RBI issues fresh norms for bill discounting under LC

Mumbai, Mar 29 (UNI) Reserve Bank has said that the bills purchased, discounted or negotiated under Letter of Credit (LC) where the payment to the beneficiary is not made 'under reserve', will be treated as an exposure on the LC issuing bank and not on the borrower.

All clean negotiations as indicated, will be assigned the risk weight as is normally applicable to interbank exposures, for capital adequacy purposes, a Reserve Bank notification said.

In case of negotiations 'under reserve', the exposure should be treated as on the borrower and risk weight assigned accordingly, the notification added.

The revised guidelines will come into operation with immediate effect.

UNI GC KU AW1612