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kaushal (w) (545 Points)

06 August 2008

wht is difference between devolvement of LC and expiry of LC ?

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3 Replies

Anil (1638 Points)
Replied 06 August 2008

I had posted a similar question to experts sometime back and it has remained unanswered . I am reproducing the question here again:

Recently I read that:

Study of Bank statment with its reconciliation with books of accounts gives an idea about "Incidence of devolving of LCs".

Please let me know the meaning of "Devolving of LC.s"

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Rishi Vyas (Internal Auditor) (189 Points)
Replied 12 August 2008

THERE ARE TWO LCS REVOLVING AND DEVOLVING

IF U ISSUED ME LC FOR 50000 AND I SENT MATERIAL FOR RS 10000 THEN REMAINING BAL IS 40000. NOW AGAIN I SENT YOU MATERIAL FOR 10000 THEN AMOUNT RAMAINING IS 30000. NOW IF YOU REMITTED FIRST 10000 THEN REMAINING BAL OF LC WOULD BE 40000 AGAIN.

SO LIKE THIS LC KEEPS ON REVOLVING .

JUST OPPOSITE IS THE DEVOLVEMENT OF LC THAT MEANS IT EXPIRES ATR SPECIFIED TRANSACTION.

IF THE LS HAS A VALIDITY DATE MENTIONED IN IT THEN THE LC GETS EXPIRES AFTER THAT DATE.

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VISWANIVAS (Retired Chief Manager PSB) (92 Points)
Replied 22 March 2011

The purchasor of LC is required to pay on due date the LC amount,so that the issuing bank pay the proceeds to the LC benefeciary ie., seller of goods. The purchaser usually maintains a Current Account and deposits all the sale proceeds of goods,so that on demand before due date bank can pay the LC amount to the LC benefeciary.In case the LC purchaser could not pay the LC amount, the banker debiting to a fund account pay the LC amount to the LC benefeciary. Then it is called as "LC devolved". Every LC has a defined time period within whcich it can be negotiated. If the LC is not negotiated within the defined period the LC is said to be expired.

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