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Reserve Bank of India issues notice on US $500m line of credit to Sri Lanka

With the signing of the Line of Credit for US $500 million, Exim Bank, to date, has extended 10 lines of credit to the Sri Lankan government on behalf of the Indian government, taking the total value of LOCs extended to $2.18 billion, a release said.

Projects covered under the LOCs extended to Sri Lanka include the supply of petroleum products, railway projects, defence and infrastructure projects.

The Reserve Bank of India has issued a notification to all banks in India on the $500m line of credit offered to Sri Lanka.

The bank said that the Export-Import Bank of India (Exim Bank) has entered into an agreement dated February 02, 2022 with the Government of Sri Lanka, for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 500 million (USD Five Hundred Million only) for the purpose of financing purchase of petroleum products from India.

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 the agreement, goods, works 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.

The Agreement under the LoC is effective from February 18, 2022. Under the LoC, the terminal utilization period is 6 months from the date of signing of LoC agreement or such other extended date which Exim Bank may agree at the request of Borrower, provided however that such extended date shall in no case be beyond 12 (twelve) months from the date of LoC agreement.

Shipments under the LoC shall be declared in Export Declaration Form as per instructions issued by the Reserve Bank from time to time.

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 (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. 

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