What is Irrevocable Letter of Credit (L.C) what type of documents are required for submitting Letter of Credit Application
Irrevocable Letter of Credit
A Letter of Credit (LC) is a document issued by your bank that essentially acts as an irrevocable guarantee of payment to a beneficiary. This means that if you do not perform your obligations, your bank pays. The letter of credit can also be the source of repayment of the transaction meaning that the exporter will get paid with the redemption of the letter of credit.
A letter of credit, valid for a stated period of time, that may be cancelled or amended only by agreement of all parties to the credit. The issuing bank waives its right to revoke a letter of credit prior to the expiration date, unless the consent of the beneficiary is obtained. Fitch, Thomas P., Barron's Business Guides Dictionary of Banking Terms, 3rd Edition, ©1997, page 250. As with any letter of credit, the wording of this letter is dictated by the ICC rules for Uniform Customs and Practice for Documentary Credits (1993 revised).
As the payment against this Irrevocable Letter of Credit is guaranteed by the issuing bank and the holder of this Irrevocable Letter of Credit (seller) can borrow short term finance from any other bank or lending institution at a very low rate of interest and within a very short time.