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However, while discounting such payments, banks should be sure that actual companies are rendered and accommodation payments aren’t discounted. Further, providing finance against discounting of providers sector payments could additionally be treated as unsecured advance and therefore, should be within the norm prescribed by the Board of the bank for unsecured exposure restrict. Banks ought to open letters of credit score and buy / low cost / negotiate bills under LCs solely in respect of real business and trade transactions of their borrower constituents who’ve been sanctioned common credit amenities by the banks. Banks mustn’t, therefore, extend fund primarily based or non-fund based mostly services like opening of LCs, offering guarantees and acceptances to non-constituent borrower or / and non-constituent member of a consortium / multiple banking association. However, the Boards of banks could make an exception in specific instances, where essential, for financial viability of the project.
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