What precautions to be taken by the Bankers while issuing of Letter of Credit to their existing clients?

Precautions to be taken by the Banks while issuing of Letter of Credit (LC) to it's existing clients are as under : The LC application cum agreement form is adequately stamped as per respective State Stamp Duty Act / Laws. The LC application is signed by an authorised signatory of the firm, company etc. The signature is to be verified by the processing officer to satisfy the genuineness. The LC application is complete in all respects with clear and consistent instructions which correspond to the conditions / provisions of accompanying contract/indent/licence. In case of any variance the importer customer should be asked to obtain necessary modifications. The beneficiary of the LC should not be importer himself or his nominee or his buying agent. Further, beneficiary should be either a manufacturer, supplier or shipper of the goods. Care should be taken with regard to method of payment where the beneficiary is in one country and shipment is authorised from a different country. The insurance policy / cover note provides coverage up to 110% of the invoice value, in the currency of invoice in the banks' name and covers risks under Institute Cargo Clause "A". If the import is covered under licence, the importer must submit Exchange Control copy of the same. The LCs to be advised through a bank specified by the opener provided we have prior arrangement with that bank. Ability of the Applicant to retire the import bills on due date / presentation and / or availability of funded facilities to meet his import payment obligations including payment duties and taxes. It must be ensured that the applicant will be in a position to clear the goods by payment of duties. Credit standing and capability of the supplier to ship the goods as per the requirements is to be assessed by the branches by obtaining a credit report from the overseas banker of the supplier / Credit rating agency for establishing import LCs of over specified limit. As the import LC is drawn in a freely convertible foreign currency, the importer is exposed to exchange risk.