PNB fraud case: RBI discontinues system of issuing Letters of Undertaking system

In the backdrop of Punjab National Bank (PNB) scam that is being blamed on two jewellers Nirav Modi and Mehul Choksi, the Reserve Bank of India (RBI) on Tuesday, made a decision to discontinue the Letter of Undertaking (LOU)/ Letter of Credit (LOCs) for trade credits for imports with immediate effect.

"On a review of the extant guidelines, it has been made a decision to discontinue the practice of issuance of LoUs/ LoCs for Trade Credits for imports into India by AD Category banks with immediate effect", the central bank said in a notification. Bankers say the scrapping of LoU/LoC is unlikely to impact trade credit as banks can issue Letters of Credit (LC) and Bank Guarantees for trade credits for imports.

The RBI's action comes almost a month after PNB announced that it had detected fraudulent and unauthorised transactions at its Brady House branch in Mumbai.

PNB, the second-biggest Indian state-run lender, uncovered in January the alleged fraud in which certain bank officials were suspected of colluding with Modi and Choksi to issue fraudulent letters of undertaking (LoUs) for their firms to raise loans from overseas branches of mostly Indian banks. The fraudulent issuance of LoUs came to light when one of the branch officials asked the firms associated with the diamantaires to furnish at least 100 per cent cash margin for issuing LoUs.

The Bank has reported a Gross Non Performing Assets (Gross NPAs) of Rs 57519.41 Crore (12.11 % of total assets) and Net Non Performing Assets (Net NPAs) of Rs 34075.65 Crore (7.55% of total assets). On the other hand, an LoC is an instrument which is similar to an LoU, except that it is an intra-bank transaction.

As a trade financing measure, overseas banks usually lend to importers based on the LoUs issued by the importers' bank.

Experts said the RBI's move to bar LoUs could affect genuine importers.

(Copyright © 2015. All Rights Reserved.)
 
Recommended

Bengals Trading For OL Cordy Glenn
With Dawkins productivity this year and with him having the much cheaper contract, Glenn was more than likely on his way out. As long as he's healthy, Glenn will be an instant upgrade over any tackle that the Bengals now have on the roster.

Should Jose Mourinho have more faith in Marcus Rashford?
I say Liverpool because they are an example of a very good team, a good example of an important stadium with a big tradition. We're starting to play more like a team and Rashford stepping up in Anthony Martial's absence is testament to that.

Karachi set to host Pakistan-West Indies T20Is
Sethi also announced he was in talks with West Indies Cricket for a Twenty20 tri-series in United States. The PSL final, and now three more games for Karachi as per routine.

Netflix's The Crown paid its queen less than its prince
Suzanne Mackie and Andy Harries made the revelation at the INTV Conference in Jerusalem, according to a report by Variety . She only portrayed Queen Elizabeth for two seasons of " The Crown ".

Koch Industries Inc. Acquires 282312 Shares of Time Warner Inc (NYSE:TWX)
ValuEngine downgraded shares of Time Warner from a "buy" rating to a "hold" rating in a research report on Friday, February 2nd. In other news, insider Olaf Olafsson sold 23,450 shares of the stock in a transaction that occurred on Thursday, December 14th.

Former Cuomo Aide Percoco Guilty Of Corruption
The decision came one day after the panel informed Manhattan Federal Judge Valerie Caproni they were again at a deadlock. Percoco has been found guilty of two counts of conspiracy and guilty on one count of solicitation of a bribe.

Amazon recalls portable chargers on reports of fires, burns
Spotted by Macrumors , the details of the company's recall are available on the U.S. For more information, call Amazon toll-free at 855-215-5134 from 8 a.m.to 5 p.m.

Case Keenum To Sign With The Denver Broncos
Former Broncos coach and current front office consultant Gary Kubiak coached Keenum when he was with the Texans . Keenum will have similar talent at receiver with the Broncos in Demaryius Thomas and Emmanuel Sanders .

Chaos in the Knesset: Netanyahu's Coalition on the Verge of Shattering
Writing in the left-wing Haaretz newspaper, political commentator Yossi Verter spelled out a possible Netanyahu strategy.

Sealing: AAP, Congress to meet SC panel for amicable solution
Health Minister Satyendar Jain and Development Minister Gopal Rai were among others who attended the meeting on Tuesday afternoon. Cong MPs will raise sealing issue in Parliament along with AAP MPs.

Jaguars Fully Committing to Run Game With Andrew Norwell Signing
The Norwell signing comes as a bit of a surprise because the New York Giants were reportedly close to landing the top-rated guard. Norwell immediately solidifies the left side of the Jacksonville line that already had Cam Robinson at left tackle.

Malcolm Butler will leave Patriots for $61M deal with Titans
He played the entire 2017 season on a $3.91 million contract and joins a group of young and talented defensive backs in Tennessee. The 5-foot-11, 190-pound Butler turned 28 on March 2.

Gigi Hadid And Zayn Malik Confirm Split
Malik, who recently unfollowed his Hadid on Instagram , asked fans to respect their privacy during the rough time. He continued: "I'm grateful to all our fans for respecting this hard decision and our privacy at this time".

Video Released in Salt Lake City Federal Courthouse Shooting
Court footage shows the witness sinking out of the way before a US Marshal shot Angilau, 25, four times. Dowdell granted the summary judgment Friday and dismissed the plaintiff's excessive force lawsuit.

Twitter suspends multiple high profile accounts for stealing tweets
Tweetdecking is the practice seen with groups on Tweetdeck who mass-retweet each others posts in order to get them viral. Twitter deleted these accounts because they were reported to be stealing other users' tweets without crediting them.


More News

News
More News