What changed
Exim Bank signed a Line of Credit agreement with Mozambique on July 5, 2010, effective December 13, 2010, for USD 25 million. The credit supports rural electrification in three provinces, with 85% Indian content mandatory. Last date for LC opening and disbursement is 48 months from project completion or 72 months from agreement date for supply contracts.
What it means for you
Banks must process export transactions under this LOC with strict adherence to Indian content norms and FEMA guidelines. No agency commission is payable under the LOC, but exporters can use own resources or EEFC balances for commission after full payment realization. AD banks need to guide exporters on documentation and Exim Bank procedures.
What you must do
- Inform exporter customers about the LOC terms, including 85% Indian content requirement and 48/72-month disbursement timelines.
- Ensure GR/SDF forms are correctly filed for all shipments under this LOC as per RBI instructions.
- Verify that no agency commission is claimed under the LOC; allow commission remittance only from exporter's own resources or EEFC after full contract value realization.
- Direct exporters to Exim Bank for detailed LOC information and contract eligibility.
Who it affects
AD Category-I banks handling export transactions, Exporters supplying goods/services to Mozambique under this LOC, Exim Bank as the credit provider
What is the minimum Indian content required under this LOC?
At least 85% of the contract price must be sourced from India for goods and services, including consultancy. The remaining 15% can be procured from outside India, excluding consultancy services.
Can exporters pay agency commission under this LOC?
No agency commission is payable under the LOC. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full payment of the contract value, subject to RBI guidelines.
What are the key timelines for this LOC?
The credit agreement is effective from December 13, 2010. For project exports, LCs and disbursements must be completed within 48 months from scheduled contract completion. For supply contracts, the deadline is 72 months from the agreement execution date (July 4, 2016).