What changed
RBI issued a circular informing AD Category-I banks about Exim Bank's new Line of Credit (LOC) of USD 5 million to the Nigerian Export-Import Bank, effective December 4, 2007. The LOC covers eligible exports under India's Foreign Trade Policy, with a minimum 85% Indian content requirement. Letters of Credit must be opened and disbursements completed by December 3, 2009.
What it means for you
Indian exporters now have a dedicated credit facility to finance exports to Nigeria, reducing payment risk and potentially boosting trade. Banks must ensure that at least 85% of the contract value is sourced from India and that shipments are declared on GR/SDF forms. Commission rules are strict: no agency commission generally, but up to 5% may be allowed for after-sales service with prior RBI approval, reimbursed at 90% of invoice value.
What you must do
- Inform exporter clients about the LOC and direct them to Exim Bank's Mumbai office for full details.
- Ensure that for exports under this LOC, at least 85% of contract value is supplied from India.
- Verify that shipments are declared on GR/SDF forms as per prevailing RBI instructions.
- Process commission payments only as per circular: no agency commission generally; for after-sales service, require prior RBI approval and reimburse at 90% of invoice value.
- Allow remittance of agency commission from exporter's own resources or EEFC account only after full contract value realisation, subject to existing guidelines.
Who it affects
AD Category-I banks handling export transactions to Nigeria, Indian exporters of capital goods, engineering goods, industrial manufactures, consumer durables, commodities, and services, Exim Bank and Nigerian Export-Import Bank
What is the minimum Indian content requirement for exports under this LOC?
At least 85% of the contract price must be supplied by the seller from India.
Can exporters pay agency commission on these exports?
Generally no agency commission is payable. However, for exports requiring after-sales service, up to 5% commission may be allowed with prior RBI approval, reimbursed at 90% of invoice value. For other cases, commission can be paid from exporter's own resources or EEFC account after full payment realisation.
What is the deadline for opening Letters of Credit under this LOC?
The last date for opening Letters of Credit and disbursement is December 3, 2009, which is 24 months from the effective date of the agreement (December 4, 2007).