Knee-jerk reaction: Letters to BS on RBI's ban on issuing LoUs

This refers to the report that “RBI halts issue of LoUs” (March 14). This is an apt case of a knee-jerk reaction. It is analogous to closing the stable door after horses have bolted. The Reserve Bank of India (RBI), instead of being proactive, has again proved to be reactive and this move is certainly an after-thought. This decision will have far reaching consequences and impact genuine importers. The RBI will do well if it asks banks to connect their systems to SWIFT and do a meticulous credit appraisal on a case-to-case basis and ensure that genuine businessmen are least impacted. A checklist of sanction, appraisal and reporting must be prescribed by the RBI. The accountability clause should also be imposed. Collateral securities, personal guarantees and reasonable margins may be taken to secure the position of banks.

B Venkateswaran  Chennai

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