RBI stops issuance of LoUs for trade credits after PNB fraud
The RBI has discontinued the issuance of Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for import trade credits. This comes after Nirav Modi and Mehul Choksi's firms allegedly defrauded PNB of $2 billion by raising overseas credit using fraudulent LoUs. An LoU is an assurance given by one bank to another to meet liabilities on a customer's behalf.