PNB fraud case impact: Here is who LoU ban is really going to hurt
In the wake of Rs 13,000-crore PNB scam allegedly by diamond jewellery designer Nirav Modi and his associates through fraudulent LoUs, the central bank stopped banks from issuing the two instruments for trade credits for imports into India. "The Reserve Bank of India's (RBI) decision to ban LoUs) and LoCs as trade finance instruments is likely to limit the overall financial flexibility of Indian importers," said India Ratings and Research (Ind-Ra).
Banning of letters of undertaking (LoUs) and letters of comfort (LoCs) by the RBI as trade finance instruments is likely to reduce financial flexibility of importers, a Fitch group company said today. Image source: Reuters