Red Clause and Green Clause Letter of Credit

Red Clause and Green Clause Letter of Credit


Red Clause and Green Clause Letter of CreditA red clause letter of credit is one that authorizes the exporter to avail pre-shipment finance on the strength of the credit. In this letter of credit, the clause is printed or typed in red ink. Hence, such letter of credit is known as red clause letter of credit. This is a pre-shipment finance provided to the beneficiary by the importer. This credit is liquidated once the documents are negotiated. In a green clause letter of credit, in addition to pre-shipment finance, storage facilities are allowed at the port of shipment to the exporter by opening bank. Such type of clause is typed or printed in green ink. So, this letter of credit is known as "green clause letter of credit'.


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John Keevan-Lynch: Can an Indian bank issue a red clause letters of credit? I have been told it is against Indian banking regulations. Please advise. Thank you.

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