The Hindu Business Line : RBI unveils new norms on letter of credit

Mumbai, Aug. 3 Banks can now negotiate a Letter of Credit where the negotiation of bills drawn under LC is restricted to a particular bank, and the beneficiary of the LC is not a constituent of that bank, said a press release from the Reserve Bank of India.

The LC can be negotiated subject to the condition that the proceeds will be remitted to the regular banker of the beneficiary.

The guidelines will come into effect with immediate effect, said the release.

Banks can also negotiate bills drawn under LCs, on ‘with recourse’ or ’without recourse’ basis, as per their discretion and based on their perception about the credit worthiness of the LC issuing bank.

Banks were earlier allowed to purchase, discount or negotiate bills under LC only in respect of genuine commercial and trade transactions of their borrower constituents who have been sanctioned regular credit facilities by the banks, the release said.

They were therefore, not allowed to extend fund-based credit facilities (including bills financing) to a non-constituent borrower or a non-constituent member of a consortium or multiple banking arrangement.

The prohibition regarding negotiation of unrestricted LCs of non-constituents and restriction on purchase or discount of other bills (the bills drawn otherwise than under LC) on ‘without recourse’ basis will continue to be in force.

More Stories on : Credit Market | Financial Policy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Monetary Policy Review — Managing the tide

Forex reserves up $3.31 b

PSBs post 47% profit growth in first quarter

Daimler ties up with ICICI Bank

ABN Amro mulls opening India-centric pvt equity fund

United Bank cuts domestic term deposit rates

Recap bonds converted into G-Secs

Bond prices up 19 paise

IRFC raises Rs 1,200 cr through domestic bonds issue

Credit info cos: 49% cap on foreign investment likely

RBI unveils new norms on letter of credit

Call ends higher at 2-2.25%

Deregulation hits non-life insurers’ premium accretions in Q1