What changed
Exim Bank signed a LoC agreement with Guyana on September 29, 2021, effective February 14, 2022, for USD 7.29 million to procure and install 30,000 solar home lighting systems in hinterland communities. RBI circular outlines operational instructions for AD Category-I banks, including export declaration, commission payment rules, and sourcing requirements.
What it means for you
Indian exporters can now participate in this government-backed LoC, ensuring at least 75% of goods/services are from India. AD banks must facilitate shipments under this LoC with proper EDF declarations and allow commission payments from EEFC accounts post-realization. No agency commission is payable under the LoC itself.
What you must do
- Inform exporter clients about this LoC and direct them to Exim Bank for full details.
- Ensure shipments under this LoC are declared on Export Declaration Forms per RBI instructions.
- Allow commission remittances from EEFC accounts only after full export value realization, subject to extant rules.
- Verify that at least 75% of contract value is sourced from India as per LoC terms.
Who it affects
AD Category-I banks, Indian exporters of solar home lighting systems and related services, Exim Bank
What is the purpose of this LoC?
It provides USD 7.29 million to Guyana for procuring and installing 30,000 solar home lighting systems in hinterland communities.
What are the sourcing requirements under this LoC?
At least 75% of contract value must be supplied from India; the remaining 25% can be procured from outside India.
Can exporters pay commission under this LoC?
No agency commission is payable under the LoC itself, but exporters may use their own resources or EEFC balances for commission in free foreign exchange after full export value realization.