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What is LC at sight? Meaning, how it works, and example
A letter of credit at sight is a document that ensures payment of goods provided by an exporter to an importer. Learn its process, benefits, and role in trade.
June 11, 2026 | 3 min read
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Documentation is critical in international trade for clarity, compliance, and trust between exporters and importers. Proper documentation facilitates smooth customs clearance and timely payments. Letters of credit (LCs) are a vital part of the export logistics process as they define the payment terms between an exporter and importer. A letter of credit at sight is a type of letter of credit that defines the payment period for an export transaction. Learn more about the meaning of LC at sight, process, and benefits in this blog.
What is the meaning of an LC at sight?
A letter of credit at sight (l/c at sight) or sight LC is a document that guarantees payment for goods provided by an exporter to an importer. The document is issued by an intermediary, third-party bank and lists the precise conditions under which the payment will be made.1
The importer makes the payment when the exporter presents the sight LC along with other required documentation. There are three parties involved in a sight LC: the importer, exporter, and the issuing bank.
The importer makes the payment when the exporter presents the sight LC along with other required documentation. There are three parties involved in a sight LC: the importer, exporter, and the issuing bank.
How does an LC at sight work?
The sight LC outlines specific criteria for the release of funds. This can involve procedural requests such as timely delivery and appropriate documentation including proof of shipping and other bills. Based on the successful completion of the requirements, the amount is payable to the beneficiary. The bank is given a certain period to complete the payment, usually five to ten working days.
Step-by-step process of how a sight LC works
The LC at sight process follows 8 stages that cover LC issuance, document verification, and fund transfer from the importer to the exporter.
Step 1: Request for an estimate
The importer contacts an exporter to request an estimate for their goods and finalizes the transaction.
Step 2: Request for issuance of an LC at sight
The importer then goes to a bank (often one that has already given them a line of credit) and requests the bank to issue a sight LC.
Step 3: Issuance of LC at sight by bank
After examining the importer’s creditworthiness, the bank issues a sight LC and sends it to the exporter’s bank.
Step 4: Importer gets notified
The importer is then notified by the exporter’s bank and an LC is sent along with the trade transaction’s terms and conditions.
Step 5: Shipment of goods
Once the exporter is satisfied with the LC, the goods are shipped. Proper international shipment packaging ensures products arrive safely at their destination. After shipping, the exporter submits the shipping paperwork to the bank.
Step 6: LC at sight is sent to the importer’s bank
After processing the paperwork, the bank forwards it to the importer’s bank.
Step 7: The importer makes a payment
The importer receives notification from the bank that the paperwork has arrived and that full payment needs to be made to collect it. To get product delivery, the importer requires these papers.
Step 8: Exporter’s bank receives payment
The importer examines the paperwork, pays for the LC, and then the importer’s bank transfers the funds to the exporter’s bank.2
What is the need for an LC at sight?
A sight LC offers protection to both the importer and exporter in a transaction. Some of its benefits are:
Effective working capital management for exporters
Exporters have freedom to manage their working capital as they can receive payments against goods as soon as the shipment is on the way. This is beneficial for exporters because it reduces cash constraints due to delayed payments.
Short payment terms
Usually, a credit term given by an exporter lasts between 15 and 90 days. A sight LC ensures that the exporter is paid earlier rather than later.
Competitive edge for importers
Since the importer does not request a prolonged credit period from the exporter, they are in a strong position to negotiate rates and conditions during trade. This provides a competitive advantage in the market.3
Reduced trade risk
LC at sight reduces trade risk by balancing payment security for both exporters and importers.4 Open account terms risk non-payment for exporters, while cash-in-advance terms risk non-delivery for importers. LC at sight eliminates these risks by using the issuing bank as a neutral guarantor that releases payment only when compliant documents are submitted.
The bank acts as a trusted middleman in cross-border trade. It examines documents against LC terms rather than inspecting the actual goods. This ensures payment occurs if the paperwork meets requirements. Payment goes through even if the buyer and seller dispute product quality or delivery.
The bank acts as a trusted middleman in cross-border trade. It examines documents against LC terms rather than inspecting the actual goods. This ensures payment occurs if the paperwork meets requirements. Payment goes through even if the buyer and seller dispute product quality or delivery.
Access to pre-shipment and post-shipment finance
LC at sight allows exporters to access pre-shipment finance(packing credit)from banks to cover costs of purchasing raw materials, manufacturing, and packing goods before shipment for up to 360 days at concessional interest rates.5
After shipping, exporters can access post-shipment credit immediately by presenting compliant documents to their bank.6 The bank then purchases, discounts, or negotiates the export bills. This provides instant cash flow during the Normal Transit Period (NTP). Exporters don't have to wait for payment from the issuing bank, which typically takes 5 to 7 banking days.
