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RBI/2017-18/39
DGBA.GBD.No.279/31.02.007/2017-18
August
3, 2017
All Agency Banks
Dear Sir / Madam
Government Banking - Issue of
Letters of Credit and Bank Guarantee
Please refer to Circular No.
DGBA.GAD.No.H.6254/31.03.002/2011-12 dated March 28, 2012 regarding
procedure relating to Letter of Credit (LC) enclosing a copy of letter
dated November 30, 2011 issued by the Office of Controller General of
Account.
2. A review has been undertaken
on the entire gamut of LC/BG transactions and it is decided that RBI will
continue not to issue LCs on behalf of government and will not act as an
issuing or advising bank for government as far as transactions related to
BGs are concerned. The government department concerned would be directly
taking up the matter with any commercial bank identified by them and all
matters concerned with the issuances of LC should be dealt with by the
government and the commercial banks, without involving RBI. As LC/BG
business is not part of agency banking, government can choose any
commercial bank for this purpose. The role of RBI is strictly limited to
reimbursement of payments made by the banks for such LCs/BGs on behalf of
the government, after satisfying itself with the debit mandate given by the
government. Further, RBI may not issue any letter advising / recommending
opening of LC/BG to the commercial banks on behalf of government
department.
Yours faithfully
(Partha Choudhuri)
General Manager
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