RBI closes Loopholes to prevent Bank Scams

Mumbai Mar 13: In a Move to ensure damage control the RBI has taken strict steps to ensure that Nirav Modi PNB scam doesn't take place the apex bank has discontinued the practice of LOU and LC.

The RBI in its circular has said that "it has been decided to discontinue the practice of issuance of LOUs/ LoCs for Trade Credits for imports into India by AD Category –I bank with immediate effect."

RBI has also said that "the Letters of Credit will be continued to be issued subject to compliance with the provisions contained in Department of Banking Regulation Master Circular on 'Guarantees and Co-acceptances' dated July 1, 2015."

Sources said that this move was taken after the PNB scam has disrupted the nation and scamsters have used the loopholes such as LOUs to loot many crores.