What changed
Exim Bank signed a credit agreement on July 27, 2010, effective August 25, 2010, providing a USD 25 million LOC to PTA Bank. The LOC covers eligible goods and services under India's Foreign Trade Policy for exports to 17 specified African nations. Key timelines: LCs must be opened by August 24, 2013, and disbursements completed by February 24, 2014.
What it means for you
Indian exporters gain a new financing channel for shipments to PTA Bank member countries, reducing payment risks. Banks must handle LOC-related documentation and commission payments per revised norms—agency commission is generally prohibited except for after-sales service cases, where prior RBI approval is needed. This expands export credit options for Indian firms targeting East and Southern Africa.
What you must do
- Inform exporter customers 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.
- Process commission payments only as per circular: no agency commission generally; for after-sales service, allow up to 5% deduction from invoice with prior RBI approval.
- Verify that LCs are opened before August 24, 2013, and disbursements completed by February 24, 2014.
Who it affects
AD Category-I banks handling export transactions, Indian exporters to PTA Bank member countries, Exim Bank and its negotiating banks
Which countries are covered under this LOC?
The LOC covers 17 PTA Bank regional member countries: Burundi, Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
Can exporters pay agency commission on shipments under this LOC?
Generally, no agency commission is payable. However, for exports requiring after-sales service, RBI may allow commission up to 5% of invoice value, paid by deduction from the invoice, with prior approval before shipment.
What are the key deadlines for this LOC?
Letters of Credit must be opened by August 24, 2013 (36 months from the effective date), and disbursements must be completed by February 24, 2014 (42 months from the effective date).