March 13, 2018 / 1:35 PM / 9 days ago

RBI bars issuance of letters of undertaking for trade credit

MUMBAI (Reuters) - The Reserve Bank of India (RBI) ordered commercial banks on Tuesday to stop issuing with immediate effect guarantees in the form of letters of undertaking - which are at the heart of the country’s biggest bank fraud - in the latest regulatory clampdown.

The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui/Files

The RBI also barred the issuance of letters of comfort, but said letters of credit and bank guarantees can be continued to be issued if certain rules are met. (

The instruments are all forms of trade finance often used by importers to fund their overseas purchases.

Reporting by Devidutta Tripathy, Abhirup Roy and Suvashree Choudhury; Editing by Subhranshu Sahu

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