A.P. (DIR Series) Circular No. 20
All Authorised Dealer Category –
Discontinuance of Letters of
Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits
Attention of Authorised Dealer
Category - I (AD Category - I) banks is invited to paragraph 2 of A.P.
(DIR Series) Circular No. 24 dated November 1, 2004 and paragraph No. 5.5 of Master Direction
No.5 dated January 1, 2016 on ‘External Commercial Borrowings, Trade
Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and
Persons other than Authorised Dealers’ (Master Direction), as amended from
time to time, on the issuance of LoUs/ LoCs/ guarantees for Trade Credits
for imports into India under delegated powers of AD banks.
2. On a review of the extant
guidelines, it has been decided to discontinue the practice of issuance of
LoUs/ LoCs for Trade Credits for imports into India by AD Category –I banks
with immediate effect. Letters of Credit and Bank Guarantees for Trade
Credits for imports into India may continue to be issued subject to
compliance with the provisions contained in Department of Banking Regulation Master
Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on
“Guarantees and Co-acceptances”, as amended from time to time.
3. AD Category-I banks may bring
the contents of this circular to the notice of their constituents and
4. The aforesaid Master
Direction No. 5 dated January 01, 2016 will be updated to reflect the
changes. The changes will be applicable from the date of issuance of this
5. The directions contained in
this circular have been issued under sections 10(4) and 11(1) of the
Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions/ approvals, if any, required under any other law.
Chief General Manager