{"id":6259,"date":"2023-03-20T11:10:39","date_gmt":"2023-03-20T05:40:39","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=6259"},"modified":"2025-03-27T13:44:51","modified_gmt":"2025-03-27T08:14:51","slug":"what-is-a-letter-of-comfort-loc","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/what-is-a-letter-of-comfort-loc\/","title":{"rendered":"What is a Letter of Comfort (LoC)?"},"content":{"rendered":"<h2><strong>About Letter of Comfort (LoC):<\/strong><\/h2>\n<ul>\n<li><strong>What is it?<\/strong> An LoC is a <strong>letter issued to a lending institution<\/strong> <strong>by a stakeholder of the company acknowledging the support<\/strong> of the attempt <strong>for financing asked by that company.<\/strong><\/li>\n<li>They are usually issued by a <strong>third party or a stakeholder in the transaction<\/strong>.<\/li>\n<li>For instance, <strong>a holding company<\/strong> <strong>can give<\/strong> an <strong>LoC<\/strong> <strong>on behalf of its subsidiary,<\/strong> or a <strong>government<\/strong> can issue a letter of comfort <strong>for PSUs.<\/strong><\/li>\n<li>It is <strong>not legally binding<\/strong> and <strong>does not imply<\/strong> that the <strong>parent company guarantees repayment<\/strong> of the loan being sought by the subsidiary company.<\/li>\n<li>It <strong>merely gives reassurance<\/strong> to the lending institution <strong>that the<\/strong> <strong>parent company is aware of the credit facility being sought<\/strong> by the subsidiary company and supports its decision.<\/li>\n<li>This <strong>provides some comfort to the financial institution to lend money<\/strong> for the short term or long term.<\/li>\n<li>It, thus, is a <strong>moral rather than a legal obligation<\/strong> for the borrower.<\/li>\n<li>It <strong>can also be issued by banks<\/strong>, <strong>NBFCs, and auditors.<\/strong><\/li>\n<li>It <strong>lays down the contract conditions<\/strong> and steps to <strong>complete the transaction successfully<\/strong>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3>Q1)\u00a0What is a Letter of Guarantee?<\/h3>\n<p>A letter of guarantee is a contract issued by a bank on behalf of one of their customers who has entered into a contract to buy goods or services from a supplier. The letter of guarantee lets the supplier know that they will receive payment, even if the bank customer defaults.<br \/>\n<strong>Source:<\/strong>\u00a0<a href=\"https:\/\/www.outlookindia.com\/business\/psus-asked-to-issue-locs-based-on-their-financial-strength-news-271676\" target=\"_blank\" rel=\"nofollow noopener\"><u>PSUs Asked To Issue LoCs Based On Their Financial Strength<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Letter of Comforts are usually issued by a third party or a stakeholder in the transaction.<\/p>\n","protected":false},"author":5,"featured_media":6260,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-6259","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6259","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=6259"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6259\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/6260"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=6259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=6259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=6259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}