Importance of prime bankingCheck Authenticity of LC
The least familiarity with export and import can be enough to depict the importance of a Letter of Credit. Many people are not aware of the functionality of LC, the letter of credit is a guarantee from a bank. The role of LC is to ensure that the buyer makes the payment to the seller. Another important significance would be to ensure that the payment is received within the allotted time. In the case of inability of the buyer to make the full payment, the bank will be liable to make the remaining (or full) payment of the purchase, as per the Letter of Credit.
Here, the article will help you understand the role of prime banker in Letter of Credit. We will share insights on Prime Banker, how to check the authenticity of Letter of Credit, and the importance of Prime Banker in Letter of Credit.
If a buyer opens the LC against the sale of the exported goods, then it is the best scenario for the manufacturer, since the seller will get a guaranteed payment (either from the buyer/importer or from the bank). This is why it is recommended that the exporter should check whether there is an involvement of the Letter of Credit.
However, there has been a question, are Letters of Credit safe? The question itself on the reliability of the Letters of Credit speaks that all LCs are not safe! If your buyer agrees with opening an LC, you should always ask the buyer to open the Letter of Credit with a Prime Banker! As a seller, it is important for you to save yourself from any monetary harm.
Who is Prime Banker?
According to the liabilities and assets of every single bank across the globe, based on their yearly financial report, a list of prime bankers is separated out by the authorities. The prime banks are primarily known for their financial stability with a reputation of serving people with the finest services for some time. The information of Prime Bankers is globally available and can be acquired with the help of any chief reputed banks. This data can be obtained from your bank.
Everything described above conveys the fact that opening Letter of Credit with Prime Bank is way safer! Now, the next thing to be considered is checking the authenticity of the Letter of Credit.
How to Check the Authenticity of Letter of Credit?
Checking the authenticity of the LC is highly recommended since an unchecked LC can be lethal for the business. Since letter of credit witnessed a lot of fraudulent activities. For instance, somebody can show you that he/she has opened a Letter of credit; but it can be opened from a co-operative society!
Countless banks are there across the globe at the moment. And after the internationalization of trading, the number of banks and financial organizations are growing at a rapid rate! Along with the huge upsurge in the introduction of financial organizations, the restrictions have been diminished within the perimeter of the country. The most shocking fact is some of the financial organizations work without any government regulations! They are called ‘banks’ but they act under the Societies Registration Act.
To check the authenticity of Letter of Credit, anyone can approach the bank with a copy of the Letter of Credit, received by the importer/buyer. Then it can be made clear whether the Letter of Credit has been opened by a prime bank or such an unreliable organization.
Importance of Prime Banker in Letter of Credit
The role of prime banker in Letter of Credit is undeniable. But you should know the exact reasons to associate with a prime banker.
Better Financial Stability
- The primary reason for choosing a prime bank over the other is quite simple – the financial stability of prime banks is way better than others. So, there’s no chance that your payment will remain unpaid.
- Prime Banks work with the standard regulations and norms of banks, which make them more professional than any other organization. When it comes to export and import, one should always go with professionals.
Goes with International Trade Norms
- Since the Prime banks go with international trade norms, they can't violate or influence the rules. So, it makes the banks extremely reliable when it comes to monetary safety.
Open Letter of Credit with Prime Banker
As described above, the Letter of Credit is the guarantee of payment for the exporter. But the letter may not work as per the expectations when opened with some random bank other than prime banks. Now, you know the role of Prime Banker in Letter of Credit and how to check the authenticity of Letter of Credit. So, make an informed decision that goes in your favour.