What changed
Exim Bank signed a credit agreement with Banco Exterior De Cuba on October 10, 2012, effective February 28, 2013, for a USD 5 million line of credit. The credit supports Indian exports of goods, services, machinery, and consultancy for a milk powder processing plant in Camaguey Province, Cuba. At least 75% of contract value must be sourced from India, with up to 25% from outside India.
What it means for you
Indian exporters now have a structured financing route for exports to Cuba under this LOC, reducing payment risk. Banks must ensure compliance with FEMA and RBI guidelines on GR/SDF forms and agency commission rules. The 75% local sourcing requirement boosts Indian manufacturing and services exports.
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 from exporter's own resources or EEFC account.
- Verify that exports meet the 75% Indian content requirement under the Foreign Trade Policy.
Who it affects
AD Category-I banks, Indian exporters of goods, services, machinery, and consultancy, Exim Bank
What is the total value of this line of credit?
The LOC is for USD 5 million, as per the agreement between Exim Bank and Banco Exterior De Cuba.
What is the deadline for using this credit?
For project exports, letters of credit must be opened and disbursed within 48 months from the scheduled completion date. For supply contracts, the deadline is 72 months from the agreement execution date (October 9, 2018).
Can exporters pay agency commission under this LOC?
No agency commission is payable under the LOC. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full contract value realization.