Run banks rise on PNB compensation hopes, easing rate woes

The RBI said the decision to discontinue the practice of LoUs and Letters of Comfort for trade finance comes into force with immediate effect. Reutrs File

Run banks rise on PNB compensation hopes, easing rate woes

However, "letters of credit and bank guarantees for trade credits for imports into India may continue to be issued subject to compliance with" existing regulations, a notification from RBI said.

In the aftermath of Punjab National Bank (PNB) fraud case, a couple of banks had clamped down on the issue of LoUs.

Punjab National Bank had reported fraudulent issuances of Letters of Undertakings (LoUs) and Letters of Credit (LoCs) for the payment of import bills and fraudulent transactions in accounts, amounting to Rs 12,967.86 crore to the RBI through its fraud monitoring reporting system.

The CBI since then registered seven cases that also include other banks like State Bank of India, OBC, Bank of Maharashtra and Telangana Grameena Bank.

Mourinho hits back at De Boer over Rashford comments
De Boer's tenure at Crystal Palace was statistically the worst in Premier League history. Rashford has made 93 appearances since Mourinho took over from Van Gaal in 2016.

"Reserve Bank of India (RBI) has apprised that it had issued two circulars to banks in the months of August and November 2016, related to security and operational controls in the SWIFT environment", minister of state for finance Shiv Pratap Shukla told the Rajya Sabha in a written reply.

In today's plea before the special CBI court, the agency said it has filed another supplementary complaint about additional fraud of Rs 942 crore, taking the total amount of fraud to Rs 7,080 crore.

During issuance of LoU, there are four parties involved - issuing bank, receiving bank, importer and beneficiary entity overseas. Banks charge a fee from the importer for the LoU. Indian banks in Hong Kong paid the "suppliers" of these firms based on the LoUs. "This is clearly a risk mitigating step as letter of credit are governed by Uniform Customs and Practice for Documentary Credits, which has a well defined set of rules and procedures", said a senior official at one of the public sector banks. Recent reports also highlight that, billionaire Modi has refused to join the CBI investigation related to the case, citing that he has a business overseas.

Latest News