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3.1 LITERATURE REVIEW

Foreign Exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. “Foreign Exchange as the system of process of converting one national currency into another and of transferring money from one country to another” Dr. Paul Einzings

“Foreign Exchange as Foreign currency including any investment draws, accepted, made or issued as per clause 13 of article 16 of Bangladesh Bank order 1972 and all deposits, credits and balances payable in any foreign currency, any drafts, travelers cheques, L/C and bill of exchange express or drawn in currency but payable in foreign currency.” The Foreign Exchange Regulation Act 1947

“Foreign Exchange means foreign currency and includes any instrument drawn, accepted made or issued under clause 13 of section 16 of the Bangladesh Bank order 1972 and all deposits, credits and balances payable in any foreign currency, any drafts, travelers cheques, L/C and bill of exchange express or drawn in currency but payable in foreign currency. All branches of a bank cannot practice the foreign exchange. To practice the foreign exchange it must be Authorized Dealer (AD). To become AD, the bank must show that the branch is capable and has sufficient manpower to practice Foreign Exchange business.” According to Bangladesh Bank Order 1972

A foreign trade is also known as international trade. It is the exchange of capital, goods and services between different nations. It has been in the history even before the civilization. It also has notable effect on economic, social, and political areas of every country. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. International trade is a major source of economic revenue for any nation that is considered a world power. Without international trade, nations would be limited to the goods and services produced within their own borders. According to a web-based encyclopedia

A letter of credit is a document issued mostly by a financial institution which usually provides an irrevocable payment undertaking (it can also be revocable, confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is most commonly irrevocable/confirmed) to a beneficiary against complying documents as stated in the credit. Letter of Credit is abbreviated as a LC or L/C, and often is referred to as a documentary credit, abbreviated as DC or D/C, documentary letter credit or simply as credit (as in the UCP 500 and UCP 600). Once the beneficiary or presenting bank acting on its behalf, makes a presenting to the issuing bank or confirming bank if any, within the expiry date of the LC, comprising documents complying with the terms and conditions of the LC, the applicable UCP and international standard banking practice, the issuing bank or confirming bank if any, is obliged to honor irrespective of any instructions from the applicant to the contrary. In other words, the obligation to honor (usually payment) is shifted from the applicant to the issuing bank or confirming bank if any. Non –banks can also issue letters of credit however parties must balance potential risks. Mr. Tony

Quanzhou Bushuo Machinary Co.Ltd.
Quanzhou, China

Import Letters of Credit provides importers the most broadly used and accepted worldwide trade payment mechanism and business instrument. By structuring Letter of Credit terms to permit Deferred Payment or Trade Acceptance an L/C can be operated to offer funding to the importer. Most appropriately could build up a turnover capable of running a nation state’s budget hence it is significant that it is managed with care. Aana Sharma

(www.articleat.com)

3.2 INTERNATIONAL TRADE-IMPORTANCE OF LETTER OF CREDIT
The Letter of Credit gives importers...
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