Wednesday, 14 March 2018

RBI curbs the Practice of Issuing Letters of Understanding and Letters of Comfort for Trade Credits

The Reserve Bank of India ( RBI ) decided to stop the practice of issuing Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits with immediate effect. A Notification issued by the RBI in this regard said that “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. 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.” The changes are applicable from 13th March 2018 itself

**All the views expressed above are personal comments of the author and does not form any sort of legal opinion** 
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