Discounting of Letter of Credit is a short-term credit facility that is provided by the bank to the beneficiary. Bank purchases the documents or bills of the Seller (beneficiary) after he fulfills certain compliances and provides the required documents to be dispatched to LC opening bank.

1. LC Discounting Charges

2. LC Discounting Charges
Discounting of Letter of Credit Discounting Charges is a short-term credit facility that is provided by the
bank to the beneficiary. Bank purchases the documents or bills of the Seller (beneficiary) after he fulfills
certain compliances and provides the required documents to be dispatched to LC opening bank. Factors
like the relation between a buyer and a seller, economic conditions, nature of transactions, national and
international trade, etc. often decide the fate of trading. If there is discord among any of these factors,
traders are likely to incur a loss unless they have financial security like a Letter of Credit or LC
discounting to fall back on.
Types Of Letters of Credit:
In a broader sense, there are 5 types of Letters of Credit
Revocable:
It is an uncommon Letter of Credit as it can be changed or cancelled by a banking institution at any time
and for any reason. It cannot be transferred to a third party.
Irrevocable:
This Letter of Credit can only be changed or cancelled if all concerned parties agree to it. Typically, an
irrevocable Letter of Credit is more secure than revocable ones.

3. Transferable:
• A transferable Letter of Credit can be transferred from one beneficiary to another.
Such an LC is used when intermediaries partake in a transaction.
Confirmed:
When an advising financial institution trusted by the seller guarantees payment from
the buyer, a LC Discounting is confirmed. A confirmed irrevocable Letter of Credit is
more secure than an unconfirmed one as it is backed and guaranteed by both the
issuing and confirming bank.
Unconfirmed:
In the case when a letter of credit reaches the beneficiary with only the issuing bank's
payment undertaking, without any confirmation added by another financial institution
it is known as an unconfirmed letter of credit.
Besides these, other Letters of Credit include – standby Letter of Credit, revolving
Letter of Credit, and back-to-back Letter of Credit.