Mumbai, Mar 14 (KNN) The Reserve Bank of India (RBI) has decided to discontinue issuance of Letters of Undertaking (LoU) and Letters of Comfort (LoC) for trade credit for imports into India.

Authorised dealer-1 (AD-1) category banks will not be allowed to issue LoCs and LoUs for this line of business, the regulator said in a notification on its website.

Banks may continue to issue letters of credit and bank guarantees for trade credit for imports into India as per the current guidelines applicable, the notification added.

The move comes after the Nirav Modi scam came to light in which the business man’s associates approached the domestic branch of Punjab National Bank to issue fraudulent LoUs to foreign branches of other Indian banks through the SWIFT network. These LoUs were not registered in the core banking system for PNB.