Why most of the Indian suppliers prefer to accept Telegraphic transfer as the payment method over Letter of Credit?
Hope to receive your replies.
Thanks and Best Regards,
R.C.Sukhtankar
1) If documents are not correct your money will held.
2) Some times buyers don't have sufficiet fund.
3) LC is not as safe for transaction as TT.
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There are so many reasons as Bharat mentioned. Some additional info
1. The sellers are not well informed about procedures and shy
2. They do not have bank facilities /credit limit
3. The volume could be small and prohibitive for L/C expenses
4. The buyer country or buyer's credit may be not very high to risk.
As far I know, we Indians accept L/C whenever it is workable.Many of my friends exporting rice, spices and other containersied items mainly do it on * basis, a more riskier term than L/C.
1. The transaction value justifies the cost of the L/C transaction.
2. The L/C opening Bank is a a relaible and reputed one.
2. The Letter of Credit is 100% Confirmed at Sight.
For small transaction values, TT is a preferred payment instrument becuase of the ease and cost of the transaction.
Hope this helps.
GNN India
Simply because
1) L/C has more transaction costs.
2) there is often a misinterpretation of the terms due to spelling mistakes.
3) there is delay in payment.
4) correction or amendment charges are very high and often cause inordinate delays.
Quoting from [essar53]:
Dear Friends,
Why most of the Indian suppliers prefer to accept Telegraphic transfer as the payment method over Letter of Credit?
Hope to receive your replies.
Thanks and Best Regards,
R.C.Sukhtankar
Letter of Credit (L/C) is the most reliable mode of payment when it comes to export transaction subject to few conditions - L/C has to be irrevocable & 100% at sight, 100% accuracy of paperwork (shipping documents which have to be sent to the bank for negotiation) as each discrepancy may lead to deduction of few dollars say USD50 or more. Therefore, the best way to avoid this is to send a proforma of the L/C with the terms and conditions as mutually agreed between the buyer and seller- e.g. Payment Terms, Last date of shipment, Date of expiry of L/C, place of expiry of L/C, Port of Loading (preferably to be mentioned as "any Indian Port" i/o any specific port and to check the unit of commodity and price per unit, and to agree upon a reliable Bank which will be issuing the L/C. Once the buyer approves the proforma of L/C sent by the seller, they can go ahead to open the L/C. This way the seller is prepared to meet all conditions of L/C. As for the paperwork please do not be scared as it is very much possible to eliminate any error by checking the documents time and again and by developing a very good rapport with the L/C Negotiating Bank so that when the Bank Personnel comes across any error, they immediately inform seller, giving them a chance to rectify the document before they forward the same to the L/C issuing bank. Hope these tips will be of some use to you.
Thank you very much,Mr.Chakraborty.
Thanks and Best Regards,
R.C.Sukhtankar