Various types of L.C. are present in business system. Some recognized processes are
1) MASTER /MOTHER L.C
2) BACK TO BACK L.C
3) SIGHT L.C
(Note: in Bangladesh sight L. C OR irrevocable L / C is mainly used)
Ø In this trade initially cash money is not used. L. C is the main process for buying & selling. When a business deal is made for buying & selling between buyer & merchandiser then the buyer gives permission to his bank to open an L.C. of approx amount & send it to merchandiser’s bank. Then this bank informed to merchandiser that an L.C. is accepted. This L .C is called MASTER L.C.
Ø THEN MERCHANDISER takes decision about the manufacturer for collecting raw materials .when merchandiser choose supplier then he tell the supplier to send a pro-forma invoice. After getting p .I. merchandiser tell to his bank to open an L .C send to the supplier’s bank. This L. C is opened from mother L .C which is given to merchandiser. This L .C is called back to back or b to b L.C.
Ø When supplier sends the products to merchandiser, then he send a acceptance copy to his bank & a copy to the supplier. Then the supplier can able to get cash from his bank. At the same way merchandiser send the product to the buyer or after shipment he also able to get cash from bank. Shipment of goods is done by B.L (bill of leading).this system is called SIGHT L.C.SIGHT L.C. consists of MASTER & B TO B L.C[1]
