Full formBanking & Finance
LUDstands forLetter of Undertaking
Full Form of LUD
What is LUD?
A Letter of Undertaking (LUD) is a financial document issued by a bank on behalf of an importer, guaranteeing that the payment will be made to the exporter as per the terms of the transaction. In India, LUDs are primarily used in international trade under the Foreign Exchange Management Act (FEMA), 1999. They allow importers to clear goods from customs without making an immediate payment, thereby facilitating cash flow and trade efficiency. Banks issue LUDs only to authorized dealers and creditworthy customers, and the instrument is typically valid for a specified period. The usage of LUDs is common in high-value imports, such as machinery, raw materials, or bulk commodities. They are also referenced in regulatory compliance and trade finance operations. For students preparing for banking exams like IBPS PO, RBI Grade B, and SBI PO, understanding LUDs is essential as questions often appear on trade finance instruments, their features, and differences from Letters of Credit (LC). The LUD reduces the financial burden on importers while providing assurance to exporters, making it a key tool in India's growing trade ecosystem.
LUD का फुल फॉर्म
प्रतिबद्धता पत्र (Letter of Undertaking)
Example
The importer submitted a Letter of Undertaking from the bank to clear the consignment at the port without immediate payment.
LUD — frequently asked questions
What is the full form of LUD?
The full form of LUD is Letter of Undertaking, a financial guarantee issued by a bank for import transactions.
How is LUD used in import transactions in India?
LUD allows importers to clear goods without immediate payment by providing a bank guarantee to customs, under FEMA regulations.
What is the difference between LUD and LC?
LUD is a promise to pay from the importer's bank, while LC (Letter of Credit) is a commitment from the bank to pay the exporter upon fulfilling specified conditions.