1) The document is a study on the impact of letters of credit on customer satisfaction among traders in Navi Mumbai, India. It analyzes primary and secondary data collected through questionnaires. 2) The results found that traders highly ranked letters of credit as the most satisfactory payment method compared to other options like open accounts or checks. Traders reported high levels of satisfaction with letters of credit. 3) The study tested hypotheses about letters of credit usage and impact on trading sectors and customer satisfaction in Navi Mumbai. Statistical analysis found the hypotheses confirming high usage and impact on trading and customer satisfaction.

1. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 6, June (2015), pp. 01-06 © IAEME
1
IMPACT OF LETTER OF CREDIT ON CUSTOMER
SATISFACTION
(A Study on Letter of Credit with Respect To Satisfaction of Tradesmen, Navi Mumbai)
MangeshJadhav1
, Alpha Lokhande2
1,2
Asst Prof. DY Patil School of Management, Belapur, Navi Mumbai
ABSTRACT
To overcome business of overseas opponentsit has become mandate for every individual
engaged businessof trade on the global frontiers to offer lucrative mode of payment to consumers.
Receiving timely and total payment is a definite objective behind trade.Choosing the relevant mode
of payment by mitigating risk and delivering the goods in healthy condition is win –win situation for
both the participants engaged in trade. Letter of credit is amongst the one which is most acceptable
and protected tool to carry out the overseas and domestic trade. Letter of credit is promissory note
delivered by the bank to the individual receiving the goods on behalf of the sender. In other words
letter of credit reflects the trustworthinessof the individual making the payment hereinafter the
receipt of the goods. It can also be stated that letter of credit is contrivance to win trust of the
supplier. Moreover centering on the banks perspective it gets the charges from the individual for
whom it stands as anassurity. The study reveals the perception of consumers towards the letter of
credit. Applying the suitable statistical tools it has been observed that consumers are highly satisfied
with the services like letter of credit by the banks. The consumers also accepts it as one of the
secured tool to carry out the trade.
Key words: Letter of Credit, Advising Bank, Issuing Bank
INTRODUCTION
Letter of credit is a credential providing security to the purchaser. It is a proposed covenant
delivered by the consumersbank which takes the responsibility of the consumer for the payment of
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2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 6, June (2015), pp. 01-06 © IAEME
2
the goods received. The letter of credit is not identical to sales agreement. Where in banks of both
the parties are not liable for payments if the proposed agreement turns void.
The banks responsibility starts thereinafter the acceptance of proposed terms and conditions
mentioned in the letter of credit by the exporter.Letter of credit is easily accessible for single
businessdeal for the stipulated period of time. However it can be availed for the upcoming trade
proposals.The termination and amendment cannot be carried out without the prior consent of all the
entities affianced in proposed agreement of trade.
LITERATURE REVIEW
Harfield describes LOC as a contractual agreement between banks on behalf of its customers.
It is a written commitment of the supplier of goods or services to pay certain financial amount. The
terms and conditions are provided in the Letter of Credit
Wiley stated LOC being a four- party undertaking. In which a farmer, agent or business
correspondent ordered payment at another place or at fair to a specified person in order to settle an
exchange between the sender of the “letter” and a person named in it.
OBJECTIVES OF THE STUDY
To study the utility of Letter of credit (LOC) at Navi Mumbai.
To study theimpact of letter of credit in trading sector.
To study the impact of letter of credit on customer satisfaction at Navi Mumbai.
HYPOTHESIS
H01: The usage of letter of credit is not high at Navi Mumbai
HA1: The usage of letter of credit is high at Navi Mumbai
H02: There is no impact of letter of credit in trading sector at Navi Mumbai.
HA2: There is huge impact of letter of credit in trading sector at Navi Mumbai.
H03: There is no impact on customer satisfaction with respect to letter of credit at Navi Mumbai.
HA3: There is huge impact on customer satisfaction with respect to letter of credit at Navi Mumbai.
METHODOLOGY
Primary Data: The data used of Navi Mumbai, The population of the consumers availing letter of
credit is 500. 10 percent of the target population ie.50 wasadministered, which was corroborate by
using sample size formula. Duly filled fifty questionnaires were returned.
Secondary Data: The data was collected from Indian bankers association and Merchants
Association of Navi Mumbai through questionnaire and schedule.

3. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 6, June (2015), pp. 01-06 © IAEME
3
DATA ANALYSIS
Table No: 1
Count Column N %
Education Graduation 20 40.0%
Post-Graduation 14 28.0%
Technical Education 16 32.0%
Total 50 100.0%
MS Married 23 46.0%
Unmarried 22 44.0%
Separated 5 10.0%
Total 50 100.0%
Age Below 30 10 20.0%
31 – 40 14 28.0%
41 – 50 15 30.0%
51 – 60 11 22.0%
Total 50 100.0%
Source: Data Collected
Table no: 2
Mean SD
Ranking on the
basis of mean
Consignment 2.36 1.01 10
Open Account 4.04 0.7 2
Government Guaranteed export working capital loan 4.02 0.74 3
Letter of Credit 4.06 0.62 1
Cash-in-Advance 4.04 0.64 2
Wire Transfer 3.6 0.93 7
Export working capital Financing 3.34 0.98 9
Documentary Collections 3.54 0.93 8
Credit Card 3.64 0.85 6
Payment by Check 3.96 0.7 4
Escrow Service 3.92 0.72 5
Satisfied with Letter of credit 3.64 0.8 6
Source: Data Collected
Table 3: Descriptive statistics with respect to Demographic Parameter
Satisfaction Level
Mean Standard Deviation
Education
Graduation 3.81 0.81
Post-Graduation 3.67 0.99
Technical Education 3.53 0.98
MS
Married 3.66 0.87
Unmarried 3.64 0.98
Separated 3.93 0.92
Age
Below 30 3.65 0.77
31 – 40 3.96 0.77
41 – 50 3.47 1.05
51 – 60 3.64 0.98
Source: Data Collected

4. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 6, June (2015), pp. 01-06 © IAEME
4
Table No: 4 ANOVA
Tests of Between-Subjects Effects
Dependent Variable: Satisfaction Level
Source
Type III Sum of
Squares df Mean Square F P-value
Corrected Model 201.301a
95 2.119 3.409 .000
Intercept 4101.706 1 4101.706 6599.204 .000
Attribute* 66.513 11 6.047 9.728 .000
Education .762 2 .381 .613 .542
MS* 17.410 2 8.705 14.005 .000
Age* 27.285 3 9.095 14.633 .000
Attribute * Education 9.529 22 .433 .697 .844
Attribute * MS 7.586 22 .345 .555 .951
Attribute * Age 13.608 33 .412 .663 .926
Error 313.259 504 .622
Total 8640.000 600
Corrected Total 514.560 599
a. R Squared = .391 (Adjusted R Squared = .276)
Interpretation
Since p-value for the Attribute, MS, Age is less than that of 0.05 indicates significant
difference between the mean satisfaction level with respect to Attribute, MS, Age. The observed
significant difference for satisfaction level for Attribute is irrespective of Education, Marital status
and Age.
Table no: 5
Education MS Age
Gradua
tion
PG
Technical
Education
Married Unmarried Separated
Below
30
31 –
40
41 – 50 51 – 60
Mean Mean Mean Mean Mean Mean Mean Mean Mean Mean
Consignment 2.70 1.93 2.31 2.30 2.55 1.80 2.90 2.57 1.80 2.36
Open Account 4.20 3.86 4.00 3.96 4.09 4.20 4.00 4.36 3.87 3.91
Government
Guaranteed export
working capital
loan
4.15 4.00 3.88 4.00 3.91 4.60 4.10 4.21 3.73 4.09
LOC 4.20 4.00 3.94 4.09 3.91 4.60 4.10 4.21 3.93 4.00
Cash-in-Advance 4.20 3.93 3.94 4.09 3.91 4.40 4.00 4.29 3.80 4.09
Wire Transfer 3.65 3.57 3.56 3.57 3.64 3.60 3.30 4.00 3.40 3.64
Export working
capital Financing
3.60 3.50 2.88 3.26 3.36 3.60 3.50 3.71 3.27 2.82
Documentary
Collections
3.60 3.64 3.37 3.43 3.50 4.20 3.20 4.00 3.40 3.45
Credit Card 3.80 3.57 3.50 3.61 3.64 3.80 3.70 3.93 3.40 3.55
Payment by Check 4.00 4.14 3.75 3.96 3.91 4.20 3.80 4.21 3.80 4.00
Escrow Service 3.95 4.14 3.69 3.91 3.86 4.20 3.70 4.21 3.80 3.91
Satisfied with LOC 3.65 3.79 3.50 3.78 3.41 4.00 3.50 3.86 3.40 3.82
Source: Data Collected

5. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 6, June (2015), pp. 01-06 © IAEME
5
Table No: 6. Knowledge against Demographic Parameter
Source: Data Collected
Table No.7 Chi-square test result
Value
Education Chi-square 7.958
Df 8
p-value .438a,b
MS Chi-square 10.410
Df 8
p-value .237a,b
Age Chi-square 13.339
Df 12
p-value .345a,b
Interpretation
Since p-value for all the comparison is greater than that of 0.05 indicates no significant
association between the Parameters and Knowledge.
RECOMMENDATIONS
The letter of credit is most widely used tool for the successful trade due the invention of
banks. The consumer should be facilitated with the services with the nominal amount of charges. The
consumer builds a trust on the seller as the banks being a legal entity takes the responsibility for
payment. Maximum number of banks should provide such services which enhances trade globally
and domestically. Consequently it will improve the financial stature of nation.
Education MS Age
Graduate Post-Graduate
Technical
Education
Married Unmarried Separated Below 30 31 – 40 41 – 50 51 – 60
Mean Mean Mean Mean Mean Mean Mean Mean Mean Mean
Consignment 2.70 1.93 2.31 2.30 2.55 1.80 2.90 2.57 1.80 2.36
Open Account 4.20 3.86 4.00 3.96 4.09 4.20 4.00 4.36 3.87 3.91
Government
Guaranteed export
working capital loan
4.15 4.00 3.88 4.00 3.91 4.60 4.10 4.21 3.73 4.09
Letter of Credit 4.20 4.00 3.94 4.09 3.91 4.60 4.10 4.21 3.93 4.00
Cash-in-Advance 4.20 3.93 3.94 4.09 3.91 4.40 4.00 4.29 3.80 4.09
Wire Transfer 3.65 3.57 3.56 3.57 3.64 3.60 3.30 4.00 3.40 3.64
Export working
capital Financing
3.60 3.50 2.88 3.26 3.36 3.60 3.50 3.71 3.27 2.82
Documentary
Collections
3.60 3.64 3.37 3.43 3.50 4.20 3.20 4.00 3.40 3.45
Credit Card 3.80 3.57 3.50 3.61 3.64 3.80 3.70 3.93 3.40 3.55
Payment by Check 4.00 4.14 3.75 3.96 3.91 4.20 3.80 4.21 3.80 4.00
Escrow Service 3.95 4.14 3.69 3.91 3.86 4.20 3.70 4.21 3.80 3.91
Satisfied with Letter
of credit
3.65 3.79 3.50 3.78 3.41 4.00 3.50 3.86 3.40 3.82

6. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 6, June (2015), pp. 01-06 © IAEME
6
CONCLUSION
The customer inclination towards letter of credit is high as compared to other tools of
payment used in trade finance. It is observed that the satisfaction is high among the consumers as
their respective banks stands as a guarantee between the two consignee. The satisfaction level is
subsequently low with the tools like Government Guaranteedexport working capital loan and
Documentary Collections
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