What changed
Exim Bank signed a Line of Credit agreement with Guyana on July 26, 2010, effective July 19, 2011, for USD 4 million. The credit finances Indian exports of goods and services for fixed and mobile irrigation pumps, with at least 85% of contract value sourced from India.
What it means for you
Banks must process Letters of Credit and disbursements within 48 months (project exports) or 72 months (supply contracts) from contract completion or credit agreement execution. No agency commission is payable under this LOC, but exporters can use own resources or EEFC balances for commission after full payment realization.
What you must do
- Inform exporter clients about this 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.
- Allow remittance of agency commission only after full contract value realization and compliance with prevailing rules.
- Monitor LC opening and disbursement timelines: 48 months for project exports, 72 months for supply contracts.
Who it affects
AD Category-I banks, Exporters dealing with irrigation equipment and consultancy services to Guyana, 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% can be procured from outside India for non-consultancy goods and services.
Can exporters pay agency commission under this LOC?
No agency commission is payable under the LOC itself. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full contract value is realized.
What are the key deadlines for this LOC?
The last date for opening LCs and disbursement is 48 months from scheduled contract completion for project exports, and 72 months (July 25, 2016) from the credit agreement execution date for supply contracts.