What changed
Exim Bank signed a Line of Credit agreement with Eritrea on August 24, 2009, effective October 1, 2009, for USD 20 million. The credit is split equally between multipurpose agricultural projects and educational projects, each capped at USD 10 million. At least 85% of contract value must be sourced from India, with the remaining 15% allowed from outside India for non-consultancy goods.
What it means for you
Indian exporters can now access this credit facility to supply goods and services for Eritrea's agricultural and educational sectors. Banks must ensure compliance with the 85% Indian content rule and handle remittances for any agency commission only after full contract payment is realized. The last date for opening LCs is 48 months from project completion for project exports, or 72 months from the credit agreement date for supply contracts.
What you must do
- Inform exporter customers about the USD 20 million LOC to Eritrea and direct them to Exim Bank for full details.
- Verify that at least 85% of contract value is sourced from India for shipments under this LOC.
- Ensure GR/SDF forms are correctly declared for all shipments under this credit.
- Allow agency commission remittances only after full contract payment is realized and from exporter's own resources or EEFC balances.
- Monitor that no agency commission is paid from the LOC proceeds.
Who it affects
AD Category-I banks, Indian exporters to Eritrea, Exim Bank
What is the total value of the Line of Credit to Eritrea?
The LOC is USD 20 million, split equally between agricultural projects (up to USD 10 million) and educational projects (up to USD 10 million).
What is the Indian content requirement under this LOC?
At least 85% of the contract price must be supplied from India; the remaining 15% (excluding consultancy) can be procured from outside India.
Can agency commission be paid from the LOC proceeds?
No, agency commission is not payable under this LOC. If needed, exporters must use their own resources or EEFC balances, and remittance is allowed only after full contract payment is realized.