What changed
Exim Bank signed a Line of Credit agreement with the Government of Tanzania on May 28, 2009, effective January 11, 2010, for USD 40 million. The credit covers eligible goods and services, including consultancy, with a minimum 85% Indian content. Last date for LC opening and disbursement is 48 months from project completion or 72 months (May 27, 2015) for other supply contracts.
What it means for you
Indian exporters of tractors, pumps, and equipment now have a government-backed financing route to Tanzania, reducing payment risk. AD banks must ensure shipments are declared on GR/SDF forms and that no agency commission is paid from the LOC proceeds. Banks can allow commission remittance from exporter's own resources after full payment realization.
What you must do
- Inform exporter constituents about the LOC and direct them to Exim Bank for full details.
- Ensure shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Verify that at least 85% of contract value is sourced from India before processing payments.
- Allow agency commission remittance only from exporter's own resources or EEFC account after full contract payment realization.
- Comply with FEMA sections 10(4) and 11(1) and other applicable laws.
Who it affects
AD Category-I banks, Indian exporters of tractors, pumps, and equipment, Exim Bank
What is the minimum Indian content required 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, no agency commission is payable under the LOC. However, exporters may use their own resources or EEFC balances for commission after full payment realization.
What are the key deadlines for this LOC?
For project exports, LCs must be opened and disbursed within 48 months from scheduled completion. For other supply contracts, the deadline is 72 months from the credit agreement execution date (May 27, 2015).