Normally, an Islamic LC that is opened is negotiated within its expiry date. If the negotiation does not happen even after the expiry date, you can close the Islamic LC. By closing an Islamic LC, you is reversing the liability entries passed for the Islamic LC. This ensures that the credit limit that was taken by the Islamic LC is released and is available for future utilization.

The accounting entries defined for this event is generally the reversal of the outstanding liability. No availment is made against an Islamic LC that is closed. You should reopen a closed Islamic LC if you have to make an availment against it. This would be required in a situation when the Islamic LC comes in for negotiation after it has been closed. The reopening of the Islamic LC will put back the outstanding liability and availability for the Islamic LC.

• Close an Islamic LC automatically
  
• Close an Islamic LC manually