What changed
Exim Bank signed a LoC agreement with Guinea on September 29, 2020, effective August 11, 2021, for USD 20.51 million to upgrade regional hospitals. RBI circular directs AD banks to handle related export documentation and remittances under FEMA.
What it means for you
Banks must ensure exports under this LoC comply with Indian trade policy and FEMA. No agency commission is allowed from LoC funds, but exporters can use own or EEFC accounts for commission after export proceeds realization. AD banks need to guide exporters on LoC details from Exim Bank.
What you must do
- Inform exporter clients about the LoC and its terms, including the 75% Indian sourcing requirement.
- Ensure export declarations are filed as per RBI instructions for shipments under this LoC.
- Allow agency commission remittances only from exporter's own resources or EEFC accounts after full export value realization.
- Direct exporters to Exim Bank for complete LoC details.
Who it affects
AD Category-I banks, Exporters dealing with Guinea under this LoC, 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% can be procured from outside India.
Can agency commission be paid from the LoC funds?
No, agency commission cannot be paid from LoC funds. Exporters may use their own resources or EEFC balances for commission after export proceeds are realized.
When did this LoC become effective?
The LoC agreement is effective from August 11, 2021, with a terminal utilization period of 60 months from the project's scheduled completion date.