What is Letter of Undertaking (LOU)

Define Letter of Undertaking (LOU)?

Letter of undertaking (LOU) is a bank guarantee under which a bank allows its customers to raise money from another bank generally a foreign branch of Indian Bank in the form of short-term credit. In return for Letter of undertakings (LOUs), Banks asked for collateral or guarantee (margin requirement), which could be in the form of fixed deposit or other assets.

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