New Delhi, Apr 23 (KNN) The top exporters' body in the country FIEO has written a letter to the Reserve Bank of India urging reintroduction of Letter of Undertakings (LoUs) which has been discontinued by the apex bank after the Nirav Modi scam.

In the letter, the Federation of Indian Export Organizations (FIEO) said the alternatives for LoUs like bank guarantees increase the cost for exporters by 1 to 3 per cent making exports uncompetitive in comparison to global players.

The FIEO in its letter to  Reserve Bank Governor Urjit Patel and finance ministry has sought reintroduction of the crucial trade finance instruments, but feels that the government will have to take the lead to end the stalemate.

FIEO pointed gems & jewellery exports have contracted by a massive 36 per cent following the regulatory actions, which employs 5 million.

FIEO further said that the ban has also cause problems for the exporters who face the spectre of banks cancelling LoUs. The association has taken up the matter with the commerce ministry also.

The LoUs were banned following the discovery of the over Rs. 13,000-crore Nirav Modi scam, the biggest fraud in domestic banking history early February. The instrument was allegedly misused by Modi and his henchmen in connivance with officials of state-run Punjab National Bank's at the Brady House branch in south Mumbai between 2011 and 2017.