What changed
Exim Bank signed a credit agreement with Nepal on September 14, 2007, effective January 1, 2008, providing a $100 million Line of Credit. The circular specifies minimum Indian content requirements: 85% for Devighat hydro repairs, 70% for transmission lines, and 50% for other projects. Last dates for LC opening and disbursement are 48 months from project completion or 72 months from agreement date.
What it means for you
Indian exporters can now tap this LOC to supply goods and services for Nepal's infrastructure projects, with clear local sourcing thresholds. AD banks must ensure proper documentation on GR/SDF forms and restrict agency commission payments; any commission must come from exporter's own resources or EEFC accounts after full contract value realization. This opens a structured financing channel for Indian exports to Nepal.
What you must do
- Inform exporter constituents about the LOC and direct them to Exim Bank for full details.
- Ensure all shipments under the LOC are declared on GR/SDF forms as per RBI instructions.
- Do not allow agency commission payments under this LOC; if needed, permit only from exporter's own resources or EEFC after full contract realization.
- Verify compliance with prevailing instructions on transactions with Nepal when processing remittances.
Who it affects
All Category-I Authorised Dealer banks, Indian exporters of goods and services to Nepal, Exim Bank
What is the minimum Indian content required for projects under this LOC?
For major repairs to Devighat hydro project, at least 85% of contract price must be from India; for interconnectivity/transmission lines, 70%; for other projects, 50%.
Can exporters pay agency commission under this LOC?
No agency commission is payable under the LOC. If required, exporters may use their own resources or EEFC balances for commission in free foreign exchange, but only after full contract value is realized.
What is the validity period for opening LCs under this credit?
For project exports, LCs must be opened within 48 months from scheduled completion dates; for other supply contracts, within 72 months from the credit agreement execution date (January 1, 2008).