Usance Interest Over And Above The Value Of LC

Abhishek009 · Post by **Abhishek009** » Wed Aug 05, 2015 11:58 pm

I am often in receipt of request from parties where the terms of LC states that -

" Usance Interest will be borne over and above the value of LC "Suppose I issue an LC for $100 , usance Interest is $ 10 , now my total amount comes $ 110 .

The documents are in order and there is no discrepance on the part of beneficiary , now how much amount do I as a LC Issuing Bank supposed to pay in case of default due to non payment of bill on due date.

Is my liability restricted to $ 100 , if yes how can I safeguard my Bank's interest ? Can the Beneficiary's bank demand the interest amount ( over and above my LC value ) which the applicant has promised to pay under the LC ??

Plz clarify ?

picant · Post by **picant** » Sat Aug 08, 2015 5:45 pm

Hi Pal,

as p.e. the issuing bank stated that the freight will be paid, it must quantify the maximum amount, in order to book
correctly the credit risk.
In your case you me be aware of the maximun interests to pay, under a simple calculation. Maximum so minor amounts are possible too.

Ciao

shahriar · Post by **shahriar** » Sat Aug 22, 2015 3:23 pm

I have one question. Under what scenerio you are considrting non payment on maturity date and paying interest for that

hardy2175 · Post by **hardy2175** » Sat Aug 29, 2015 10:45 pm

The basic question is what is the liablity of the issuing bank.Is it just the principal amount or principal + interest.
The followup question to the above query is if ' all charges are on the applicant' and the charges are not clearly defined and one of the presenting banks/ negotiating bank demands excessive charges and the applicant does not pay then is it the liability of the issuing Bank.

This is a very important question . I would like to invite views on the matter .