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LINES OF CREDIT
What is LOC?
Exim Bank extends Lines of
Credit (LOCs) to overseas financial institutions,
regional development banks, sovereign governments
and other entities overseas, to enable buyers
in those countries, to import goods and services
from India on deferred credit terms. The Indian
exporters can obtain payment of eligible value
from Exim Bank, without recourse to them, against
negotiation of shipping documents. LOC is a financing
mechanism that provides a safe mode of non-recourse
financing option to Indian exporters, especially
to SMEs, and serves as an effective market entry
tool. Exim Bank extends LOCs, on its own, as well
as, at the behest of Government of India.
How does LOC work?
| 1. |
Exim Bank
signs LOC Agreement with overseas Borrower
Institution (Borrower) and announces the availability
of LOC for utilization, when the Agreement
becomes effective. |
| 2. |
Exporter checks
with Exim Bank, available amount under the
LOC and quantum of service fee payable to
Exim Bank, if any, and negotiates contract
with Importer. |
| 3. |
Importer approaches
the Borrower for approval of the contract. |
| 4. |
Borrower appraises
the proposal. If satisfied, approves the contract
and refers to Exim Bank for concurrence for
inclusion of contract for being financed under
the LOC. |
| 5. |
Exim Bank
accords approval to the contract, if in conformity
with the terms of LOC. Exim Bank conveys contract
approval to the exporter and the Borrower. |
| 6. |
The Importer
arranges remittance of advance payment to
the Exporter and also opening of a Letter
of Credit, which states that the contract
is covered under Exim Bank's LOC to the Borrower
and reimbursement will be by Exim Bank for
the Eligible Value of Credit, upon compliance
with stipulated conditions therein. |
| 7. |
Exporter executes
the contract/ships the goods/provides services. |
| 8. |
Exim Bank/commercial
bank in India, designated as the Negotiating
Bank negotiates shipping documents and pays
the exporter. |
| 9. |
Exim Bank
reimburses the Negotiating Bank, on receipt
of valid claim and service fee, as applicable,
by debit to the LOC account of the Borrower. |
| 10. |
Borrower repays
Exim Bank on due dates. |
To View Revised Guidelines for Lines of Credit
Click Here 
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