DISCOUNTING BY THE ISSUING BANK

QUERY FROM NESAR AND COMMENT FROM MEHDI
Post subject: Discounting by issuing bank

Nesar:

Dear All,

A credit is available with a nominated bank by acceptance.
Draft Drawn on nominated bank for 180 days after sight.

query:

Can issuing bank discout this bill?

Regards
Nesar
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Mehdi:

I am not sure such arrangement of delayed payment is allowable under the existing regulations of the land. However, in respect of export from Bangladesh, such practice of discounting at sight against a credit of 90 days deferred is in place (BNP Paribash is doing so).

Regards….Mehdi

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MR. OLD MAN'S COMMENT

Hi all,

Banco Santander v. Banque Paribas is the case in connection with the nominated confirming bank's discounting of its own deferred payment undertaking under a deferred payment L/C whereas Nesar's case is in connection with the issuing bank's discounting of the time draft under an acceptance L/C.

Please note the draft once accepted would become an instrument independent of the L/C and could be sold on the forfaiting market by endorsement on its reverse side. Therefore, the draft which was accepted by the nominated bank can be discounted by any bank including the issuing bank.

Best regards,
Nguyen Huu Duc …