What changed
RBI circular informs AD Category-I banks about a new line of credit (LOC) of USD 5 million from Exim Bank to the Eastern African Development Bank (EADB), Kampala, Uganda. The LOC, effective June 26, 2007, supports Indian exports of eligible goods and services to Uganda, Kenya, and Tanzania under India's Foreign Trade Policy. It sets terminal dates for opening letters of credit (June 25, 2009) and disbursements (December 25, 2009).
What it means for you
Banks can now facilitate export transactions under this LOC, ensuring compliance with GR/SDF form declarations and agency commission rules. For exports requiring after-sales service, agency commission up to 5% of f.o.b. value is allowed with prior RBI approval, and Exim Bank reimburses 90% of f.o.b./c.f.r./c.i.f. value. For other exports, commission must be paid from exporter's own resources or EEFC account after full payment realization.
What you must do
- Inform exporter customers about the LOC and direct them to Exim Bank for full details.
- Ensure all shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Verify that no agency commission is paid for exports under this LOC unless prior RBI approval is obtained for after-sales service cases.
- For after-sales service exports, allow commission up to 5% f.o.b. only after RBI approval and ensure Exim Bank reimbursement is 90% of invoice value.
- For other commission payments, allow remittance from exporter's EEFC account or own resources only after full contract value realization.
Who it affects
AD Category-I banks handling export transactions, Exporters of eligible goods and services to Uganda, Kenya, and Tanzania, Exim Bank and its negotiating banks
What is the purpose of this USD 5 million line of credit?
It finances Indian exports of eligible equipment, goods, and services to member countries of the Eastern African Development Bank (Uganda, Kenya, and Tanzania) under India's Foreign Trade Policy.
Can agency commission be paid for exports under this LOC?
Generally no, except for exports requiring after-sales service. In such cases, commission up to 5% of f.o.b. value is allowed with prior RBI approval, and Exim Bank reimburses 90% of the invoice value.
What are the key deadlines for this LOC?
Letters of credit must be opened by June 25, 2009, and disbursements completed by December 25, 2009. The LOC became effective on June 26, 2007.