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Letter of Credit (LC)
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A document issued by a bank on behalf of a customer authorizing the customer or a third party to draw drafts on the bank up to a stipulated amount and under specified terms and conditions. The letter of credit may be a conditional commitment or it may be irrevocable if a fee has been paid by the customer. One type of LC guarantees that the bank will meet a customer's obligation if the customer is unable or unwilling to meet it.
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