Who is being protected in PNB fraud case: Letter to BS

Why are only low-level officers being questioned: Business Standard reader questions

The letters of undertaking (LoU), letters of credit and guarantees are credit facilities extended by banks that fall under the head of Non-Fund Based (NFB) limits. An NFB limit is like a rock on a slope possessing potential energy. The moment it rolls down that potential energy translates to kinetic energy. With NFB limits, the moment the goods arrive and the document “crystallises” it automatically becomes a fund-based liability and the NFB issuing bank is under obligation to retire the documents. That is why before an NFB limit is sanctioned it is necessary to have the fund-based facility in place.