Fino-Graphic #3 – L.O.U.

– Prasun Banerjee,   Editor TJEF

The banking system functions on the very foundation of trust between the lender and the creditor. Businessmen borrow money to build assets which supposedly churn more money when put to use. These businesses should have the competitive advantage to repay not only the principle but also the timely interests attached with the borrowed sum from the banks. Yet, history has numerous examples, when people tried to dupe the system and exploit loopholes to embezzle.

One such facility (/loophole) being employed on Indian banks have recently heated up the socio-political environment. The dent that has been caused on the coffer of Punjab National Bank (PNB) is in the tune of one-third of the re-capitalization amount that the bank is allocated. The LOUs which have led to such a massive loss, is being explained in a pictorial format.

LOU stands for Letter Of Undertaking

LOU