Reserve Bank of India has discontinued the issuance of letters of undertaking (LoU) and letters of comfort (LoC) for trade credit by banks. The move has attracted a lot of anticipations as to what will its impact be on corporates or banks.

Rajkiran Rai G, Managing Director & CEO of Union Bank of India said that there was not going to be any significant effect on corporates as they always had an option to shift to other norms of raising capital.

"Cost wise, it will make a difference to the customer so they may have to shift to more of documentary credit like letter of credit kind of thing", said Rajkiran.

The UBI chief also said that LoUs which were already issued will get squared off in the course of time.

According to Rai, deposit rates are firming up and the reasonable rate for bond yields should be 7.8-7.6. There is no selling or buying happening in the market because of lack of action in this market.

First Published:Mar 14, 2018 6:14 AM IST