What changed
RBI has informed AD Category-I banks about a new Line of Credit agreement between Exim Bank and Myanma Foreign Trade Bank, effective September 19, 2008. The LOC of USD 64.07 million is for financing three transmission line projects in Myanmar executed by Power Grid Corporation of India. Key timelines: last date for L/C opening and disbursement is 48 months from project completion for project exports, or 72 months (June 23, 2014) from agreement execution for supply contracts.
What it means for you
Banks must facilitate export transactions under this LOC by handling GR/SDF form declarations and allowing remittance of agency commission from exporter's own resources or EEFC accounts after full contract value realisation. The 85% Indian content requirement ensures significant domestic sourcing. No agency commission is payable under the LOC itself, but banks can process such payments if exporters use their own funds.
What you must do
- Inform exporter constituents about this LOC and advise them to contact Exim Bank for full details.
- Ensure shipments under this LOC are declared on GR/SDF forms as per prevailing RBI instructions.
- Process agency commission remittances only after full contract value realisation and from exporter's own resources or EEFC accounts.
- Verify that at least 85% of contract value goods and services are sourced from India as per the agreement.
Who it affects
AD Category-I banks handling export transactions under this LOC, Exporters dealing with Power Grid Corporation of India's Myanmar transmission line projects, Exim Bank and Myanma Foreign Trade Bank
What is the last date for opening Letters of Credit under this LOC?
For project exports, the last date is 48 months from the scheduled completion date of the contract. For supply contracts, it is 72 months from the execution date of the Credit Agreement, i.e., June 23, 2014.
Can agency commission be paid under this LOC?
No agency commission is payable under the LOC itself. However, exporters may use their own resources or EEFC account balances to pay commission in free foreign exchange, and AD banks can allow such remittance after full contract value realisation.
What is the minimum Indian content requirement for exports under this LOC?
At least 85% of the contract price must consist of goods and services supplied from India. The remaining 15% (excluding consultancy services) may be procured from outside India.