Source: Reserve Bank of India · RBI/2004-05/373 · issued 22 Feb 2005 · ~2 min read
Quick answerRBI notified a USD 5 million Exim Bank line of credit to Lesotho for financing Indian exports of capital goods, machinery, and consumer durables and other items eligible under Foreign Trade Policy. Letters of credit must be opened by Jan 31, 2007, and disbursements by Jul 31, 2007. Agency commission rules are specified; for after-sales service exports, commission up to 5% of f.o.b./c&f/c.i.f. value may be considered by RBI on merit, paid in Lesotho by deduction from invoice, with Exim Bank reimbursing 90% of f.o.b./c&f/c.i.f. value minus commission paid.
The rule, in the simplest words
India's Exim Bank gave a 5 million US dollar loan to Lesotho so Indian companies can sell things like machines and TVs there.
All sales using this loan must have their letter of credit (a promise to pay) opened by January 31, 2007, and money given out by July 31, 2007.
If a product needs after-sales service (like fixing or help after buying), a commission (extra fee) up to 5% of the invoice value can be paid to an agent in Lesotho, but only if the Reserve Bank says yes first.
For products that don't need after-sales service, any commission to an agent must be paid by the exporter from their own money, not from this loan.
When a commission is allowed, Exim Bank will pay back 90% of the invoice value minus that commission to the bank that handled the payment.
How it plays out — a real example
A forex & trade-finance officer in Indore is helping an exporter who wants to sell water pumps to a buyer in Lesotho under this Exim Bank credit. The officer checks that the letter of credit is opened before January 31, 2007, and reminds the exporter that if the pumps need after-sales service, any agent commission in Lesotho needs prior RBI approval and is capped at 5% of the invoice value, with Exim Bank reimbursing 90% minus that commission.
What changed
Exim Bank signed an agreement with the Government of Lesotho on Oct 12, 2004, for a USD 5 million line of credit, effective Feb 1, 2005. This circular informs authorised dealers about the credit terms, including last dates for LC opening and disbursement, and commission payment rules.
What it means for you
Banks can now facilitate Indian exports to Lesotho under this credit, with clear timelines and documentation requirements. The commission up to 5% of f.o.b./c&f/c.i.f. value for after-sales service exports (subject to RBI approval on merit) and the 90% reimbursement rule (minus commission) impact how banks process payments and advise exporters.
What you must do
Inform exporter customers about the USD 5 million Exim Bank line of credit to Lesotho and its terms.
Ensure shipments under this credit are declared on GR/SDF forms as per existing instructions.
Advise exporters that agency commission for after-sales service exports requires prior RBI approval and is capped at 5% of invoice value, paid only in Lesotho.
Remind exporters that for exports without after-sales service, any agency commission must be paid from their own resources.
Who it affects
Authorised dealer banks handling export transactions, Exporters of capital goods, machinery, industrial manufactures, and consumer durables to Lesotho, Exim Bank
❓ Common questions
Regulatory timeline
Stated effective dateeffective Feb 1, 2005
Decoded by BankPulse2026-06-19 21:13 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the last date for opening letters of credit under this line of credit?
Letters of credit must be opened by January 31, 2007.
Can agency commission be paid for exports under this credit?
Yes, but only for exports requiring after-sales service, with prior RBI approval, capped at 5% of invoice value, and paid only in Lesotho by deduction from the invoice.
📜 Read the original circular — full text as issued by RBI
RBI/2004-05/373
A.P. (DIR Series) Circular No.35
February 22, 2005
To
All Banks Authorised to Deal in Foreign Exchange
Madam /Sirs,
Exim Bank's Line of Credit of USD 5 million
to Government of Lesotho
The Export-Import Bank of India (Exim Bank)
has concluded an agreement with the Government of Lesotho on October 12, 2004
making available to the latter a Line of Credit (LOC) upto an aggregate sum
of USD 5 million (US Dollar five million only). The credit is available for
financing export of capital goods, plant and machinery, industrial manufactures,
consumer durables and any other items eligible for being exported under Foreign
Trade Policy of the Government of India, from India to buyers in Lesotho.
2. The credit agreement has become effective
on February 1, 2005. The last dates for opening letters of credit and disbursement
of credit are January 31, 2007 and July 31, 2007 respectively.
3. Shipments under the credit will have to be
declared on GR/SDF Forms as per instructions issued from time to time.
4. While no agency commission shall be payable
in respect of exports financed under the above line of credit, Reserve Bank
may consider, on merit, requests for payment of commission upto a maximum extent
of 5 per cent of the f.o.b./c&f/c.i.f. value in respect of goods exported
and which require after sales service. In such cases, commission will
have to be paid in Lesotho only by deduction from the invoice of relevant shipment
to agents in Lesotho only and the reimbursable amount by the Exim Bank to the
negotiating bank will be 90 per cent of the f.o.b./c&f/c.i.f. value minus
the commission paid. Approval for the payment of commission should be obtained
before the relevant shipment is effected. In other cases (i.e. exports not involving
after sales service), if the exporter is required to pay agency commission,
he will have to use his own resources for such payments.
5. Authorised Dealer Banks may bring the contents
of this circular to the notice of their exporter constituents and advise them
to obtain full details of the Line of Credit from Exim Bank's office or its
website.
6. The directions contained in this circular
has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management
Act (FEMA), 1999 (42 of 1999) and is without prejudice to permissions / approvals,
if any, required under any other law.
Yours faithfully,
(F.R. Joseph)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2004-05/373 · issued 22 Feb 2005. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Authorised dealer banks handling export transactions, Exporters of capital goods, machinery, industrial manufactures, and consumer durables to Lesotho, Exim Bank), your first concrete step on “Exim Bank USD 5 mn Line of Credit to Lesotho” is: “Inform exporter customers about the USD 5 million Exim Bank line of credit to Lesotho and its terms.” (RBI issued this 22 Feb 2005).
Circular: RBI/2004-05/373 -- Exim Bank USD 5 mn Line of Credit to Lesotho
Issued: 22 Feb 2005
Action required: Inform exporter customers about the USD 5 million Exim Bank line of credit to Lesotho and its terms.
Action required: Ensure shipments under this credit are declared on GR/SDF forms as per existing instructions.
Action required: Advise exporters that agency commission for after-sales service exports requires prior RBI approval and is capped at 5% of invoice value, paid only in Lesotho.
Action required: Remind exporters that for exports without after-sales service, any agency commission must be paid from their own resources.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2137&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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