What changed
Exim Bank signed a Line of Credit agreement with Mozambique on September 1, 2011, effective April 23, 2012, for USD 13 million to finance a solar photovoltaic module manufacturing plant. The circular outlines sourcing requirements, disbursement timelines, and documentation procedures for AD Category-I banks.
What it means for you
Indian exporters can now access this LOC to supply goods, machinery, and services for the Mozambique project, with a mandatory 75% Indian content. Banks must ensure compliance with FEMA rules, including GR/SDF form declarations and no agency commission from LOC funds. This opens a targeted export financing channel for solar equipment.
What you must do
- Advise exporter clients about the LOC and direct them to Exim Bank for full details.
- Ensure shipments under this LOC are declared on GR/SDF forms per RBI instructions.
- Verify that at least 75% of contract value is sourced from India before processing remittances.
- Allow agency commission only from exporter's own resources or EEFC account after full contract payment realization.
- Monitor disbursement deadlines: 48 months for project contracts, 72 months (by August 31, 2017) for supply contracts.
Who it affects
AD Category-I banks handling export transactions, Indian exporters of solar equipment and services, Exim Bank as the LOC provider
What is the minimum Indian content required under this LOC?
At least 75% of the contract price must be supplied from India, including goods, machinery, equipment, and consultancy services. The remaining 25% can be procured from outside India.
Can exporters pay agency commission from the LOC funds?
No, agency commission is not payable under this LOC. Exporters may use their own resources or balances in their Exchange Earners' Foreign Currency Account to pay commission in free foreign exchange after full contract payment is realized.
What are the key deadlines for this LOC?
The last date for opening Letters of Credit and disbursement is 48 months from the scheduled completion date for project exports, and 72 months from the execution date (September 1, 2011) for supply contracts, i.e., by August 31, 2017.