What changed
Exim Bank signed an agreement with the Government of Maldives on October 12, 2020, for a USD 400 million LoC, effective January 28, 2021. The LoC finances the Greater Male Connectivity project, requiring at least 75% of contract value from Indian goods, works, and services. Shipments must be declared on Export Declaration Forms, and no agency commission is payable from LoC proceeds.
What it means for you
AD Category-I banks must facilitate exports under this LoC, ensuring compliance with the 75% Indian content rule and FEMA guidelines. Banks can allow agency commission payments only from the exporter's own resources or EEFC account after full export value realization. This LoC strengthens India's export financing and bilateral ties with Maldives.
What you must do
- Inform exporter constituents about the LoC and direct them to Exim Bank for full details.
- Ensure export shipments under this LoC are declared on Export Declaration Forms as per RBI instructions.
- Verify that at least 75% of contract value comprises Indian goods, works, and services.
- Do not allow agency commission payments from LoC funds; permit only from exporter's own resources or EEFC account after full export realization.
- Advise exporters to contact Exim Bank at Mumbai or www.eximbankindia.in for complete LoC terms.
Who it affects
AD Category-I banks, Exporters dealing with Maldives under this LoC, Exim Bank, Indian suppliers for the Greater Male Connectivity project
What is the minimum Indian content required for exports under this LoC?
At least 75% of the contract price must be for goods, works, and services supplied from India. The remaining 25% can be procured from outside India.
Can exporters pay agency commission from the LoC proceeds?
No, agency commission is not payable from LoC funds. Exporters may use their own resources or balances in their Exchange Earners' Foreign Currency Account to pay commission in free foreign exchange, but only after full realization of the eligible export value.
When did this LoC become effective and what is its purpose?
The LoC became effective on January 28, 2021, and is for financing the Greater Male Connectivity project (Male' to Thilafushi Link) in the Republic of Maldives.