After PNB scam, RBI discontinues LoUs and LoCs for trade credits
Mumbai, Mar 13 (IBNS): The Reserve Bank of India (RBI) on Tuesday discontinued the Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for trade credits which were responsible for the Punjab National Bank scam.
In a notification, the RBI stated: " On a review of the extant guidelines, it has been decided to discontinue the practice of issuance of LoUs/ LoCs for Trade Credits for imports into India by AD Category –I banks with immediate effect."
The RBI said that Letters of Credit and Bank Guarantees for trade credits for imports into India may continue to be issued subject to compliance with the provisions contained in Department of Banking Regulation Master Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended from time to time.
This comes after the CBI on Feb 14 received complaints from PNB, which detected a Rs 11,292 crore fraud involving billionaire diamond merchant Nirav Modi.
Modi, who is in the centre of a huge storm, reportedly left the country in January, much before the scam came to light.
According to media reports, he is now in New York.
The Central Bureau of Investigation (CBI) has registered two cases against Modi.
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