The letter of credit is a request made by the issuing bank to its correspondent or agent making the request on demand on any draft on the issuing bank up to the amount mentioned in the letter of credit. A letter of credit remain enforced for a fixed date only. They are issued only to the persons who furnish guarantee or securities or make payment of the full amount there in. The L.C’s are of great significance in international trade. Specially the importers and exporters frequently use them. It saves from the trouble of carrying money from place to place with the risk of loss or theft.
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