What changed
Exim Bank signed a Line of Credit agreement with the Government of Malawi on February 1, 2011, effective February 23, 2011, for USD 50 million. The credit will finance three projects: Cotton Processing Facilities (USD 20 million), Green Belt Initiative (USD 15 million), and One Village One Product Project (USD 15 million). At least 75% of contract value must be sourced from India, with up to 25% from outside India.
What it means for you
Indian exporters can now access this LOC to supply goods, services, and consultancy to Malawi, with financing backed by Exim Bank. AD banks must ensure shipments are declared on GR/SDF forms and that no agency commission is paid from LOC funds; exporters can use their own EEFC accounts for commission if needed. The LOC supports India's export push in Africa, particularly in agriculture and infrastructure.
What you must do
- Advise exporter constituents about the LOC and direct them to Exim Bank for full details.
- Ensure shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Allow remittance of agency commission only from exporter's own resources or EEFC accounts after full contract value realization.
- Verify that at least 75% of contract price is sourced from India for eligible contracts.
Who it affects
AD Category-I banks, Indian exporters to Malawi, Exim Bank
What is the last date for opening Letters of Credit under this LOC?
For project exports, the last date is 48 months from the scheduled completion date of the contract. For supply contracts, it is 72 months from the execution date of the Credit Agreement, i.e., January 31, 2017.
Can agency commission be paid from the LOC funds?
No, no agency commission is payable under this LOC. Exporters may use their own resources or balances in their Exchange Earners' Foreign Currency Account for commission in free foreign exchange after full payment realization.
What is the minimum Indian content requirement for exports under this LOC?
At least 75% of the contract price must be supplied from India. The remaining 25% (excluding consultancy services) may be procured from outside India.