Need your help

It is not fraud to raise LC for local beneficiary in same city, provided if it is for genuine trade.

All those banks that had discounted the bills on the strength of LCs had gone to court to make the opening bank pay. It is understood that, big losses incurred by banks in these sham transactions. So there is a loss to the bank in these transaction.

As the bills discounted based on the strength of genine LCs is secured(Commercial transactions involved there is a commitment on the buyer to make payment) . Here the LC is bogus so it is not secured. 

 

Originally posted by : SEETHARAMAN
	It is not fraud to raise LC for local beneficiary in same city, provided if it is for genuine trade. All those banks that had discounted the bills on the strength of LCs had gone to court to make the opening bank pay. It is understood that, big losses incurred by banks in these sham transactions. So there is a loss to the bank in these transaction. As the bills discounted based on the strength of genine LCs is secured(Commercial transactions involved there is a commitment on the buyer to make payment) . Here the LC is bogus so it is not secured.

i want to know is it fraud or not:

The X company created LC based on PO in favour of Y company both companies are in same building.

Y company discounted the LC

X company and Y company have no relations on business wise

X company or Y company not sold or bought any goods till now

Banker debited margin money to X company of Rs.50 Lakhs

till now X company not paid LC amount to Bakner even after one year completed

the amount involved is 50 crores

the entry in X company is

XYZ company a/c   DR      50 crores

    To Other Libilities A/c          50 crores

is there any wrong in this case under law or not

need experts opinion

Many such incidents have come to the attention of bankers regarding defrauding the bank with such sham transaction using usance LC.

Issuing LC within the city is allowed but the parties involved should be genuine and so should the transaction. But here, the parties are taking advantage of some loophole and causing losses to the banks.

Originally posted by : Mihir
	Many such incidents have come to the attention of bankers regarding defrauding the bank with such sham transaction using usance LC. Issuing LC within the city is allowed but the parties involved should be genuine and so should the transaction. But here, the parties are taking advantage of some loophole and causing losses to the banks.

Sir,

is there any time limit for closure of LC after raising the LC?

Thanks

For LCs validity period will be there, unless extended the validity of LCs will expire on the end of validity period. 

Originally posted by : SEETHARAMAN
	For LCs validity period will be there, unless extended the validity of LCs will expire on the end of validity period.

Dear Sir,

Which documents to be procedued before bank for LC discouting and what are the bankers duties at that time

How it comes to know that if LC was discounted by seller(benificiary) with bank to the buyer ( LC raiser)

Thanks

You can't discount LC it is only bills can be discounted. Based on LC the banks will saction credit. You will not know that any borrowing against your LC unless the cocerned bank intimates to you.

For borrowing against LC you have to produce original LC, copy of order placed by the buyer on you and any other document required by the banker.  

Originally posted by : SEETHARAMAN
	You can't discount LC it is only bills can be discounted. Based on LC the banks will saction credit. You will not know that any borrowing against your LC unless the cocerned bank intimates to you. For borrowing against LC you have to produce original LC, copy of order placed by the buyer on you and any other document required by the banker.

Thank you very much sir, please don't mind sir  i have one more question, realy i do not have any practical experience in LC

is it necessary to produce any security by the benificiary(seller) to the bank for discouting the bill? or original LC is enough?

Thanks

For bill discounting you have to get sactioned that facility with limits based on credit review by bank for that some banks may insist on security.

Originally posted by : SEETHARAMAN
	For bill discounting you have to get sactioned that facility with limits based on credit review by bank for that some banks may insist on security.

Dear Sir,

Indian Nationalised banks giving loans indirectly for contesting as a memeber of parlament upto 100 crores but not giving loans to farmers even ten thousand after asking ten thousand questions

Originally posted by : Dharma

Dear Sir,

Is there any guidlines/rules/regulations etc  for letter of credit either from RBI or from any act

for banks/companies

thanks

Refer to the following master circular of Reseve Bank of India on Letters of Credit.

Master Circular- Guarantees, Co-Acceptances & Letters of Credit - UCBs

Please refer to our Master Circular UBD. BPD (PCB) MC. No. 4/09.27.000/2012-13 dated July 2, 2012 on the captioned subject (available at RBI website www.rbi.org.in). The enclosed Master Circular consolidates and updates all the instructions / guidelines on the subject issued upto June 30, 2013 as listed in the Appendix.