The Export-Import Bank of Thailand (Eximbank Thailand) and the Export-Import Bank of India (Eximbank India) have concluded an agreement that aims to stimulate new and strengthen existing trade flows between the two countries.

This is the first letter of credit (L/C) confirmation facility to be concluded by Thailand after six Asian export credit agencies (ECAs) agreed last year to set up such facilities.

Confirmation

Under the agreement, Eximbank Thailand will confirm letters of credit (L/Cs) issued by 17 eligible Indian banks to Thai exporters while Eximbank India will confirm L/Cs opened by Thailand's commercial and state banks.

According to Eximbank Thailand's president, Sataporn Jinachitra, each of the two Eximbank's will cover counterparty credit risks to a value of up to US$10 million.

Reduce uncertainty

The aim of the facility is that with each Eximbank confirming L/Cs issued for importers in each other's country, the uncertainties associated with bilateral trading under L/Cs should be reduced.

This in turn should boost the volume of business written by Thai and Indian traders and will hopefully result in rising trade volumes between the two countries.

Initial agreement

The two export credit agencies (ECAs) signed the bilateral L/C confirmation facility agreement earlier this year during the 9th Annual Meeting of Asian ECAs in Manila, the Philippines. The initial agreement is expected to run for three years.

Eximbank Thailand said in a statement that it would inform Thai commercial banks of the details of this facility so their customers can fully benefit from the facility.

More to come

This is the first L/C confirmation facility agreement concluded bilaterally between Thailand and an Asian ECA after the signing of a multilateral L/C confirmation facility agreement during the 8th Annual meeting of Asian ECAs in Malaysia in 2002. Six Asian ECAs - India, Indonesia, Japan, South Korea, Malaysia and Thailand -signed up to that agreement.

Eximbank Thailand says it will continue to hold talks with ECAs in other Asian countries in order to conclude more bilateral agreements of a similar nature.This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.