Assessment of Inland

LC
Credit Management in Practice
Submitted by: Group 8
Shashi
Prabha
(P301414CMG461)
Adarsh (P301414CMG4 )
Sujit
Kumar
jena
(P301414CMG4 )
Apporva (P301414CMG4 )

Agenda
Introduction
Types of LC
Parties in LC
Assessment of LC Limit
Assessment DA LC Limit
Assessment of DA LC with EOQ

Introduction

Letter Of credit

A written instrument issued by a banker at the

request of a Buyer(applicant) in the favor of the
seller(beneficiary) undertaking to honor the
documents in accordance with the terms and
condition specified in the credit, within a specified
time

Types Of Letter of Credit

Inland/Foreign LC
Sight/Usance LC
Revocable LC
Irrevocable LC
Back to back
Confirmed LC
Red Clause LC
Green Clause LC
Revolving LC
Standby LC

Parties in Letter of credit

Applicant
Beneficiary
Issuing Bank
Advising Bank
Confirming Bank
Negotiating Bank
Accepting Bank
Reimbursing Bank

Assessment of LC Limit
Term of LC(DA/DP)
II. Average Amount of LC
III. Periodicity of supply by the seller
IV. Credit period available
V. Lead Time
VI. LC outstanding at particular time
VII. Min level of stocks to be kept at all times
VIII.Storage facility
IX. Quota Allotment
X. Min size of each consignment
XI. Freight cost, Insurance Charges
XII. CIF value of goods
XIII.Adherence to FEMA<RBI & UCPDC guidelines
I.

DA/DP Calculation
DP LC Limit Assessment
Total Annual Purchase of Raw Material(RM)
Purchases Under LC(50%)
Import Purchases Under LC(50%)
Lead Time(Months)
Monthly purchase of Indigenous RM(24001200)/12(A)
Inland LC requirement i.e (A* Lead Time)
DA LC Limit Assessment

100
Rs. In200
Thousands

Total Annual Purchase of Raw Material(RM)

4800

Purchases Under LC(50%)

2400

Import Purchases Under LC(50%)

1200

Lead Time(Months)
Monthly purchase of Indigineous RM(24001200)/12(A)
Usance Period (B)in months
Inland LC requirement i.e (A* (Lead Time+B))

Rs. In
Thousands
48 00
2400
1200
2

2
100
2
400

DA LC Assessment with EOQ

DA LC Limit Assessment with Economic order
Quantity
(A)Total Annual Purchase of Raw Material(RM)
(B) Minimum Order Level (EOQ)
Lead Time(Months)
Usance Available(Months)

2400
600
1

(C)Total Lead Time+Usance

6
7

(D)No. of LC to be opened(A/B)

(E)Frequency of LCs(12/D)

LC outstanding at any point of (C/E)

Rounding off to nearest Digit
LC Limit(2*600)

Rs. In
Thousands

2.33
2
1200

THANK YOU