PHDCCI Urges RBI to Ease Credit Flow, Standardise LoC Discrepancy Norms

Industry body PHD Chamber of Commerce and Industry (PHDCCI) has urged the Reserve Bank of India (RBI) to enhance credit flow to small businesses and address operational challenges in trade finance, including inconsistencies in handling discrepancies in letters of credit (LoC) by banks.

In a statement, PHDCCI said its leadership met RBI Governor earlier this week and flagged concerns around delays and uncertainties faced by businesses due to varying practices followed by issuing banks while dealing with LoC discrepancies.

The chamber called on the central bank to introduce clear and uniform guidelines mandating banks to honour LoC documents in cases where discrepancies have been formally waived by the applicant, except in situations involving fraud or material risk.

“The RBI may also prescribe uniform procedures and standardised documentation practices for discrepancy waivers, ensuring consistency across banks,” said Rajeev Juneja, President, PHDCCI.

According to the industry body, inconsistent handling of such cases has led to operational inefficiencies and increased transaction risks for businesses, particularly small and medium enterprises (SMEs) that rely heavily on trade finance instruments.

PHDCCI also raised concerns regarding alleged unfair practices by rating agencies, urging the RBI to look into the matter to ensure greater transparency and fairness in the credit ecosystem.

The recommendations come amid ongoing efforts to improve access to finance for small businesses, which remain a critical driver of economic growth and employment in the country.