What changed
Exim Bank signed a LoC agreement with Nicaragua on February 18, 2021, effective April 16, 2021, for USD 7.35 million to upgrade a hospital in Managua. RBI circular informs AD banks about the facility, including sourcing norms and commission rules.
What it means for you
Indian exporters can now access this LoC for eligible goods and services, with 75% local sourcing mandatory. AD banks must ensure compliance with FEMA and FTP, and no agency commission is payable under the LoC unless from exporter's own resources.
What you must do
- Inform exporter clients about the LoC details and direct them to Exim Bank for full terms.
- Ensure exports under this LoC are declared on Export Declaration Forms per RBI instructions.
- Verify that at least 75% of contract value is sourced from India; allow up to 25% foreign procurement.
- Do not permit agency commission under the LoC; allow remittance only from exporter's own resources after full export value realization.
Who it affects
AD Category-I banks, Indian exporters of eligible goods and services, Exim Bank
What is the purpose of this Line of Credit?
It funds replacement and equipment of the High Technology Centre of Hospital Antonio Lenin Fonseca in Managua, Nicaragua, with USD 7.35 million from Exim Bank.
Can exporters pay commission under this LoC?
No agency commission is payable. If needed, exporters may use their own resources or EEFC balances for commission in free foreign exchange after full export value realization.
What are the sourcing requirements?
At least 75% of the contract price must be supplied from India; the remaining 25% may be procured from outside India.