Bank Payment Obligation!
Bank Payment Obligation!
BPO is a payment tool offering a level of security similar to that of a letter of credit. The BPO is an irrevocable undertaking on the part of an obligor bank (typically that of a buyer) to recipient bank (typically that of a seller) to pay a specified amount on agreed date on condition of a successful matching of electronic data according to rules adopted by the ICC. It combines some of the features of a Documentary Credit but with the intention to meet the needs of open account trade transactions. As a conditional payment mechanism, it may be issued to make immediate (sight) payments or deferred payments, based on the irrevocable undertaking of the obligor bank towards the recipient bank. The matching of trade data on an electronic matching platform triggers this irrevocable undertaking. The parties to the BPO are the buyer, obligor bank (buyer’s bank), seller (supplier) and recipient bank (seller’s bank).
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