India provides $700 Million Loan to Mongolia for Crude Oil Refinery Project, Check All Features of Agreement

In a significant step toward strengthening bilateral economic ties, the Export-Import Bank of India (Exim Bank) has extended a Government of India-supported Line of Credit (LoC) worth USD 700 million to the Government of Mongolia. This credit facility is intended to finance the construction of a Crude Oil Refinery Plant in Mongolia, a project expected to boost the country’s energy self-sufficiency and economic development.

The agreement for the Line of Credit was officially signed on January 16, 2025, and came into effect from May 6, 2025, according to a circular (RBI/2025-2026/37) issued by the Reserve Bank of India (RBI) on May 16, 2025.

Key Features of the Agreement

The USD 700 million LoC will facilitate the export of eligible Indian goods and services for the refinery project, as defined under the terms of the agreement. These exports must conform to the Foreign Trade Policy of the Government of India, and the purchases must be agreed upon by Exim Bank for financing under this arrangement.

As per the agreement, the disbursement period will last for 48 months beyond the scheduled completion date of the project, giving adequate time for fund allocation and project execution.

Operational Guidelines for Exporters and Banks

The RBI has laid down specific operational procedures for Indian exporters and banks involved in the transaction:

• All exports under this LoC must be recorded in the Export Declaration Form (EDF) or Shipping Bill, as per RBI’s prevailing instructions.
• No agency commission is payable on exports made under this credit. However, if necessary, exporters may pay commission using their own resources or through balances in their Exchange Earners’ Foreign Currency (EEFC) Accounts, but only after full realization of the eligible export value. Such remittances will be subject to compliance with existing RBI norms.
• Authorised Dealer Category-I banks have been instructed to inform their exporter clients about the details of this LoC and advise them to contact Exim Bank’s Mumbai office (Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade) or visit the official website: www.eximbankindia.in.

Legal Framework

The directions contained in the circular have been issued under the authority of Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999. The RBI clarified that these directions do not replace or override any other permissions or approvals required under applicable laws.

Strategic Significance

This Line of Credit is part of India’s broader strategy to strengthen international partnerships through developmental and financial cooperation. For Mongolia, the crude oil refinery project is expected to reduce dependency on imported fuels, while for India, it opens up new avenues for exports and economic engagement in the region.

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