What changed
Exim Bank signed a LoC agreement with Mozambique on August 3, 2020, effective April 9, 2021, for $250 million. The circular formalizes operational guidelines for AD banks, including export declaration, sourcing norms (75% Indian content), and commission restrictions.
What it means for you
Banks must ensure exporters under this LoC comply with FEMA and FTP rules, with no agency commission payable. Remittance for commission is allowed only post-realization from exporter's own resources or EEFC. This facilitates Indian exports to Mozambique's power sector.
What you must do
- Inform exporter constituents about the LoC details and Exim Bank's contact/website.
- Verify that exports meet the 75% Indian content requirement and are eligible under FTP.
- Ensure Export Declaration Forms are filed per RBI instructions for shipments under this LoC.
- Allow commission remittance only after full export value realization and compliance with extant rules.
- Refer exporters to Exim Bank for complete LoC terms and conditions.
Who it affects
AD Category-I banks, Exporters dealing with Mozambique under this LoC, Exim Bank
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% may be procured from outside India.
Can agency commission be paid for exports under this LoC?
No agency commission is payable. However, if required, exporters may use their own resources or EEFC balances for commission in free foreign exchange after full export value realization.
When did this LoC become effective?
The agreement is effective from April 9, 2021, with a terminal utilization period of 60 months after the scheduled project completion date.