What changed
Exim Bank signed an agreement on June 12, 2020 with Nicaragua for a USD 20.10 million LoC, effective September 15, 2020. The LoC funds reconstruction of Aldo Chavarria Hospital, with a 60-month terminal utilization period post-project completion. RBI circular instructs AD banks to facilitate exports under this LoC, mandating that at least 75% of contract price be supplied from India.
What it means for you
Indian exporters can now finance eligible goods and services for this Nicaragua hospital project through Exim Bank's LoC, with a 75% local sourcing requirement boosting domestic supply chains. AD banks must ensure no agency commission is paid from LoC proceeds, though exporters may use own resources or EEFC balances for commissions after full export value realization. This reinforces India's export credit framework under FEMA.
What you must do
- Inform exporter constituents about the Nicaragua LoC and direct them to Exim Bank for full details.
- Verify that at least 75% of contract value is sourced from India for shipments under this LoC.
- Ensure no agency commission is paid from LoC proceeds; allow remittance from exporter's own resources or EEFC only after full export value realization.
- Declare shipments under this LoC in Export Declaration Form as per RBI instructions.
Who it affects
AD Category-I banks, Indian exporters of eligible goods and services, Exim Bank
What is the purpose of this USD 20.10 million LoC to Nicaragua?
The LoC is for reconstruction of Aldo Chavarria Hospital in Nicaragua, financing eligible Indian exports under the Foreign Trade Policy.
Can exporters pay agency commission on exports under this LoC?
No agency commission is payable from LoC proceeds. Exporters may use own resources or EEFC balances for commission after full export value realization, subject to extant RBI instructions.
What is the sourcing requirement for contracts under this LoC?
At least 75% of the contract price must be supplied from India; the remaining 25% may be procured from outside India.