Nirav Modi Scam Explained | PNB Fraud Case Study in English | ShareMarketStudies
The scam of Rs 11000 Cr happened because of LOU. Now, what is LOU? Let me explain in detail. First of all, guys, let me make you understand what is buyers credit? If you are importing some goods from a foreign country, then to make payment if you are taking a loan from the foreign branch of an Indian bank for the short term, this process is called buyer’s credit. Suppose you have an account in PNB and you imported some goods. Then you will go to a foreign branch and ask them to give the buyer’s credit to pay to the supplier. Then the bank officials will check the documents and provide you with the buyer’s credit. You will have to give some security deposit to the bank as well. Along with this, your bank means PNB would have to provide LOU to that foreign branch, after that only you will get buyer’s credit. LOU means Letter of Understanding. It guarantees that the foreign bank will receive the principal amount + interest in a given period. If you fail to return loan money to a foreign bank, then your bank will have to pay your loan with interest.
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