What changed
RBI issued a circular on September 17, 2020, notifying AD Category-I banks about a new Government of India-supported Line of Credit (LoC) of USD 215.68 million from Exim Bank to the Government of Malawi. The LoC, effective from September 9, 2020, is for financing drinking water supply schemes and other development projects in Malawi. It mandates that at least 75% of goods and services under eligible contracts be sourced from India, with the remaining 25% allowed from outside India.
What it means for you
Indian exporters can now access this LoC to supply eligible goods and services for Malawi's water and development projects, with financing from Exim Bank. Banks must ensure that exports under this LoC are declared on Export Declaration Forms and that no agency commission is paid from the LoC proceeds; any commission must come from the exporter's own resources or EEFC account after full export value realization. This opens a targeted export opportunity for Indian firms, particularly in infrastructure and water supply sectors.
What you must do
- Inform exporter constituents about the LoC details and direct them to Exim Bank for complete information.
- Ensure shipments under this LoC are declared on Export Declaration Forms as per RBI instructions.
- Allow remittance of agency commission only from exporter's own resources or EEFC account after full export value realization, and only if compliant with extant commission payment guidelines.
- Verify that at least 75% of contract value is sourced from India for eligible contracts under this LoC.
Who it affects
AD Category-I banks handling export documentation and remittances, Indian exporters of goods and services for water supply and development projects in Malawi, Exim Bank as the LoC administering agency
What is the total value of the Line of Credit to Malawi?
The LoC is for USD 215.68 million, as per the agreement between Exim Bank and the Government of Malawi dated June 12, 2020.
What is the minimum Indian content requirement under this LoC?
At least 75% of the contract price for goods, works, and services must be supplied from India. The remaining 25% may be procured from outside India.
Can exporters pay agency commission from the LoC proceeds?
No, agency commission is not payable from the LoC. Exporters may use their own resources or balances in their EEFC account for commission in free foreign exchange, but only after full realization of the export value.