Introduction

Letter of Credit (LC) is a documentary credit or banker's commercial credit issued by the credit-worthy bank to an exporter. It is widely used in international trade to secure the exporter about financial guarantees. A letter of credit is used if both the buyer and seller have agreed to use it as a tool of payment after the sales contract has been negotiated. The applicant will ask the bank for the letter of credit and the bank will use the letter of credit to the seller on behalf of the buyer.

Frequently Asked Questions about Letter of Credit in Nepal

1. What are the types of LC in Nepal?

• The types of LCs are mainly international and local.

2. What is the LC period in Nepal?

• The period of LC varies from 30 days to 120 days.

3. Which financial institutions issue LC in Nepal?

• All the Commercial banks of Nepal issue LC on behalf of sellers in Nepal.

4. What are the documents required for issuing LC in Nepal?

• First of all, the customer must fill out the BI.BI.NI Form No. 3 and the following other documents are required for issuing LC:

1. Performa Invoice or Sales Contract
2. The Harmonic Code of the product
3. Certificate of Origin
4. Certificate of Analysis
5. Transport Documents (Bill of Loading/ Airway bill/ Road Consignment bill)
6. Insurance Policy

5 What are the documents required for the first time for issuing LC?

• If the customer is applying for the first time, the bank requires the following documents:

1. Firm/ Company Registration Certificate
2. PAN Certificate
3. Board Minutes
4. Memorandum of Association
5. Articles of Association
6. Citizenship
7. Latest Tax Clearance Certificate

6 What are the fees for issuing LC?

• The fees charged by the banks may vary.

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