New Delhi, April 05, 2018: The Reserve Bank of India’s (RBI) decision to ban letters of undertaking (LoUs) and letters of comfort (LoCs) as trade finance instruments is likely to limit the overall financial flexibility of Indian importers, says India Ratings and Research (Ind-Ra).
The curb on the mobilisation of foreign currency working capital funds is likely to translate into liquidity pressure and higher funding costs for small and medium-sized corporates in the short term. Meanwhile, the impact on large-sized (revenue above Rs 7.
5 billion) players is likely to be lower.
Therefore, Ind-Ra expects the aggregate interest coverage of the top 160 importers by import value that avail buyer’s credit to contract by about 0.
United News Of India
