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, dated May 16, 2025, concerning a Government of India (GOI) supported Line of Credit (LoC) of USD 700 million to the Government of Mongolia (GOMNG). The purpose of the LoC is to finance the construction of a Crude Oil Refinery Plant in Mongolia. The circular outlines the terms and conditions for export of eligible goods and services from India under this LoC, including declaration requirements, agency commission guidelines, and relevant contact information. The key finding is that the circular directs Authorized Dealer (AD) Category I banks to facilitate and regulate exports under the LoC in accordance with existing regulations and the specifics outlined in the agreement between Exim Bank and the GOMNG. **2. Introduction:** This report aims to provide a comprehensive overview of RBI Circular No. 05/2025-26 regarding a GOI-supported Line of Credit to Mongolia. The analysis is based solely on the information provided within the circular text. **3. Policy Overview:** * This is a *new policy* announcement regarding the operationalization of the LoC. * **Core Objective:** To facilitate and regulate the export of eligible goods and services from India to Mongolia for the construction of a Crude Oil Refinery Plant, under a GOI-supported Line of Credit managed by Exim Bank. The core objective is inferred from the circular's explicit statement about the LoC's purpose. **4. Background and Rationale:** As a new policy, this circular addresses the operationalization of the pre-existing agreement between the Government of India and the Government of Mongolia, managed by Exim Bank, for financing the construction of a Crude Oil Refinery Plant in Mongolia. The policy outlines the procedures and guidelines for Indian exporters and banks to participate in this initiative, providing structure and regulatory guidance to facilitate the flow of funds and goods related to the project. Without this circular, Authorized Dealer banks may not be clear on how to handle transactions related to the LoC. **5. Key Provisions / Changes:** This is a new policy; therefore, the provisions constitute the key elements: * **Line of Credit:** The circular announces a USD 700 million LoC from GOI to GOMNG, managed by Exim Bank, specifically for the construction of a Crude Oil Refinery Plant in Mongolia. * **Eligible Goods and Services:** Exports of eligible goods and services from India are permitted, subject to the Foreign Trade Policy of the Government of India and agreement by Exim Bank. * **Effective Date and Disbursement Period:** The LoC agreement is effective from May 06, 2025. The last date for disbursement will be 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, following RBI instructions. * **Agency Commission:** No agency commission is payable under the LoC. Exporters can use their own resources or Exchange Earners Foreign Currency Account balances to pay commissions in foreign currency, subject to AD Category I bank approval after realization of full export value and compliance with existing regulations. * **Information Access:** AD Category I banks are instructed to inform their exporter constituents about the LoC and advise them to obtain details from Exim Bank. * **Legal Basis:** The circular is issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999. **6. Target Audience and Stakeholders:** The directly affected parties are: * **Category I Authorized Dealer (AD) Banks:** They are responsible for implementing the guidelines and facilitating transactions under the LoC. * **Indian Exporters:** Companies that export eligible goods and services for the Crude Oil Refinery Plant project in Mongolia. * **Export-Import Bank of India (Exim Bank):** As the manager of the LoC, they provide details and oversee the financing. * **Government of Mongolia (GOMNG):** The recipient of the LoC. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Reserve Bank of India (RBI) issued the circular providing direction, while the Exim Bank is responsible for managing the Line of Credit. * **Timeline:** The LoC is effective from May 6, 2025, with disbursements allowed until 48 months after the contract’s scheduled completion date. * **Procedures:** Exporters must declare shipments under the LoC in the Export Declaration Form/Shipping Bill. AD Category I banks must ensure compliance with existing regulations for agency commission payments. **8. Expected Outcomes / Impact of Changes:** The intended outcomes are: * **Increased Exports:** Facilitation of Indian exports of goods and services related to the construction of the refinery. * **Economic Development:** Support for the development of the Crude Oil Refinery Plant in Mongolia. * **Strengthened Bilateral Relations:** Reinforcement of economic ties between India and Mongolia through financial support and trade. * **Regulatory Clarity:** Provision of clear guidelines for AD Category I banks to handle transactions under the LoC, ensuring compliance and efficient processing. **9. Conclusion:** RBI Circular No. 05/2025-26 provides the framework for operationalizing a significant GOI-supported Line of Credit to Mongolia. It outlines the procedures for Indian exporters and AD Category I banks to participate in the project, facilitating trade and supporting economic development in Mongolia. The circular's significance lies in its ability to streamline financial transactions and promote Indian exports under the LoC, contributing to stronger bilateral relations between the two countries.

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