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Nirav Modi Effect: RBI Stops Letters of Undertaking For Overseas Credit

The Reserve Bank of India has suspended letters of undertaking (LoUs) or assurances for abroad credit after the Rs. 12,600 crore Punjab National Bank (PNB) extortion was uncovered a month ago. LoU credit is in a perfect world implied just for the here and now. It additionally fills the need of a bank ensure for a bank’s client for making installment to seaward providers in outside cash.

In the Nirav Modi-Mehul Choksi case, the credit term was purportedly stretched out a long ways past what was recommended in the manage book.

The RBI said its choice to scrap the act of issuing LoUs is taking effect right now. “On an audit of the surviving rules, it has been chosen to cease the act of issuance of LoUs/LoCs for Trade Credits for imports into India by AD Category I keeps money with quick impact,” the national bank said in a notice.

Nirav Modi and the organizations he controls supposedly utilized the provisos in the managing an account framework by looking for LoUs and raising credit from remote banks to pay their merchantsFor the previous seven years, Nirav Modi and his three firms – Diamond R Us, Solar Exports and Stellar Diamonds – had been purportedly taking LoUs from PNB’s Brady Road branch in Mumbai.

These bank ensures purportedly helped Mr Modi raise here and now credits from outside branches of Indian banks to pay to providers of crude material, for example, unpleasant stones.

Indeed, even PNB and different moneylenders are slugging out finished the advance term, which ought not have been stretched out past 90 days, says PNB.

PNB has told police that it has likewise revealed extra introduction of about Rs. 9.42 billion regarding a gigantic misrepresentation, as indicated by a court documenting.

PNB last month said it had been defrauded of about Rs. 12,600 crore by two jewellery groups who raised credit from overseas banks based on fraudulent guarantees issued in collusion with rogue PNB staff.