if the documents presented conform to the letter of credit. The letter of credit process involves 9 steps including the buyer and seller agreeing to terms, the buyer applying for a letter of credit from the issuing bank, and the documents being checked by the advising and issuing banks before payment is made.

Uploaded by

Miracle Boy Ravi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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ADVISING BANK AND CONFIRMING BANK

Prepared By :Bhakti Thakkar

ADVISING BANK
Advising bank advices the letter of credit to the beneficiary. Advising bank acts as correspondent to the issuing bank. The advising bank may or may not offer to negotiate document, accept to pay the beneficiary on behalf of issuing bank.

CONFIRMING BANK
Confirming bank adds/provides an undertaking to pay the beneficiary, on behalf of d issuing bank, provided the documents are presented for negotiation are in confirmity to the Letter of Credit.

9 Steps in the Letter of Credit Process

Buyer and seller agree to terms including means of transport, period of credit offered (if any), and latest date of shipment acceptable. Buyer applies to bank for issue of letter of credit. Bank will evaluate buyer's credit standing, and may require cash cover and/or reduction of other lending limits. Issuing bank issues LC, sending it to the Advising bank by airmail or electronic means such as telex or SWIFT. Advising bank establishes authenticity of the letter of credit using signature books or test codes, then informs seller (beneficiary). Seller should now check that LC matches commercial agreement and that all its terms and conditions can be satisfied. Seller ships the goods, then assembles the documents called for in the LC (invoice, transport document, etc.). The Advising bank checks the documents against the LC. If the documents are compliant, the bank pays the seller and forwards the documents to the Issuing bank. The Issuing bank now checks the documents itself. If they are in order, it reimburses the seller's bank immediately. The Issuing bank debits the buyer and releases the documents (including transport document), so the buyer can claim the goods from the carrier.

Functions of Advising bank and Confirming Bank


To take reasonable care to verify the authenticity of credits received and then accurately transmit them to their beneficiaries. On receipt of the documents for examination and payment, the advising bank will pay the seller only. if it has received good funds from the issuing bank, even if it was specifically named as paying bank in the letter of credit.

Issuance of a Letter of Credit

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