**Summary:**
This circular, issued by the Reserve Bank of India (RBI) on November 15, 2018, informs all Category I Authorised Dealer (AD) banks about a Government of India-supported Line of Credit (LoC) of USD 2.5 million extended by the Export-Import Bank of India (Exim Bank) to the Government of Madagascar. The LoC, formalized through an agreement dated May 5, 2017, and an amendatory agreement dated February 5, 2018, is intended to finance the completion of an unfinished fertilizer plant project in Madagascar, supplementing a previous USD 25 million credit.
Under this arrangement, the financing of eligible goods and services exports from India is permitted, provided they adhere to the Indian government's Foreign Trade Policy and are approved for financing by Exim Bank. A minimum of 75% of the contract price must be for goods and services supplied by the seller from India. The remaining 25% can be procured from outside India.
The LoC is effective from October 16, 2018, with a terminal utilization period of 60 months after the project's scheduled completion date. Export Declaration Forms must be completed for all shipments under the LoC, following RBI guidelines. No agency commission is payable under this LoC; however, exporters may use their own resources or Exchange Earners Foreign Currency Account balances to pay commissions in free foreign exchange, subject to AD Category I bank approval after full export value realization and compliance with existing regulations.
AD Category I banks are instructed to inform their exporter clients about this LoC and advise them to obtain further details from Exim Bank's office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005, or from their website www.eximbankindia.in. The directives in this circular are issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999.
Key Entities Referenced
Reserve Bank of India: The central bank of India, which issued the circular.
Mumbai, Maharashtra: The city in India where the Reserve Bank of India is located and from where the circular was issued.
Exim Bank: Export-Import Bank of India, which has entered into a Line of Credit agreement.
Government of Madagascar: The government that is receiving the Line of Credit.
Line of Credit: A credit facility of USD 2.5 million from Exim Bank to the Government of Madagascar.
Foreign Trade Policy of the Government of India: The export policy under which the goods and services from India must be eligible.
Foreign Exchange Management Act, 1999: The Act under which the directions in the circular are issued.
USD 2.5 million: The total value of the Line of Credit provided by Exim Bank to the Government of Madagascar.
RESERVE BANK OF INDIA
________________________________Mumbai – 400 001______________________________
RBI/2018-19/73
A.P. (DIR Series) Circular No.12 November 15, 2018
All Category – I Authorised Dealer Banks
Madam/Sir
Exim Bank's Government of India supported Line of Credit of USD 2.5 million to the
Government of Madagascar
Export-Import Bank of India (Exim Bank) has entered into an agreement dated May 5, 2017 and
amendatory agreement dated February 5, 2018 with the Government of Madagascar for
making available to the latter, a Government of India supported Line of Credit (LoC) of USD 2.5
million (USD Two million and five hundred thousand only) for the purpose of financing the
completion of unfinished fertilizer plant project covered under an earlier credit of USD 25
million in Madagascar. Under the arrangement, financing of export of eligible goods and
services from India, as defined under the agreement, would be allowed subject to their being
eligible for export under the Foreign Trade Policy of the Government of India and whose
purchase may be agreed to be financed by the Exim Bank under this agreement. Out of the
total credit by Exim Bank under this agreement, goods and services of the value of at least 75
per cent of the contract price shall be supplied by the seller from India and the remaining 25
per cent of goods and services may be procured by the seller for the purpose of the eligible
contract from outside India.
2. The Agreement under the LoC is effective from October 16, 2018. Under the LoC, the
terminal utilization period is 60 months after the scheduled completion date of the project.
3. Shipments under the LoC shall be declared in Export Declaration Form as per instructions
issued by the Reserve Bank from time to time.4. No agency commission is payable for export under the above LoC. However, if required, the
exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign
Currency Account for payment of commission in free foreign exchange. Authorised Dealer
Category- I (AD Category- I) banks may allow such remittance after realization of full eligible
value of export subject to compliance with the extant instructions for payment of agency
commission.
5. AD Category – I banks may bring the contents of this circular to the notice of their exporter
constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at
Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from
their website www.eximbankindia.in.
6. The directions contained in this circular have been issued under section 10(4) and 11(1) of
the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to
permissions/ approvals, if any, required under any other law.
Yours faithfully
(R K Moolchandani)
Chief General Manager