What changed
Exim Bank signed an agreement with Zimbabwe on February 24, 2020, for a USD 310 million LoC, effective September 30, 2020. The LoC finances exports for repowering Hwange Thermal Power Station, requiring 75% Indian content. Shipments must use Export Declaration Forms, and no agency commission is payable; exporters may use own resources or EEFC balances for commission.
What it means for you
Indian exporters can now access this LoC for power sector exports to Zimbabwe, boosting trade. Banks must ensure compliance with FEMA and RBI instructions for export documentation and remittance of commission. The 75% local sourcing rule supports Indian industry, but banks need to verify contract terms and utilization timelines.
What you must do
- Inform exporter clients about the LoC details and direct them to Exim Bank for full terms.
- Ensure all shipments under this LoC are declared on Export Declaration Forms per RBI guidelines.
- Allow remittance of agency commission only after full export value realization, using exporter's own funds or EEFC accounts.
- Verify that at least 75% of contract value is sourced from India as per the agreement.
Who it affects
AD Category-I banks handling export transactions, Indian exporters of goods and services for power projects, Exim Bank and its LoC operations
What is the purpose of this USD 310 million LoC to Zimbabwe?
It finances the repowering of Hwange Thermal Power Station in Zimbabwe, with at least 75% of contract value sourced from India.
Can exporters pay agency commission under this LoC?
No agency commission is payable. However, if needed, exporters may use their own resources or EEFC balances for commission in free foreign exchange, after full export value realization.
What is the terminal utilization period for this LoC?
The terminal utilization period is 60 months after the scheduled completion date of the project, effective from September 30, 2020.