What changed
Exim Bank signed a credit agreement with Benin on August 23, 2012, effective February 28, 2013, for a USD 15 million LOC. The LOC finances a tractor assembly plant and farm equipment unit, with at least 75% of contract value sourced from India. Last date for LC opening/disbursement is 48 months from project completion or 72 months from agreement execution (August 22, 2018) for supply contracts.
What it means for you
Banks must facilitate export financing under this LOC, ensuring compliance with FEMA and RBI guidelines. The 75% Indian content rule boosts domestic exports, while the no-commission clause reduces transaction costs. Banks should verify GR/SDF declarations and allow commission remittance only from exporter's own resources after full payment realization.
What you must do
- Inform exporter clients about the LOC terms, including the 75% Indian content requirement and 48/72-month timelines.
- Ensure all shipments under the LOC are declared on GR/SDF forms as per RBI instructions.
- Do not process agency commission payments under this LOC; allow remittance only from exporter's own EEFC account after full contract value realization.
- Direct exporters to Exim Bank for detailed LOC information.
Who it affects
AD Category-I banks handling export transactions, Exporters of goods, services, machinery, and consultancy to Benin, Exim Bank and its LOC operations
What is the minimum Indian content required under this LOC?
At least 75% of the contract price must be supplied from India; the remaining 25% can be procured from outside India.
Can agency commission be paid under this LOC?
No agency commission is payable. If needed, the exporter can use their own resources or EEFC account balance for commission in free foreign exchange, but only after full payment realization.
What are the key timelines for this LOC?
The credit agreement is effective from February 28, 2013. For project exports, LCs must be opened and disbursed within 48 months of scheduled completion; for supply contracts, within 72 months from the execution date (August 22, 2018).