Issuing of Documentary Credit (LC)

      Issuing of Documentary Credit or Letter of Credit (LC)

      The LC issuance process (Letter of Credit) is a formal procedure used in national and international trade to ensure payment between buyer and seller. Letter of credit is an undertaking of a bank on account of the importer to pay the exporter the value of the goods. The Bank promises to honor such undertaking provided the required documents are submitted and the terms and conditions of the credit are complied with.

      Advantages for the Buyer (Importer)

      • Assurance of Shipment: Seller must comply with LC terms to receive payment.

      • Controlled Payment Timing: Payment is made only when documents are presented as per LC.

      • Negotiable Terms: Buyer can set specific conditions for shipment and documentation.

      • Facilitates Trade with New Partners: Builds trust when dealing with unfamiliar sellers.

      • Helps in Foreign Exchange Management: Payment timing can be aligned with currency availability.

      How to Apply for LC:

      1. Establish a Sales Contract with the Seller. Agree with the exporter on the terms of sales, including payment via LC.

      2. Visit Kumari Bank Ltd. (Issuing Bank): Visit your nearest Kumari Bank Ltd. branch and consult a Relationship Manager. Request to open an LC in favor of the exporter.

      3. Bank Assesment: The bank will assess your creditworthiness and may require collateral or margin deposit as per the internal policy of the Bank.

      4. Submit Required Documents: Please provide the following documents:

      • LC Application Form (provide by the Bank) 

      • Proforma Invoice from the exporter

      • Import License (if applicable)
      • Company Registration Documents 
      • PAN/VAT Certificate
      • Board Resolution (for companies)
      • Insurance Policy (if required)
      • Other documents as per bank’s policy

      5. Specify Additional details in the Proforma Invoice

      Include additional details in the Proforma Invoice, indent, or contract paper with clear information of the type of LC, name of the goods, brand, model number, name of origin country, per unit cost, quantity, total cost, custom entry point in Nepal, shipment details, incoterms, mode of payment, harmonic code number, name, address, email ID, telephone number of both importer and exporter, and Exim code.

       

      6. Bi.Bi.Ni. Form No. 3 / Bi.Bi.Ni. Form No. 3 (Ga)

      Along with the LC application, an importer must fill up three copies of Bi.Bi.Ni Form No-3 (in case of Foreign Currency LC) or Bi.Bi.Ni. Form No. 3 (Ga) (in case of Indian Currency LC) and submit it to the applicant's bank, along with the other documents listed above.

      Application Procedures:

      Fill up the application form as follows: Forms are available in Kumari Bank Web site under Downloads-Trade Operations

      1. Submit the Applications forms along with other details documents as required by the Bank to the nearest branch of Kumari Bank Ltd.
      2. Alternately, Applicant can also fill up Online Application under Kumari Bank Website Trade Finance-Online Trade Portal.

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