A guarantee issued by a bank or a financial institution to pay a beneficiary on a client’s behalf in a situation where the applicant defaults, is known as a standby letter of credit. This was developed as a consequence of legal limitation put by the US regulator on the bank’s authority for issuing guarantees.
A standby letter of credit is considered quite suitable for a wide range of secure payments making it quite a flexible tool. Most commonly, it is used for international trade purposes for providing assurance to the party that it will receive the payment whatever the case it.

Having said this, there are quite a few complexities involved in a standby letter of credit. This suggests that it is necessary to have a consultation with an expert in case complete information is not available regarding the procedure.

In   finance  foreign investment is investment originating from other countries. FDI plays a important role in the development of every economy it helps in achieving a certain degree of financial stability development and growth.

A foreign direct investment (FDI) is an investment made by a company or entity based in one country, into a company or entity based in another country. Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange.

In order to attract Foreign Direct Investment (FDI) from the world’s major investors and in order to present a favorable scenario for investors the Indian government has announced a number of reforms and has implemented several industrial policies. The foreign direct investment is allowed in India through collaborations that are of financial nature, joint venture collaborations, through preferential allotments, investment through EURO issues.Apart from this it has opened of FDI route by setting up of 100% EOUs /EHTPs/ STPs etc and entering into Foreign technology agreement.

ARE YOUR EXPORTS PAID  FOR BY LETTER OF CREDIT?Exporters often adopt a method which will enable payment to be received promptly and with the minimum of risk. A letter of credit may be revocable or irrevocable - a document, consisting of specific instructions by a buyer of goods, that is issued by a bank to the seller who is authorized to draw a specified sum of money under certain conditions, i.e., the receipt by the bank of certain documents within a given time. An irrevocable L/C provides guarantee by the issuing bank in the event that all terms and conditions are met by the buyer (or drawer).

A revocable L/C can be canceled or altered by the drawer after it has been issued by drawer's bank. A confirmed L/C is one issued by a foreign bank which is validated or guaranteed by a Indian bank for a Indian exporter in the case of default by the foreign buyer or bank.