PNB scam fallout: Exporters say banning LoUs no solution to banking mess

The trade credit instrument banned by RBI is used heavily by exporters who import goods which go into the making of export products

The Reserve Bank of India's (RBI’s) decision to suspend Letters of Undertaking (LoUs) for importers cannot be treated as a solution for cleaning the trade finance system, exporters say. The move is expected to hit large exporting firms hard, they warn.
 
“On a review of the extant guidelines, it has been decided to discontinue the practice of issuance of Letters of Understanding/ Letters of Comfort for trade credits for imports into India by Category–I banks with immediate effect,” RBI said on Tuesday.
 
The trade credit instrument banned by RBI is used heavily by exporters who import goods which