United Bank of India (UBI) has dismissed reports claiming the bank is at risk of default by extending credit lines of around the US$132 million.

The bank has explained that the credit lines were extended against letters of credit (L/Cs) issued by reputable banks.

Banking practice

State-run UBI says that its New Delhi branch had extended the credit lines against L/Cs, most of which were issued by public sector banks.

The bank said that under these circumstances it complied with all necessary requirements to verify the underlying physical goods that it had extended credit to 150 accounts.

Another denial

The bank added that the credit lines were extended during the course of L/C discounting, which it explained was a part of normal banking practice.

Besides which, UBI says its exposure to the credit lines is now down to just US$27 million.

The bank also issued a denial of reports that it was about to merge with rival Union Bank of India.

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