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
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.