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What is a Letter of Credit - Trade finance India

A documentary letter of credit, also referred to as “letter of credit or simply LC’, is an Irrevocable, written undertaking by a commercial bank, issued at the request of the buyer (Applicant) in favor of the seller (beneficiary), to the effect that payment for certain goods or services will be made against a complying presentation of documents.

Article 2 of UCP 600 defines a (letter of) credit as, “Any arrangement, however named or described, that’s irrevocable and thereby constitutes a particular undertaking of the issuing bank to honor a complying presentation’.

Note that an LC issued under UCP 600, by its very definition, is an irrevocable instrument from its very inception. If issued under UCP 600, this fact needn’t be (re)stated on the face of the credit.

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