Overview of Advising Bank
An advising bank is also known as a notifying bank. It informs the beneficiaries of banks that they can avail the letter of credit that has been released by that particular banking institution. They also provide that beneficiary with the details of the said document.
It may however be noted that the advising banks cannot be regarded responsible for paying the credit that is being promoted by itself.
Description of Advising Bank
The advising bank can at times act in the capacity of the branch office of a bank, which provides the Letter of Credit.
It may also be the issuing bank’s correspondent bank that is situated in the country where the beneficiary stays. An advising bank is also known as a Moon Bank in banking terminology.
Method of Functioning of Advising Bank
There is a certain way in which an advising bank functions. The advising bank notifies the beneficiaries by post or by calling them up through the telephone. On certain occasions they do both. The main function of an advising bank is to inform a beneficiary about the arrival of the letter of credit.
Importance of Advising Banks
The advising banks are very important in the context of the letters of credit. The particular beneficiary who is supposed to receive a letter of credit from a bank has to submit the required papers to the advising bank. While sending the necessary documents, the beneficiaries also furnish a bill of exchange or a draft so that they may receive the payment.
The advising bank sends the documents to the bank, which is providing the letter of credit. After reviewing these documents the issuing bank relays its decision to the advising bank. If the issuing bank sanctions the documents of the beneficiary then it agrees to pay the money or provide the beneficiary with other financial benefits.
However, if the documents of the beneficiary do not meet with approval from the issuing bank then the advising bank would not be held responsible for paying the amount.
Last Updated on : 1st July 2013