What changed
Exim Bank signed a Line of Credit agreement with Madagascar on November 14, 2008, effective December 4, 2008, for USD 25 million. The credit finances two projects: rice productivity ($10 mn) and fertilizer production ($15 mn). At least 85% of contract value must be sourced from India.
What it means for you
AD banks must facilitate exports under this LOC by handling Letters of Credit and disbursements within specified timelines. No agency commission is payable under the LOC, but banks can allow commission remittance from exporter's own resources after full payment realization. Banks need to ensure GR/SDF form declarations for shipments.
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.
- Allow remittance of agency commission only after full contract value realization and compliance with prevailing rules.
- Verify that at least 85% of contract price goods/services are sourced from India.
Who it affects
AD Category-I banks, Exporters dealing with Madagascar, Exim 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 (November 13, 2014).
Can exporters pay agency commission under this LOC?
No agency commission is payable under the LOC. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full contract value realization, subject to RBI guidelines.