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Discontinuance of LoU/LoC Will Have Limited Bearing on Exports: FIEO

New Delhi:

Port Wings News Network:

Reacting to the RBI Notification discontinuing Letter of Undertaking (LoU) and Letter of Comfort (LoC), Mr Ganesh Kumar Gupta, President, FIEO said that the move will have limited impact as such instruments were being used by about 5% of the importers particularly by large industries in Gems & Jewellery, Metal and Petroleum sectors. President, FIEO said that since most of the exporters are using Letter of Credit and Bank Guarantees, which are relatively safe, the move will not have much adverse bearing on exports. However, this may slightly increase the cost as such instruments are costlier by about 0.5% to 1%.  He added that none of the instruments are 100% safe and therefore, we should carefully evaluate its pros & cons before discontinuing LoU and LoC as similar kind of instruments are in vogue elsewhere as well.

Mr Gupta said that Banks should not tighten the liquidity to Gems & Jewellery sector as the sector is coming back on track due to good order booking from US, Europe, China, Japan as well as demand within the country. The sector is extremely important as it provides exports to about US$ 43 billion but more importantly gives employment to over 5 million artisans and workers.

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