After shipping, exporters can access post-shipment credit immediately by presenting compliant documents to their bank.6 The bank then purchases, discounts, or negotiates the export bills. This provides instant cash flow during the Normal Transit Period (NTP). Exporters don't have to wait for payment from the issuing bank, which typically takes 5 to 7 banking days.
Payment terms of LC at sight
A sight LC is issued to the exporter or beneficiary once the supporting financial institution receives the necessary paperwork. The payment is made after the issuing bank has verified shipping documents and other required documents submitted by the exporter. The necessary documentation can include proof of shipment, bill of lading, and packing bill. Sight LCs safeguard all parties involved in the transaction and mitigate some risks associated with overseas transactions. For instance, if the importer has a history of late payments and is at a higher risk of default, the exporter may include an at-sight clause in the contract to guarantee payment.7
How it works:
How it works:
● Payment is released as soon as compliant documents are presented, ensuring quick access to funds for exporters.
● The bank checks documents, not goods, making the process faster and reducing physical inspection delays.8
● Protects exporters from buyer default by guaranteeing payment upon document compliance, regardless of the buyer's payment history.
LC in trade transactions operates under specific payment terms governed by international banking standards. Some of these are:
UCP 600 compliance
Under UCP 600 Article 14(b), the issuing bank must verify document compliance within 5 banking days of presentation.9 The necessary documentation can include proof of shipment, a commercial invoice for exports, a bill of lading, and a packing list. All documents must match LC terms exactly, with no minor errors or discrepancies allowed.
Payment timeline and charges
According to Foreign Exchange Dealers Association of India (FEDAI) guidelines, export bills drawn in foreign currency that are 'at sight' or 'on demand' have a Normal Transit Period (NTP) of 25 days for the payment to reach the exporter's bank account.10
The issuing bank charges a fee for issuing an LC, which varies from bank to bank depending on the transaction size and risk assessment. For example, some banks charge penal rates on devolved LC liabilities.11 These rates can be 8% per annum for exposures below ₹100 crores and 2% per annum for exposures above ₹100 crores, calculated from the devolvement date until regularization. Document discrepancies result in payment rejection until the exporter corrects and resubmits compliant documents.12
The issuing bank charges a fee for issuing an LC, which varies from bank to bank depending on the transaction size and risk assessment. For example, some banks charge penal rates on devolved LC liabilities.11 These rates can be 8% per annum for exposures below ₹100 crores and 2% per annum for exposures above ₹100 crores, calculated from the devolvement date until regularization. Document discrepancies result in payment rejection until the exporter corrects and resubmits compliant documents.12
Deferred sight payment options
LC terms can include 30 days at sight, 60 days at sight, or 90 days at sight, where payment occurs 30, 60, or 90 days after the issuing bank accepts compliant documents. Exporters can choose from these different export payment methods based on their cash flow needs and buyer agreements.
Standard LC at sight processes payment immediately, while deferred sight terms delay payment by the specified number of days after document acceptance. The seller, if required, can get the LC discounted from the bank at the offered interest rates.13
Standard LC at sight processes payment immediately, while deferred sight terms delay payment by the specified number of days after document acceptance. The seller, if required, can get the LC discounted from the bank at the offered interest rates.13
Example of an LC at sight
Let us consider an example to understand how a sight LC works. An international business called A that sells consumables wants to import one million product bottles. They locate a manufacturing business B in India and discuss their requirements. After providing the complete price, the manufacturer requests an advance payment as security before starting manufacturing. The importer does not, however, want to take the chance of making an advance payment and later not receiving goods.
In this case, both parties agree to use a sight LC to avoid risk. All terms and conditions governing the trade agreement are accepted by the parties. Business A requests its bank to issue a sight LC to the exporter, business B, located in India. This LC includes the agreed-upon terms and conditions.
The importer’s bank issues the document and delivers it to the exporter’s bank in India. Business B then receives the LC from the bank and begins the production process after reviewing the paperwork. When the goods are ready, business B ships them and delivers the packing bill and bill of lading to the Indian bank for review. The bank then sends the paperwork to the importer’s bank after checking for any inconsistencies.14
After reviewing the documentation, the importer’s bank requests payment of LC amount from business A to obtain these documents. Without paying the amount as per the sight LC, business A cannot receive the goods that business B has delivered. The importer’s bank transfers the funds to the exporter’s bank after the importer pays the amount and receives the necessary paperwork.
In this case, both parties agree to use a sight LC to avoid risk. All terms and conditions governing the trade agreement are accepted by the parties. Business A requests its bank to issue a sight LC to the exporter, business B, located in India. This LC includes the agreed-upon terms and conditions.
