Who is a prime banker? How to check authenticity of letter of credit (LC)?Why LC with a prime banker is safe
In this article I would like to enlighten exporters/sellers in handling Letter of Credit under their sale of export products. I would like to share my experience in handling Letter of Credit which I firmly believe, these information helps you for smooth handling of export import procedures and formalities.
Here, I would like to share information about Prime Banker, Checking of authenticity of LC, Importance of Prime Banker in Letter of Credit etc.
You as exporters are happy, if your buyer/importer opens a Letter of Credit against the sale of export of your goods. As you know, after advance payment, best terms are payment under Letter of Credit. So any exporter is happy, if his buyer opens a Letter of credit against his supply of export goods. Under a Letter of Credit, amount of sale of goods is guaranteed by buyer’s bank.
Now, let us discuss – Are all Letters of Credit are safe? Are Letters of credit issued by any type of banks reliable? No. If your buyer agrees to open a Letter of credit against your supply of goods, you need to insist your buyer to open Letter of Credit with a Prime Banker.
Who is a ‘prime banker’ ?
As per the details of assets and liabilities based on the annual financial report of
each bank all over the world, the authorities related to banking prepares prime bankers list. The prime banks are the banks that hold strong financial background with sound assets and have been serving people with best service. The prime banker’s data base are available with all major reputed banks all over world. You can check this data with your bank. Or your bank may help you to whom to be approached to get the said data.
So a Letter of Credit issued by a Prime Bank is safe for an exporter always.
My second tip to exporters while opening an LC is ‘check the authenticity of Letter of Credit (LC)’. What is meant by authenticity of Letter of Credit?
How to check authenticity of letter of credit (LC)?
I had a bitter experience during my career as Export Manager in an Export firm, about 15 years ago. My buyer has agreed to open Letter of Credit against my supply of export materials. He opened a letter of credit as per our export sale contract. However, once after receiving a copy by fax, I have sent my representative to check the authenticity of the Letter of Credit with my banker. Unfortunately, said Letter of Credit was opened with a co-operative society which they called as ‘Bank’. I do not want to mention the country name here, but please be alert on such fraudulent activities.
There are many banks all over world. Now days, after the introduction of globalization of trade, a number of banks and financial institutions have been introduced all over world with least restrictions within the country. Some of them have been working without any regulations by government also. These banks work under Society’s Registration Act, but name as “Bank”. As I have mentioned previously, you can approach your bank with the copy of letter of credit to verify the authenticity and check whether the said LC has been opened by a prime bank.
Why LC with a prime banker is safe?
The financial strength and reputation of prime banks among people are very high compared to other banks. So, the prime banks work professionally as per their standard banking norms. No individual or firm can influence to violate the banking rules and regulations especially the norms of international trade. This helps the clients globally to depend prime banks for smooth handling of export import business.
I have tried to explain the importance of opening a Letter of Credit with a Prime Bank, Checking of authenticity of a Letter of Credit and the importance of a Prime Bank for an exporter when opening Letter of Credit. I hope, I could satisfy you on these subjects about the tips to exporters when opening a Letter of Credit under export import of International Trade.
Would you like to add more information about opening an LC with a Prime Bank, checking authenticity of Letter of Credit or Importance of opening a Letter of Credit with a prime bank? Share your experience in handling Letter of Credit with a prime bank /non prime bank, checking authenticity of LC or other related issues about Letter of Credit as an Exporter.
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