A Letter of Credit (LC) is an undertaking issued by the Bank (issuing Bank) for the account of the buyer (the applicant) to pay the beneficiary (seller), provided that the terms of the LC are complied with. It is used to facilitate importation/exportation of goods and services, and also facilitate local trade.
Sight Letters of Credit – Customers who deal in import business and are only able to get sight LCs from their suppliers. Here payment is done on presentation/sight of compliant documents.
Usance Letters of Credit – Customers who deal in import business and are able to arrange for supplier credit can be offered Usance Letters of Credit instead of Sight Letters of Credit. Here payment is done at an agreed future date