The RBI added that the aforesaid Master Direction will be updated to reflect the changes.
Last month, Punjab National Bank reported fraudulent issuance of LoUs/ Foreign Letters of Credit for payment of import bills and fraudulent transactions in accounts, amounting to Rs 12,967.86 crore, to the RBI through its fraud monitoring reporting system.More news: Tottenham striker Harry Kane reportedly ruled out until May with ankle injury
LoUs and LoCs are two of the instruments issued by Indian banks to domestic importers to get foreign exchange from banks overseas at a cheaper rate.
In today's plea before the special CBI court, the agency said it has filed another supplementary complaint about additional fraud of Rs 942 crore, taking the total amount of fraud to Rs 7,080 crore.
RBI in 2015 only observed that banks are extending non-fund based credit facilities like guarantees / stand-by letter of credits / letter of comforts etc. on behalf of JV / WOS / WoSDS for purposes which are not connected with their business, rather, in certain cases, these facilities are used to avail foreign currency loans for repayment of Rupee loans.More news: Albert Wilson intends to sign with Dolphins
The RBI has already started a special audit of public sector banks wherein it will closely scrutinise their trade financing activities especially with regards to the issuances of LoUs. These firms raised short-term credit from overseas branches of other Indian banks based on these LoUs. They did not have any pre-approved credit limit either.
A senior banker said, "For import of rough diamonds, big suppliers accept only advance remittance".
Earlier in the day, Finance Minister Arun Jaitley in a written reply to a question in Rajya Sabha said that Nirav Modi obtained his first fraudulent guarantee from PNB's Brady House branch in Mumbai on March 10, 2011 and managed to get 1,212 more such guarantees over the next 74 months.More news: Heather Locklear domestic violence charges dropped