What changed
Exim Bank signed a USD 1 billion Line of Credit agreement with Bangladesh on August 7, 2010, effective February 1, 2011. The circular outlines terms for financing eligible goods, services, and project exports, with a 48-month disbursement window for projects and 72 months for supply contracts.
What it means for you
Indian exporters can leverage this credit to boost exports to Bangladesh, with strict local sourcing norms. AD banks must ensure compliance with FEMA and RBI guidelines on documentation and commission payments. This strengthens India-Bangladesh trade ties and supports Exim Bank's export financing role.
What you must do
- Inform exporter clients about the LOC terms and direct them to Exim Bank for details.
- Ensure shipments under the LOC are declared on GR/SDF forms as per RBI instructions.
- Allow agency commission remittances only after full contract payment, using exporter's own resources or EEFC balances.
- Verify that at least 85% of contract value is sourced from India for eligible contracts.
Who it affects
AD Category-I banks, Indian exporters to Bangladesh, Exim Bank
What is the minimum Indian content required under this LOC?
At least 85% of the contract price for goods and services must be supplied from India; the remaining 15% can be procured from outside India.
What are the key timelines for disbursement?
For project exports, the last date for opening LCs and disbursement is 48 months from the scheduled completion date. For supply contracts, it is 72 months from the credit agreement execution date (August 6, 2016).
Can agency commission be paid 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 contract payment.