Letters of credit

Documentary letter of credit is an obligation of a bank that opened a letter of credit, to pay to the seller, on behalf of the buyer, the amount provided by the letter of credit once the seller has provided documents within the specified period that meet the terms of the letter of credit and confirm the shipment of goods (provision of services).

Documentary letters of credit are a reliable and flexible payment instrument and are widely used in international settlements worldwide.

PJSC "MTB" provides the following types of letters of credit:

• Covered - the cash cover for payment under the letter of credit is blocked in the emitting bank (the one, which opened the letter of credit) on a separate account.
• Uncovered - the bank's obligations under the letter of credit are covered by a cover different from the monetary.
• Confirmed - the obligation of payment under the letter of credit in relation to the seller other than the emitting bank is taken by the confirming bank;
• Unconfirmed - only the obligation of the emitting bank is valid.
• Transferable - the letter of credit is opened in favor of the Seller, who, as a rule, is an intermediary and gives instructions to his bank, which received the letter of credit, to transfer these obligations to the producer of goods.
• Reserve - bank's obligation to pay the customer if the contractual obligations are not fulfilled

Advantages

• Low cost of letter of credit
• maximal reduction of time between the moment of shipment of goods (provision of services) and receipt of revenue, as the seller receives money in the shortest period after the shipment of goods and provision of documents under the letter of credit;
• minimization of risk of non-payment for the sold product, because the payment is guaranteed by the bank, and not by the buyer;
• high payment guarantee;
• reliability of payment execution, ensured by the bank's control over the fulfillment of the terms of the transaction;
• working capital is not distracted from business;
• possibility to obtain a short-term financing;
• possibility to increase volumes of deliveries and promotion of goods (services) to new markets;

Conditions:

• An obligatory condition for issuing a letter of credit is the conclusion of the agreement, which determines the procedure for issuing a letter of credit, the terms of payment and mutual responsibility of the parties.
• All letters of credit opened by the Bank are subject to the Uniform Rules and Customs for Documentary Letters of Credit, publication No. 600 of the International Chamber of Commerce, Paris, edition 2007. 

Specialists of the bank will consult you on all issues related to the execution of the agreement and assistance of letters of credit.