What changed
Exim Bank signed an agreement with the Government of Mauritius on February 19, 2021, for a USD 100 million LoC to finance defence item imports from India. The LoC became effective on July 22, 2021, with a terminal utilization period of 60 months after project completion. RBI has now issued operational instructions to AD Category-I banks regarding this LoC.
What it means for you
Indian defence exporters can now access this LoC for eligible contracts, with a mandatory 75% local sourcing requirement. AD banks must ensure no agency commission is paid from LoC proceeds, though exporters can use their own funds or EEFC balances for commission after full export value realization. Banks need to guide exporters to Exim Bank for detailed LoC terms.
What you must do
- Inform exporter constituents about the USD 100 million LoC to Mauritius for defence procurement.
- Advise exporters to obtain complete LoC details from Exim Bank's Mumbai office or website.
- Ensure shipments under this LoC are declared on Export Declaration Forms as per RBI instructions.
- Do not allow agency commission payments from LoC proceeds; only permit commission from exporter's own resources or EEFC after full export value realization.
Who it affects
AD Category-I banks, Indian defence exporters, Exim Bank
What is the minimum Indian content required under this LoC?
At least 75% of the contract price must be supplied from India; the remaining 25% may be procured from outside India.
Can exporters pay agency commission on exports under this LoC?
No agency commission is payable from LoC proceeds. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full export value realization.
When did this LoC become effective and what is the utilization period?
The LoC became effective on July 22, 2021, and the terminal utilization period is 60 months after the scheduled completion date of the project.