What changed
Exim Bank signed a Line of Credit agreement with the Government of the Republic of Congo on December 14, 2011, effective March 28, 2012, for USD 70 million. The credit is earmarked for financing eligible goods, services, machinery, and consultancy for a Rural Electrification Project. At least 75% of the contract price must be supplied from India, with up to 25% procured from outside India.
What it means for you
Indian exporters can now tap this LOC to supply to the Congo rural electrification project, with assured payment from Exim Bank. Banks must ensure that shipments are declared on GR/SDF forms and that no agency commission is paid from the LOC proceeds. The 75% local sourcing rule boosts Indian exports, but exporters need to comply with FEMA and Foreign Trade Policy.
What you must do
- Inform exporter clients about this LOC and direct them to Exim Bank for full details.
- Ensure all shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Do not allow agency commission payments from LOC proceeds; remit only from exporter's own resources or EEFC after full contract realization.
- Verify that at least 75% of contract value is sourced from India for each eligible contract.
Who it affects
AD Category-I banks handling export transactions, Indian exporters of goods, services, machinery, and consultancy, Exim Bank
What is the last date for opening Letters of Credit under this LOC?
For project exports, the last date is 48 months from the scheduled completion date of the contract. For supply contracts, it is 72 months from the execution date of the Credit Agreement (December 14, 2011), i.e., December 13, 2017.
Can we pay agency commission from the LOC proceeds?
No, agency commission is not payable under this LOC. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full contract value realization.
What is the minimum Indian content requirement for contracts under this LOC?
At least 75% of the contract price must be supplied from India. The remaining 25% (excluding consultancy) may be procured from outside India.