What changed
RBI issued a circular on June 11, 2024, detailing Exim Bank's Line of Credit agreement dated March 15, 2024, with Guyana. The LoC of USD 23.37 mn is effective from April 8, 2024, with disbursement allowed up to 48 months after project completion. No agency commission is payable, but exporters can use own resources or EEFC balances for commission after full export value realization.
What it means for you
AD Category-I banks must ensure that exports under this LoC comply with the 75% Indian content requirement and are declared on EDF/Shipping Bills as per RBI instructions. Banks can allow commission remittances only after full export value realization, using free foreign exchange from exporter's own resources or EEFC accounts. This facilitates a government-backed export financing arrangement for Indian defense/aerospace goods.
What you must do
- Inform exporter constituents about the LoC details and direct them to Exim Bank for complete information.
- Verify that shipments under this LoC are declared on Export Declaration Form/Shipping Bill as per RBI guidelines.
- Ensure no agency commission is paid for exports under this LoC; if needed, allow remittance only after full export value realization using free foreign exchange.
- Advise exporters to confirm the 75% Indian content requirement for goods and services under the contract.
Who it affects
AD Category-I banks, Exporters dealing with defense/aerospace goods to Guyana, Exim Bank
What is the value and purpose of this Line of Credit?
The LoC is USD 23.37 million from Exim Bank to the Government of Guyana, for procuring two Hindustan 228-201 aircraft from Hindustan Aeronautics Ltd.
What are the sourcing requirements under this LoC?
At least 75% of the contract price must be supplied from India; the remaining 25% can be procured from outside India by the seller.
Can agency commission be paid for exports under this LoC?
No agency commission is payable. However, if needed, exporters may use their own resources or EEFC balances for commission in free foreign exchange, but only after full export value realization.