Discontinuation of LoU/Buyer's Credit

The Reserve Bank of India has decided in the month of March-2018 to discontinue issuance of letters of undertaking (LoU) and letters of comfort (LoC) for trade credit for imports into India. Authorised dealer-1 (AD-1) category banks will not be allowed to issue LoCs and LoUs for this line of business, the regulator said in a notification on its website. Banks may continue to issue letters of credit and bank guarantees for trade credit for imports into India as per the current guidelines applicable, the notification added.This is part of a series of moves from the RBI after details of the Nirav Modi scam came to light. In the case, Nirav Modi’s associates approached the domestic branch of Punjab National Bank to issue fraudulent LoUs to foreign branches of other Indian banks through the SWIFT network. These LoUs were not registered in the core banking system for PNB. This means that the bank was virtually unaware of any such transactions taking place. The difference between these products is that LoUs and LoCs were issued by domestic banks at the behest of the importer. The importer would negotiate the right price for these loans from the foreign branches of other Indian banks and then get these letters issued by a domestic bank. The exporter, or seller, would be paid from the nostro account.In the case of letters of credit and bank guarantees, domestic banks issue these in favour of the exporter, or seller’s, bank. Typically in these transactions, the seller would take the foreign exchange cost and would build that into the price of the product. LoUs in itself were a good product and the fraud at PNB was more of a systemic issue. Banking industry is having inherent risk like other segments. Hence Govt/RBI/Banks are required to ensure that transaction happening through any window is genuine rather than closing the window for always. Domestic buyer has to arrange for rupee or foreign currency funds to make the payment on the due date which actually was going to take place after 1 or 3 year.It would not only increase liquidity problems to domestic players but would come with other problems also.

EDPMS: Export Data Processing and Monitoring System RBI has directed AD Category-I Banks to update the EDPMS with data of export proceeds on “as and when realised basis” and, with effect from October 16, 2017 generate Electronic Bank Realisation Certificate (eBRC) only from the data available in EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC. Nice initiatives taken by RBI to monitor export related information on real time basis. Here we need to understand the EDPMS data. There are 2 legs mainly: 1)- Shipping bill is being generated by customs. 2)- That shipping bill is being transferred to RBI EDPMS data. If there is any issue in data related with shipping bill, Exporter need to contact the custom for taking corrective action.For example, that shipping bill status is LEO Cancelled or the same was sample bill and exporter did not submit GR waiver. There may be other cases also. In 2nd case, banks handling the documents need to clear the GR with received payments/ as per RBI guidleines WOFF, extension etc whatever is possible. As observed by me, at present, bills are appearing due to below mentioned reasons: > BRCs has been generated while it is showing pending.: In this, first check the AD code bills appearing in Shipping Bills, and if AD code of other Bank is appearing, transfer the same in your AD and clear the entry with the help of data center or whatever the process is there. Particular in this case, Banks are more responsible to clear the entries as payment has already been received.\ > LEO Cancelled/SAMPLE BILLS (Where GR waiver was not taken): In such case, one of the solution is to make necessary correction at customs and clear the same entry. > In case of non receipt of payment/any other technical reason: Follow the master circular of Export of goods and services dated 01.01.2016 updated on 12.05.2016 for taking corrective action. Basically where payment has been received, Banks who handled the documents has to be more proactive to clear the bills. Above are illustrative and based on while working on EDPMS.

Working in office on holidays/Late Hours.

Working in office on holidays. It seems that bank officials wait for holidays to finish the important tasks. During the 6 year in Bank's service, i worked in various offices/branches and find that whenever there is a long holiday (between 2 to 4 days), management always have some important works and passes the orders to open the office to finish this task. In my view, there may be only below mentioned reasons which I find if any task does not finish on deadlines: > Due to over burden work on staff: Bank may recruit the staff as per their requirement to address the issue. > Staff is not enough to motivate: Consult with reporting authority and make proper counseling. If even after enough counseling, staff does not improve, take stern action as per rules. >Unskilled staff: In such case, either Bank may provide proper training or on the job training, reporting authority (BOSS) either to guide them properly or assign the task according to their skills with a patience. There may be other reason, but i find these reasons more valid. Due to the continuous working in office on holidays/late hours, it is going to only decrease the efficiency and demotivation in major of staff after a certain period . As such condition is not going to work in a long run and would not be able to run a long show.I think that Banks need to address such HR issues appropriately to ensure a more productive working environment at their earliest.

BANK FRAUD MERGER BIPERTIE

As of now everyone is aware about the position of Banking Sector and after the case of NIRAV MODI, everyone is advising PSUs for improvement in working even though they do not know the even ABCD of Bank. Anyway, the only banking industry is responsible for the same due to adopted wrong practices for gaining the short term benifits. I always fail to understand: What is the purpose of Loan Mela. If PSUs would improve their services basically IT enabled services and would focus to reduce TAT for services would more than enough for growth. What happens in Loan Mela is known to everyone. I have never seen the person who defaults is in trouble, its always a banker who has all the worry to ensure the account as standard. Unfortunately, i have also become the part of such worry. There must be a worry to borrower for repayment not the Banker. Since bankers are not GOD or superhuman who will read the intention of borrower while sanctioning loans. They go by the paper and their experience and if finds correct, they go ahead. It is the borrower who has no will to repay the loans due to obvious reasons and RIN MAFI Schemes are one of them. In place of RIN MAFI, there should be other way to help the needy people. As RIN MAAFI always hurts the honest people and developing the tendency of default or make RIN MAFI to all including who paid well in time. Fraud: Today it seems that account turning into NPA is being called as a FRAUD particularly after the case of NIRAV MODI, but that is not right at all. As explained, account turns into NPA when borrower does not pay and sanctioning after the following norms, just due to bad intent of borrower, banks cant be responsible. Fraud may be called where bank's did not comply the guidelines properly and ignored the same due to malafide intention/ give specific benifits to individual.