RBI Disallows Use of Letters of Comfort: To Impact Debt Worth Rs. 35,000 Crore The Reserve Bank of India (RBI) has prohibited the usage of Letters of Comfort (LoC), a document that gives a guarantee of support to the borrower without any promise to make good any defaults.
- This move will downgrade the credit ratings of roughly 100 firms, equal to Rs. 35,000 crore of debt.
All credit rating agencies (CRAs) were instructed to disregard these letters in a guidance note and Frequently Asked Questions (FAQs) document that the RBI published in 2022 on April 22 and July 26, respectively