What changed
Exim Bank signed a Line of Credit agreement with Cambodia on March 1, 2010, effective July 29, 2010, for USD 15 million to finance a transmission line project between Kratie and Steung Treng. The circular outlines operational details for AD Category-I banks, including the requirement that at least 85% of contract value be sourced from India and that no agency commission is payable under this LOC.
What it means for you
Indian exporters can now access this LOC to supply goods and services for Cambodia's power infrastructure, with financing from Exim Bank. AD banks must ensure compliance with FEMA guidelines, including proper GR/SDF form declarations and the prohibition on agency commission, though exporters may use their own EEFC accounts for commission if needed.
What you must do
- Inform exporter clients about the LOC terms, including the 85% Indian content requirement and the 48-month (project) or 72-month (supply) timelines for LC opening and disbursement.
- Ensure all shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Do not allow agency commission payments under this LOC; if commission is required, advise exporters to use their own resources or EEFC balances after full payment realization.
- Direct exporters to Exim Bank for full details of the LOC.
Who it affects
AD Category-I banks, Indian exporters of goods and services to Cambodia, Exim Bank
What is the minimum Indian content required under this LOC?
At least 85% of the contract price must be supplied from India; the remaining 15% may be procured from outside India, excluding consultancy services.
Can agency commission be paid under this LOC?
No agency commission is payable under this LOC. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full payment realization.
What are the deadlines for using this LOC?
For project exports, the last date for LC opening and disbursement is 48 months from the scheduled completion date. For supply contracts, it is 72 months from the execution date of the Credit Agreement (February 29, 2016).