(PTI)
The finance ministry has asked RBI to look into the problems being faced by industry and banks by the abrupt ban on LoUs, and provide some breathing space to them, sources said. Reserve Bank of India this month banned issuance of Letters of Undertaking (LoUs) and Letters of Comfort (LoC), used extensively for trade finance, following the unearthing of Nirav Modi fraud case.
Nirav Modi and associates in connivance with some officials of Punjab National Bank (PNB) used LoUs to defrauded the lender of over Rs 13,000 crore. The sources said the ministry has received representations from various corporates and banks against the abrupt banning of LoUs asking the RBI to provide some breathing space to them. They feel that the sudden banning of LoUs has caused some disruption, the sources said, adding that the ministry has forwarded those representations to the central bank to take a final call.According to the representations, the sudden discontinuation of LoUs has hit small and medium enterprises, they said.
