Best Trade Solution

Dear All,

''If it is a confirmed letter of credit, draft must be drawn on confirming bank''

Is there any reason behind it.

Regards,
Dinesh

Unless the LC is available by Acceptance, a draft is not a pre-requisite under a confirmed LC. However, assuming we are considering an Acceptance LC, if a confirming bank is involved, to invoke the confirming bank's obligation to honour a compliant presentation, it would not make much sense to draw the draft on the issuing bank instead of the confirming bank. By drawing the draft onte confirming bank and obtaining its acceptance, the beneficiary receives protrection and assurance of payment both under the provisions of LC and also under the provisions of the relevant law of negotiuable instruments. Conversely, if a confirming bank has been requested to add confirmation, it will not allow for the draft to be drawn on any party other than itself (i.e the issuing bank), since if it allowed this to happen, the confirming bank would not be in a position to determine the maturity on presentation of documents to itself and would be dependent on establishing maturity date contingent on the acceptance of the draft by the issuing bank.

Dear Abrar,
Thanks.

Regards
Dinesh