Before getting LC, Buyer/ Supplier ( as the case may be) shares basic details of trade with to get quote for LCBD (LC Backed Bill discounting).
Selection and acceptance of LC discounting rate and bank by the Client.
Basic credit information, KYC, details of counterparties, LC issuing banks and client business background and any additional information that might be specifically required from client.
One-time approvals are generally needed from LC discounting Bank. For each transaction, the financing bank's details (and clauses if any) will need to be incorporated into the LC. It is strongly advised to pre-discuss each transaction to avoid issues later.
Frequently asked questions
Domestic LC Discounting
What is the criteria for domestic LC Discounting?
The bills should be drawn under irrevocable Letter of Credits issued by a Commercial Bank India.
The Bills drawn are in strict conformity with the terms of the LC.
LC must have Usance period. (At sight LC cannot get discounted).
Bills of exchange should have arose out of bonafide commercial or trade transactions.
Documents required for Domestic LC Discounting?
- Letter of credit
Bill of exchange
Receipted Challan being proof of delivery of goods
Documents of title to goods evidencing dispatch of goods (RR/ LR/ E way bill, shipping documents)
Any other relevant documents as per the terms of LC
The bills should get accepted by the drawee through their bankers
Interest and brokerage for the usance period, actual postage and handling charges will also be collected.
Tenure of Domestic LC Discounting
Tenure is upto 180 days
What is the risk involved?
Funding comes with its own associated risk . Since it is LC backed funding, applicant bank guarantees the payment to the funding done by negotiating bank . However, we have taken several steps to mitigate the risk – both strategically and operationally.