The importer’s bank issues the document and delivers it to the exporter’s bank in India. Business B then receives the LC from the bank and begins the production process after reviewing the paperwork. When the goods are ready, business B ships them and delivers the packing bill and bill of lading to the Indian bank for review. The bank then sends the paperwork to the importer’s bank after checking for any inconsistencies.14
After reviewing the documentation, the importer’s bank requests payment of LC amount from business A to obtain these documents. Without paying the amount as per the sight LC, business A cannot receive the goods that business B has delivered. The importer’s bank transfers the funds to the exporter’s bank after the importer pays the amount and receives the necessary paperwork.
Format of letter of credit at sight
A letter of credit at sight follows a standard format that includes the issuing bank's details, beneficiary information, LC amount, expiry date, and document requirements. The format lists the importer's and exporter's complete information, describes the goods being shipped, and includes the bank official's signature.
Below is a sample LC at sight document showing the standard format used in international trade.15
Below is a sample LC at sight document showing the standard format used in international trade.15
Documents required for LC at sight
The following are some of the documents required for LC at sight:
Document
Purpose
Bill of Lading
Proof of shipment and title of goods during transport
Commercial Invoice
Details of goods, quantities, prices, and total payment amount
Packing List
Breakdown of package contents, weights, and dimensions
Certificate of Origin
Verifies the country where the goods were manufactured
Insurance Certificate
Covers goods against loss or damage during transit (110% of LC value for FOB/C&F terms)
Bill of Exchange
Written order from the exporter directing the importer to pay a specified amount
Import License or OGL Declaration
Confirms goods are legally importable with the ITC(HS) classification number
FEMA Declaration
Compliance statement under Foreign Exchange Management Act 1999, Section 10(5)
Credit Report on Overseas Seller
Financial credibility verification for LCs valued above USD 100,000
KYC Documents16
Identity proof of applicant, partners, directors (Passport, Aadhar, Voter ID, Driving License)
Health Certificate
Confirms goods meet health and safety standards (if applicable)
Transport Documents
Copy of railway Receipt(RR)/Road consignment note/truck receipt evidencing delivery of the materials proving goods dispatch
Underlying Contract or Indent from importer17
Original purchase agreement between importer and exporter
Application Form with Photographs
Formal LC request submission to the issuing bank
All documents must strictly comply with the terms stated in the LC.
Contents of LC at Sight
Some of the details included in a sight LC are:
1. Details of the importer’s bank (the institution issuing the letter of credit)
2. Details of the exporter
3. Date on which the letter is written
4. Details of the importer in the letter body and the details of the transaction taking place between the exporter and the importer.
5. Signature of the bank official.18
1. Details of the importer’s bank (the institution issuing the letter of credit)
2. Details of the exporter
3. Date on which the letter is written
4. Details of the importer in the letter body and the details of the transaction taking place between the exporter and the importer.
5. Signature of the bank official.18
Difference between LC at Sight and Usance LC
Sight LC
Time letter of credit
Payment terms
Guarantees that the exporter is paid immediately upon presenting proof of shipment and required documents.
Allows buyers to pay the exporter at a later date, usually within a credit period of 30, 60, 90, or 180 days.
Due date
Due as soon as the bank has verified proof of shipment and other documents.
Due on a specified future date once proof of delivery and required documents are presented.
Benefits
Beneficial for exporters looking for immediate payment.
Beneficial for importers as the payment period is deferred.
Irrevocable LC at sight and confirmed irrevocable LC at sight
An irrevocable LC at sight guarantees payment to exporters immediately after compliant documents are presented to the bank. The issuing bank cannot cancel or modify an irrevocable LC at sight without written approval from all parties involved in the transaction.
● A 100 irrevocable LC at sight or 100% irrevocable LC at sight means the issuing bank commits to paying the complete invoice value upon document presentation with no partial payments. The bank releases the full transaction amount after verifying that the bill of lading, commercial invoice, packing list, and certificate of origin match the LC requirements.
● A confirmed irrevocable LC at sight includes a payment guarantee from a second bank, usually located in the exporter's country. The confirming bank pays the exporter even if the issuing bank fails to transfer funds.19 Exporters use confirmed LCs when dealing with buyers in countries with unstable banking systems or unfamiliar banks to eliminate payment risk.
Conclusion
A sight LC can be an empowering tool for sellers looking to ship internationally, as it guarantees payment upon receipt of the letter and other documentation. This can reduce cash constraints for exporters and enable them to manage their working capital effectively. With e-commerce exports, reaching international customers and receiving payments is easy and simple. Indian businesses interested in starting their exports journey can leverage the tools and services offered by e-commerce export programs like Amazon Global Selling.
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Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Frequently Asked Questions
Where is a 90-day sight term in an LC?
A 90-day sight term in an LC indicates that the exporter will not receive payment till 90 days after submitting the shipment’s draft to the bank.
Can an LC at sight be negotiated?
Yes, a sight LC is negotiable.
What are the benefits of an LC at sight?
A sight LC offers benefits like effective working capital management for exporters, early payment benefits for the exporter, and a competitive advantage for the importer.
