A letter of credit is a guarantee issued by the importer’s bank that it will honour up to a
certain amount of export hills to the bank of the exporter. Letter of credit is the most appropriate , and secure method of payment adopted to settle international transactions.
The exporter needs this letter to insure against the non-payment of dues by the importer in the . foreign country as there is always a risk in the collection of payment from the importers. Thus, in order to protect the exporter from financial loss ‘Letter of Credit’ is needed.