What changed
Exim Bank signed a Line of Credit agreement with Zambia on January 6, 2010, effective March 4, 2010, for USD 50 million to finance the Itezhi-Tezhi hydro power project. The circular outlines the sourcing requirement (85% from India), timelines for LCs and disbursement, and commission payment rules.
What it means for you
Indian exporters can now access this LOC to supply goods and services for the Zambia hydro project, with a mandatory 85% local content. AD banks must ensure compliance with GR/SDF form declarations and the no-agency-commission rule, though exporters can use their own EEFC funds for commissions if needed.
What you must do
- Inform exporter clients about the LOC and its 85% India-sourcing requirement.
- Ensure shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Allow remittance of agency commission only after full contract payment is realized, using exporter's own resources or EEFC balances.
- Advise exporters to contact Exim Bank for full LOC details.
Who it affects
AD Category-I banks, Indian exporters of goods and services, Exim Bank
What is the minimum India-sourcing 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.
What are the key timelines for this LOC?
The credit agreement is effective from March 4, 2010. For project exports, LCs must be opened and disbursed within 48 months of scheduled completion; for supply contracts, within 72 months from the agreement date (January 5, 2016).
Can agency commission be paid 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 payment is realized.