Letters of credit are assurances or guarantees to sellers that they will be paid for a large transaction. They are particularly common in international or foreign exchanges. Think of them as a Letter of credit discounting occurs when your bank offers to advance you the letter of credit payment before you have completed the steps needed to present the sales and shipping documents. It is Bank Guarantee vs Letter of Credit - Key Difference. Bank Guarantee is given by the bank to the beneficiary in case there is a default in payment by a borrower. LC is a financial document for assured payment. 3 Parties namely the issuer, banker, and the beneficiary (third party). The issuing bank evaluates the applicant’s creditworthiness and then extends a standby letter of credit as a payment guarantee assuming full responsibility for the on-time payment to the seller. Nevertheless, both seller and buyer must fulfill the terms and conditions specified in the trade agreement to avail of the guarantee. bank concerned or unless otherwise instructed by the L/C opener. In any case, clear cut instructions as mentioned below are to be given to the advising bank. LC to be advised without adding its confirmation. LC to be advised after adding its confirmation. Authorised to add confirmation if required by the beneficiary. The first one is known as a commercial letter of credit. It involves a payment which is made directly wherein the bank that issues the letter of credit will need to pay the seller or the beneficiary. The second kind of letter of credit is known as a standby letter of credit where a secondary payment is made. The National Commercial Bank - A Saudi Joint Stock Company - Paid Up Capital SR 30,000 Million - C.R. 4030001588 - www.alahli.com - Value Tax Number 300002471110003 Date DD MM YYYY LC For Service Goods For Bank Use only Facility ID LC No. LC Type Transferable LC Revolving LC. Standby LC The full form of SLR is Statutory Liquidity Ratio. SLR is defined as the minimum liquidity percentage that every bank has to maintain with them in order to discharge their liability as and when occurs. This liquidity can be maintained in the form of cash, gold, and other liquid assets. SLR is the amount that commercial banks need to maintain App Vay Tiền.

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