The full form of L C in banking is Letter of Credit.
Understanding Letter of Credit (LC)
A Letter of Credit (LC) is a vital financial instrument, especially in international trade. It acts as a guarantee of payment to the seller, provided they meet the specific terms and conditions outlined in the LC.
- Payment Security: An LC ensures that the seller receives payment from the buyer.
- Mitigating Risks: It helps reduce risks for both the buyer and the seller in a transaction. The Letter of Credit guarantees that the seller will receive payment from the buyer, as long as the seller fulfils the agreed-upon terms and conditions.
In essence, a Letter of Credit provides a secure and reliable way to facilitate trade, particularly across international borders.
