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Cabinet okays EXIM Bank's credit extension in local currency under BRICS

Exim Bank finances, facilitates and promotes India's international trade

Press Trust of India  |  New Delhi 

Prime Minister Narendra Modi in a bilateral meeting with the President of the People's Republic of China, Xi Jinping, on the sidelines of the 9th BRICS Summit in Xiamen. Photo: PTI
Prime Minister Narendra Modi in a bilateral meeting with the President of the People’s Republic of China, Xi Jinping, on the sidelines of the 9th BRICS Summit in Xiamen. Photo: PTI

The Cabinet on Wednesday approved signing of interbank agreement and cooperation memorandum relating to credit ratings by Exim with member banks under Interbank Cooperation Mechanism.

Exim finances, facilitates and promotes India's It provides competitive at various stages of the business cycle.


"The agreements will promote multilateral interaction within the area of mutual interest which will deepen political and economic relations with nations," an official statement said after the Cabinet meeting chaired by Prime Minister

As the agreement and the MoU are umbrella pacts and non-binding in nature, the Board of Directors of Exim has been authorised to negotiate and conclude any individual contracts and commitments within their framework.

Signing of the agreements, the release said, will position Exim in the international platform along with large development institutions like CDS, and

At an appropriate time, Exim Bank, leveraging this umbrella agreement, could enter bilateral agreement with any of these member institutions to raise resources for its business, it said.

"As and when an opportunity arises for co-financing in commercial terms, by any two member institutions (say and South Africa), lending in single currency by both the institutions would also be possible," it said.

The initial Master Agreement on Extending Credit Facility in under the Interbank Cooperation Mechanism had a validity of five years, which expired in March 2017.

"It is understood that some of the member banks (like CDB and VEB; CDB and BNDES) have entered into bilateral agreements for financing under the Master Agreement signed in 2012," the release said.

It further said although the current conditions are not conducive to usage, it was useful to keep the same alive as an enabling feature in case a suitable opportunity materialises in future.

Exim raises resources in the off-shore market in diverse currencies and swaps to mitigate the risk.

The umbrella agreement would serve as an enabler to enter into bilateral agreements with member banks.

Cooperation Memorandum Relating to Credit Ratings would enable sharing of credit ratings amongst the member banks, based on the request received from another

This, the release said, would be an ideal mechanism to mitigate the credit risks associated with cross-border financing.

"In future, such a mechanism could also serve as pre- cursor to the proposal of having an alternate rating agency by nations," it said.

The agreement and the MoU were highlighted in the Leaders Xiamen Declaration made in Xiamen, China earlier this month.

First Published: Wed, September 27 2017. 17:35 IST
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