With reference to Usance letter of credit, consider the following statements

1. It is a specific type of letter of credit that allows a predetermined credit period to the buyer i.e. the importer.
2. In common business usage, a usance letter of credit is also known as a deffered letter of credit.
3. It provides a deferred payment option to the buyer and the tenor of payment is pre-decided by the buyer and the seller. 

Select the correct statement.

• Recently, Coal India Limited (CIL) is supplying about eighty percent of its coal to Power Sector consumers.In order to provide relief to the power sector consumers and increase liquidity in the system, CIL has already allowed the facility of Usance Letter of Credit to power and it has also introduced the same mechanism for customers of Non-Power Sectors in the month of April 2020 
• A usance letter of credit is a specific type of letter of credit that allows a predetermined credit period to the buyer i.e. the importer. In common business usage, a usance letter of credit is also known as a differed letter of credit. It provides a deferred payment option to the buyer. The tenor of payment is pre-decided by the buyer and the seller.

The usance letter of credit can be classified into two based on their tenor. The usual tenors can be as follows:

• PAYMENT WITHIN 90 DAYS AFTER THE BILL OF LADING (B/L): This means that after the B/L is issued, the buyer has a time of 90 days from the date of B/L to make the payment for the goods.
• PAYMENT WITHIN 30 DAYS AFTER SIGHT: This means that on the date that the issuing bank receives the documents, from that date the buyer has 30 days to make the payment for the goods.

By: Shubham Tiwari