Understanding the Role of an Advising Bank

 An advising bank is essentially a middleman in international trade transactions.

Breakdown of the Sentence:

  • Advising bank: This is the bank that acts as an intermediary between the issuing bank and the beneficiary (usually the exporter).
  • Advises the credit: The advising bank informs the beneficiary about the terms and conditions of the letter of credit (LC) issued by the issuing bank. This includes details such as the amount, expiry date, required documents, shipping terms, etc.
  • At the request of the issuing bank: The issuing bank, which is the buyer's bank, requests the advising bank (usually the seller's bank) to inform the seller about the LC.

In simple terms:

The issuing bank (buyer's bank) asks the advising bank (seller's bank) to tell the seller (exporter) about the payment terms and conditions specified in the letter of credit.

Key role of the advising bank:

  • Verifies the authenticity of the LC.
  • Communicates the LC terms to the beneficiary.
  • May negotiate documents on behalf of the beneficiary (depending on the agreement).

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