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Home > Corporate > Non-Fund Based assistance > Letter of credit

Letter of credit - IDBI Bank Letter of Credit Services (LC)



Documentary Credits, more commonly known as letters of credit are a widely used method to effect payments in domestic and international trade. A written undertaking is issued by a bank (usually referred to as the issuing bank) on the instructions of the buyer of goods to the seller. The use of documentary credits provides enough safeguards for the parties involved. The seller is ensured payment, provided he complies with terms he agreed to while the buyer can include all terms and conditions within the documentary credits that satisfy him on the quality and quantity of the goods without having to sight / inspect the goods themselves. Since banks act as trustworthy third parties/ intermediaries, the issues relating to trust between the buyer and the seller are taken care of.

Documentary Credits can be either sight or usance depending on whether credit period is extended to the buyer by the seller.
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