Discounting Without Draft Under LC
Posted: Sat Mar 05, 2016 3:25 pm
I have been talking to my bank about discounting my LC before acceptance. However, they have been declining my request since the LC does not call for draft even though the LC is available by negotiation. According to UCP 600, definition of negotiation is purchase by nominated bank of drafts... and/or documents under complying presentation.... My bank is telling me that they would only discount after acceptance. I checked with two other banks and one bank is willing and another is willing only with indemnity signed. I don't quite understand the risk with presentation of bill of exchange or not since the LC does not require this. The bank has been discounting my LCs on without recourse basis. Also why would issuing bank issue Usance Lc without draft? What is advantage for issuing bank to issue lc without draft? I understand issuing bank stated that they do not need to amend lc.
Hope you can explain to what is the potential risk for the bank to discount prior to acceptance without presentation of bank draft.
Hope you can explain to what is the potential risk for the bank to discount prior to acceptance without presentation of bank draft.