What changed
Exim Bank signed a credit agreement on October 2, 2012, with Tanzania for a USD 178.125 million line of credit to fund water supply schemes in Dar-es-Salaam and Chalinze. The credit became effective from November 21, 2012. Last dates for opening LCs and disbursement are 48 months for project exports and 72 months for supply contracts.
What it means for you
Indian exporters can now tap this credit line for supplying goods, machinery, and services to Tanzania, with a mandatory 75% local sourcing requirement. AD banks must ensure compliance with FEMA rules on GR/SDF forms and agency commission restrictions. This opens a structured financing route for exporters targeting African infrastructure projects.
What you must do
- Inform exporter customers about the Exim Bank line of credit and its terms.
- Advise exporters to contact Exim Bank for full details and documentation.
- Ensure shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Verify that no agency commission is paid from the credit; allow remittance only from exporter's own resources or EEFC after full payment realization.
Who it affects
AD Category-I banks, Indian exporters of goods, machinery, equipment, and services, Exim Bank
What is the minimum Indian content requirement under this line of credit?
At least 75% of the contract price must be sourced from India for goods and services, including consultancy. The remaining 25% can be procured from outside India.
Can exporters pay agency commission under this LOC?
No agency commission is payable from the credit. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full contract payment is realized.
What are the key timelines for this credit facility?
The credit agreement is effective from November 21, 2012. For project exports, LCs must be opened and disbursements made within 48 months of scheduled completion. For supply contracts, the deadline is 72 months from the execution date, i.e., October 1, 2018.