What changed
Exim Bank signed a Line of Credit agreement with the Government of Malawi on December 13, 2012, effective March 13, 2013, for USD 76.50 million. The credit will finance Indian exports for irrigation network development, sugar processing equipment, and fuel storage facilities in Malawi. At least 75% of the contract price must be supplied from India, with the remaining 25% allowed from outside India.
What it means for you
Indian exporters now have a funded avenue to supply goods and services to Malawi under this LOC, with assured payment from Exim Bank. AD Category-I banks must facilitate the opening of Letters of Credit and disbursements within 48 months for project exports or 72 months for supply contracts. No agency commission is payable under this LOC, but exporters can use their own resources or EEFC balances for commission if needed.
What you must do
- Advise exporter constituents about the LOC and direct them to Exim Bank for full details.
- Ensure shipments under the LOC are declared on GR/SDF Forms as per RBI instructions.
- Allow remittance of agency commission only after full contract value realization and compliance with existing guidelines.
- Monitor that at least 75% of contract value is sourced from India for each eligible contract.
Who it affects
AD Category-I banks, Indian exporters of goods, services, machinery, and consultancy, Exim Bank
What is the total value of the Line of Credit to Malawi?
The LOC is for USD 76.50 million, as per the agreement dated December 13, 2012.
What are the last dates for opening Letters of Credit and disbursement?
For project exports, 48 months from the scheduled completion date of the contract; for supply contracts, 72 months from the execution date of the Credit Agreement (i.e., December 12, 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.