What is a LC at sight 30 days?
There can be a substantial gap between document submission from importers and the bank processing the payment. In this case, importers receive a grace period of 30, 60 or 90 days as per the terms in the LC. To reduce this payment waiting period, a usance LC or sight LC is issued to the exporter.
What is a usance LC payable at sight?
A usance LC payable at sight refers to an LC arrangement in which the exporter makes sight collection from the drawee bank that handles discounting while the importer makes an advance payment to the issuing bank that provides financing to the importer.
When does a sight letter of credit become due?
A sight letter of credit becomes due immediately when the exporter presents compliant documents to the issuing bank, with payment required within 5 banking days under UCP 600 guidelines.
What is the difference between LC at sight and LC at 30 days or 90 days?
LC at sight requires immediate payment once documents are presented. In contrast, LC at 30 days or 90 days delays payment for the specified period after the issuing bank accepts the documents.
What is 100% LC at sight payment terms?
100% LC at sight payment terms means the issuing bank pays the complete invoice value immediately after verifying compliant documents, with no partial payments required.
Published on December 29, 2022.
Updated on June 11, 2026.
Sources:
1. https://www.investopedia.com/terms/s/sightletterofcredit.asp
2. https://www.dripcapital.com/en-in/resources/finance-guides/sight-lc-letter-of-credit
3. https://www.tradefinanceglobal.com/letters-of-credit/sight-lcs/
4. https://pmc.ncbi.nlm.nih.gov/articles/PMC8728483/
5. https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=302#pre
6. https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=302#post
7. https://www.dripcapital.com/en-in/resources/finance-guides/sight-lc-letter-of-credit
8. https://www.tradefinanceglobal.com/letters-of-credit/
9. https://www.aarcentre.com/ojs3/index.php/jaash/article/view/80/292
10. https://www.unionbankofindia.bank.in/pdf/hkb_%2007credmonipolicypostshipfinance.pdf
11. https://www.kotak.bank.in/en/business/working-capital/non-fund-based/letter-of-credit/fees-and-charges.html
12. https://www.hfw.com/app/uploads/2024/04/HFW-Client-Guide-Letters-of-Credit-November-2018.pdf
13. https://www.tradeindia.com/communities/6/2156/Payment-Modes-Finance-Issues/What-is-Letter-of-Credit-L-C-60-days-.html
14. https://www.dripcapital.com/en-in/resources/finance-guides/sight-lc-letter-of-credit
15. https://midhani-india.in/WordPress-content/uploads/2021/02/LC-1.pdf
16. https://www.paisabazaar.com/business-loan/letter-of-credit/
17. https://www.unionbankofindia.bank.in/pdf/hkb_20_auditpolicylettersofcredit.pdf
18. https://expresstradefinance.com/sight-lc-vs-usance-lc-what-when-why-and-which-one-to-choose-in-trade-finance/.
19. https://www.icici.bank.in/business-banking/trade-solutions/letter-of-credit
Updated on June 11, 2026.
Sources:
1. https://www.investopedia.com/terms/s/sightletterofcredit.asp
2. https://www.dripcapital.com/en-in/resources/finance-guides/sight-lc-letter-of-credit
3. https://www.tradefinanceglobal.com/letters-of-credit/sight-lcs/
4. https://pmc.ncbi.nlm.nih.gov/articles/PMC8728483/
5. https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=302#pre
6. https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=302#post
7. https://www.dripcapital.com/en-in/resources/finance-guides/sight-lc-letter-of-credit
8. https://www.tradefinanceglobal.com/letters-of-credit/
9. https://www.aarcentre.com/ojs3/index.php/jaash/article/view/80/292
10. https://www.unionbankofindia.bank.in/pdf/hkb_%2007credmonipolicypostshipfinance.pdf
11. https://www.kotak.bank.in/en/business/working-capital/non-fund-based/letter-of-credit/fees-and-charges.html
12. https://www.hfw.com/app/uploads/2024/04/HFW-Client-Guide-Letters-of-Credit-November-2018.pdf
13. https://www.tradeindia.com/communities/6/2156/Payment-Modes-Finance-Issues/What-is-Letter-of-Credit-L-C-60-days-.html
14. https://www.dripcapital.com/en-in/resources/finance-guides/sight-lc-letter-of-credit
15. https://midhani-india.in/WordPress-content/uploads/2021/02/LC-1.pdf
16. https://www.paisabazaar.com/business-loan/letter-of-credit/
17. https://www.unionbankofindia.bank.in/pdf/hkb_20_auditpolicylettersofcredit.pdf
18. https://expresstradefinance.com/sight-lc-vs-usance-lc-what-when-why-and-which-one-to-choose-in-trade-finance/.
19. https://www.icici.bank.in/business-banking/trade-solutions/letter-of-credit
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