Exim Bank’s GOI-supported Line of Credit (LOC) for USD 700 million to the Govt. of Mongolia (GO-MNG), for financing construction of Crude Oil Refinery Plant in Mongolia

## Report on RBI Circular No. 05/2025-26: GOI-supported Line of Credit for Mongolia **1. Executive Summary:** This report analyzes Reserve Bank of India (RBI) Circular No. 05/2025-26, concerning a Government of India (GOI)-supported Line of Credit (LoC) of USD 700 million extended to the Government of Mongolia (GOMNG) for financing the construction of a Crude Oil Refinery Plant. The circular outlines the operational guidelines for Authorized Dealer (AD) Category I banks regarding exports under this LoC, including eligibility criteria, disbursement timelines, export declaration requirements, and agency commission regulations. The report provides a detailed overview of the policy, its implications for exporters and AD Category I banks, and the expected impact on Indo-Mongolian economic relations. **2. Introduction:** This report aims to provide a comprehensive analysis of RBI Circular No. 05/2025-26, based solely on the provided text. The report will cover the policy's objectives, key provisions, target audience, implementation aspects, and expected outcomes, providing a clear understanding of the circular's implications for relevant stakeholders. **3. Policy Overview:** * This is a *new policy* announcement regarding the operationalization of a specific Line of Credit. * **Core Objective(s):** Facilitate and regulate exports from India under the GOI-supported LoC to Mongolia for the construction of a Crude Oil Refinery Plant. The underlying objective, inferred from the text, is to promote Indian exports to Mongolia and support the development of Mongolia's refining capacity through financial assistance. **4. Background and Rationale:** This new policy addresses the operational aspects of the USD 700 million LoC extended to Mongolia. The likely problem the policy addresses is the lack of specific guidelines for Indian banks and exporters on how to participate in this LoC arrangement. The text suggests a need to streamline the process of financing eligible exports, ensuring compliance with Foreign Trade Policy and Reserve Bank regulations. The policy ensures that AD Category I banks have clear instructions regarding permissible transactions, reporting requirements, and payment protocols under the LoC. **5. Key Provisions / Changes:** This is a new policy outlining the details of the Line of Credit. The main provisions are as follows: * **LoC Agreement:** An agreement dated January 16, 2025, between Exim Bank and the Government of Mongolia makes available a USD 700 million LoC for financing the construction of a Crude Oil Refinery Plant in Mongolia. * **Eligible Goods and Services:** Only eligible goods and services from India, as defined under the agreement and the Foreign Trade Policy of the Government of India, are allowed for export under this LoC. Their purchase needs to be agreed upon and financed by Exim Bank. * **Effective Date and Disbursement Timeline:** The LoC is effective from May 06, 2025. The last date for disbursement is 48 months after the scheduled completion date of the contract. * **Export Declaration:** Shipments under the LoC must be declared in the Export Declaration Form/Shipping Bill, as per RBI instructions. * **Agency Commission:** No agency commission is payable for exports under the LoC. However, exporters may use their own resources or Exchange Earners Foreign Currency Account balances for commission payments in foreign currency, subject to AD Category I bank approval after realization of the full eligible export value. * **Information Dissemination:** AD Category I banks are instructed to inform their exporter constituents about the LoC details, which can be obtained from Exim Bank. * **Legal Basis:** The circular is issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * **Category I Authorised Dealer (AD) Banks:** They are responsible for implementing the guidelines and processing export transactions under the LoC. * **Indian Exporters:** Specifically, those exporting eligible goods and services for the construction of the Crude Oil Refinery Plant in Mongolia. * **Export-Import Bank of India (Exim Bank):** The entity responsible for administering the LoC and financing eligible exports. * **Government of Mongolia (GOMNG):** As the recipient of the LoC, they are a key stakeholder in the successful implementation of the project. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** Reserve Bank of India (RBI), Export-Import Bank of India (Exim Bank), and AD Category I banks. * **Timelines:** * Agreement Effective Date: May 06, 2025. * Last Disbursement Date: 48 months after the scheduled completion date of the contract. * **Procedures:** Exporters need to ensure their goods and services are eligible under the LoC agreement and the Foreign Trade Policy. They need to coordinate with Exim Bank for financing arrangements. AD Category I banks are responsible for processing export payments and ensuring compliance with RBI regulations. Exporters must declare shipments as per RBI instructions in the Export Declaration Form/Shipping Bill. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes and impact of this policy are: * **Increased Indian Exports to Mongolia:** The LoC is expected to stimulate demand for Indian goods and services in the Mongolian market, specifically related to the construction of the Crude Oil Refinery Plant. * **Support for Mongolian Infrastructure Development:** The LoC will contribute to the development of Mongolia's refining capacity, enhancing its energy security. * **Strengthened Indo-Mongolian Economic Relations:** The initiative is expected to deepen economic ties between India and Mongolia. * **Streamlined Export Financing:** The clear guidelines provided in the circular should facilitate smoother processing of export transactions under the LoC by AD Category I banks. * **Regulatory Compliance:** The policy ensures that all transactions under the LoC adhere to FEMA regulations and the Foreign Trade Policy of India. **9. Conclusion:** RBI Circular No. 05/2025-26 provides a framework for implementing the GOI-supported LoC to Mongolia, facilitating Indian exports and supporting Mongolian infrastructure development. The policy's provisions aim to streamline export financing, ensure regulatory compliance, and ultimately strengthen Indo-Mongolian economic relations. The circular's clear guidelines are crucial for AD Category I banks and Indian exporters to effectively participate in this initiative. This policy signifies the Indian government's commitment to supporting infrastructure development in Mongolia and promoting bilateral trade relations.

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