DOCUMENTARY LETTERS OF CREDIT

1. Beneficiary of an LC is
(a) (a)Buyer (b) Seller (c) LC Opening Bank (d) LC
Negotiating Bank
2. Primary liability to honour bills drawn under LC, if documents are otherwise in order, is
on (a) LC Opening Bank (b) LC
Conforming Bank (c) LC Reimbursing Bank (d) Buyer on whose behalf LC has
been opened.
3. Proceeds of payment made on bills drawn under LC is to be sent to
(a) The Confirming Bank (b) The sellers bank for crediting seller’s account (c)
Negotiating Bank (d) Reimbursing Bank.
4. The main role of LC advising bank is to
(a) Pay on behalf of LC issuing bank (b) Authenticate the LC issuing bank (c)
Negotiate the bills drawn under LC (d) None of these
5. Which of the following types of LC have ceased to exist under UCP 600
(a) Red clause LC (b)Transferable LC (c)
Revocable LC (d) Back to back LC.
6. A bank which has negotiated bills drawn under confirmed LC is required to submit his
claim to (a) LC issuing bank (b) LC
Conforming Bank (c)either (a) or (b) (d) first to issuing bank and if not paid then
to the confirming bank
7. An LC Conforming Bank may also function if it so desires, as
(a)LC advising bank (b) LC negotiating bank (c)both
(a) or (b) (d) Neither (a) nor (b)
8. How many beneficiaries can be of a transferable LC
(a)One (b)Two (c) Three
(d) Any number of beneficiaries is possible.
9. A foreign buyer intends to finance the exporter for the raw material required by him
for the order. The buyer will request the banker to open (a) Back to back LC
(b) Green clause LC (c) Red clause LC
(d) Transferable LC
10. Back to back LC is opened on behalf of
(a)Importer (b)Exporter
(c)Exporter’s supplier (d) None of these
11. Under UCP 600 maximum time allowed to banks to honour or dishonour documents is
(a) 7 days (b)5 days (c) 7
banking days (d)5 banking days
12. In dealing with discrepant documents, which of the following options is not available
to banks under UCP-600? (a) Hold documents pending
 further instruction from presenter (b) Return the documents
(c) Pay under reserve (d) Act as per instruction previously received.
13. The parties concerned with bank to bank reimbursements are bound by
(a) UCP (b) URR (c) ISP
(d) Incoterms
14. In dealing with LC and its documents, banks are responsible for
(a) Genuineness of the documents (b) For the acts of correspondent banks
(c) Errors in translation/interpretation of technical terms (d) None of these.
15. LC documents must be consistent with the requirements of
(a) Incoterms (b) UCPDC (c)
Exchange control guidelines (d) All of these
16. Bill of exchange, arising out of LC transaction is
(a) Drawn by LC applicant on LC issuing bank (b) Drawn by
LC applicant on beneficiary’s bank (c) Drawn by beneficiary on LC
issuing bank (d) Drawn by beneficiary on his bank
17. Which of the following documents must bear LC number with the name of issuing
bank (a) Bill of exchange
(b) Invoice (c) Bill of Lading
(d) All of these.
18. Number of non-negotiable copies that must accompany a bill of lading is
(a) 3 (b)7 (c)5
(d) As mentioned in LC
19. Which of the following details must be mentioned in invoice accompanying LC
document (a) Terms of sale
contract (b) Bill of lading number (c) Name of LC issuing bank and
LC number (d) All of these.
20. Currency of issuance of insurance policy that accompanies documents under LC must
be the (a) Currency of the LC
applicants country (b) Currency of the beneficiary’s country (c)Currency of the LC
(d) any of the above
21. An importer from India fails to retire the bills received under LC, although, he holds a
forward contract for the amount. The LC issuing bank must crystallize the liability in
INR
(a) Within 10 days (b) Within 15 days if requested by the importers (c)
Either (a) or (b) (d) Neither (a) or (b)
22. In the above example, the crystallization would be done at
(a) Bill Selling rate (b) Rate at which forward contract was booked (c)
Either (a) or (b) (d) Neither (a) or (b)
23. Goods imported under LC must be insured at, if not specifically mentioned
(a) 100% of invoice value (b) 110% of invoice value (c)
120% of invoice value (d) None of these
24. Issuance of commercial stand by LCs attract provisions of
(a) ISP 98 (b) UCPDC 600
(c)URR525 (d) All of these
25. A commercial stand by LC may be used for the purpose of
(a) Financial guarantee (b) Performance guarantee (c)
Import of goods (d) All of these
26. An LC provides for reimbursement to negotiating bank through a reimbursing bank
and sends instructions to the reimbursing bank. The reimbursing bank may honour
reimbursement claim
(a) If it is otherwise in order (b) Provided it has received the instruction by an
authenticated means (c) Provided it has accepted the reimbursement
authorization from issuing bank
(d) Provided it has received the instruction by an authenticated means along with a copy
of the documentary credit.
27. Reimbursement authority issued by LC issuing bank has a validity period
(a) In accordance with the LC (b) Of 7 banking days from the date of negotiation (c)
Of 5 banking days from the date of negotiation (d) The reimbursement
authority must not have an expiry date
28. Which of the following sentences is not correct?
(a) Reimbursement authority must be issued by an authenticated means (b) Mail
confirmation should be sent for such tele transmission (c) The reimbursement
authority must not have an expiry date (d) Reimbursement authorization must state
that they are subject to URR-525.
29. A reimbursing bank has given reimbursement undertaking which has been duly
accepted by the reimbursing bank. Issuing bank can (a) Cancel its
reimbursement authorization by issuing a notice (b) Amend its
reimbursement authorization by issuing a notice (c) Cancel its
reimbursement authorization without issuing a notice (d)Can’t cancel its
reimbursement authorization by issuing a notice
30. The reimbursing bank must process reimbursement claim within
(a) 5 banking days (b) 7 banking days (c) 3
working days (d) Next day
31. Reimbursement claims should not be presented to reimbursing bank earlier than
(a) 10 days prior to due date (b) 7 days prior to due date (c) 3
days prior to due date (d) Date of negotiation.
32. Reimbursing banks are liable for consequences arising out of
(a) Delay/loss of any message in transit (b) Lock out of their premises (c)
Strike (d) None of these
33. INCOTERMS deal with
(a) Relationship between seller and buyer (b) Relationship between parties to LC (c)
Relationship between issuing bank and reimbursing bank (d) All of these
34. Documents accompanying a claim must not be
(a) Dated prior to the date of LC (b) Dated after the date of LC
(c) Dated after the bill of lading (d) Dated after the date of
presentation.
35. An irrevocable LC can be
(a) Revoked (b) Cancelled
(c) Amended with the concurrence of reimbursing bank (d) Amended without the
concurrence of parties concerned.
36. A back to back LC is
(a) LC opened for meeting export obligation (b) LC opened for meeting import
obligation (c) LC opened against a master LC where master LC is an export LC
(d) LC opened against a master LC where master LC is an import LC
37. The “Incoterms” FCA implies
(a) Inclusive of main carriage (b) Inclusive of main carriage and insurance
(c) Excluding main carriage (d) None of these
38. “Incoterm” CIP means
(a) Inclusive of cost &freight (b) Inclusive of cost insurance & freight
(c) Inclusive of carriage and insurance (d) Inclusive of carriage
39. “Incoterm” DDP means (a) Delivered ex-ship (b) Delivered ex-works
(c) Delivered duty unpaid (d) Delivered duty paid
40. Bill of entry evidences
(a) Goods have been imported (b) Customs duty have been paid on goods
(c) Goods have arrived without incurring any damage (d) All of these