Letter of credit business of Nepal Investment bank Ltd.

Abstract

At present, the trade / business is not confined to one country and has expanded internationally. In international trade there arises problem of distance and unfamiliarity between the parties’ viz. importer and exporter. On one hand, there is no guarantee between them that importer will send good after receiving payment while on the other hand there is no guarantee that importer will make payment after receiving goods. By any chance, even without intention, if the importer fails to pay the bill, the exporter will find it next to impossible to recover the amount. Moreover when the goods are imported from another country there arises the problem such as hazard of journey as well as cost involved in it, customs formalities and import / export as well as exchange control regulations. Hence as the answer to the entire above mentioned problem, the Letter of Credit (L/C) came into existence as a concrete solution whereby the Bank takes the responsibility to fulfill the requirement of both the parties and acts as a middleman. LC is the most important financial instrument in today’s world of international trade and it is unimaginable to carry out foreign trade without using LC. The present study regarding the Letter of Credit operations is concerned with the study of Nepal Investment Bank Ltd. (NIBL). The study has been conducted to present the L/C business of NIBL where all the aspects involved in the process of Letter of Credit transactions. The objective of the study can also be meant to familiarize about the LC to the general public as well as the people who are involved in the international trade. Moreover to come up with the findings, conclusions regarding the performance of L/C business of NIBL and to provide the suggestions and guidelines which will be beneficial for the Co. as well as to other banks in order to improve its performance for the benefit of the organization thereby uplift the economy of the nation.