Exim Bank's LoC scheme to see fresh commitments worth $20 billion by 2025

The Government of India backed Exim Bank's Lines of Credit (LoC) Programme is projected to see fresh credit commitments of the order of $20 billion over the next five years. The programme since its inception in 2003 has witnessed credit commitments worth $30 billion. Of the total commitment, there have been disbursements worth $7.7 billion.

“In the last five years, credit commitments under LoC have shot up by three times. By 2025, we are looking at $20 billion in new commitments. The programme has been designed keeping in view the needs of the developing countries. Nepal, Bangladesh and Sri Lanka are the top three recipients of LoC credit”, said Santosh Kumar, advisor (power), Ministry of External Affairs

Availing credit of $7 billion under the aegis of LoC, Bangladesh is at the top of beneficiary nations, while both Nepal and Sri Lanka have received assistance in upwards of $1.5 billion. Credit is advanced to developing countries at nominal rates of interest ranging from 1.5 to 1.75 per cent. The  LoCs enable buyers in developing countries to import developmental and infrastructure projects, equipment, goods and services from India, on deferred credit terms.

The Indian companies benefit from the programme as a minimum of 75 per cent of the value of goods and services covered under it typically sourced from India. Since only Indian companies can participate under LoC projects, it has had a positive impact in terms of acting as an entry point for Indian exporters to countries that are perceived to be difficult to enter.

As many as 115 consultants and more than 165 EPC (Engineering Procurement & Construction) contracts have been empaneled under the LoC programme. The process of empaneling companies had started from 2015 onwards when a set of revised guidelines were issued by the Department of External Affairs (DEA) with respect to the LoC facility extended by Exim Bank at the behest of the government.  

Asia and Africa account for 52 per cent and 42 per cent respectively of the share of total LoC commitments. Africa is the largest recipient in terms of the number of LOCs extended. Value-wise, Asia leads other regions.

At the end of January 2020, Exim Bank had signed 258  LOCs covering 61 countries in five continents with credit commitments aggregating $25.14 billion. Besides, 42 LOCs amounting to $5.50 billion are in the pipeline. The total commitment then is slated to rise to 300 LOCs of $30.64 billion to 64 countries over the world.

The LOCs extended to various countries have catalyzed exports of various projects in diverse sectors such as agriculture, construction, roads, railways and transportation, irrigation, energy generation, transmission & rural electrification, technology (parks and training centres) and sugar industry rehabilitation.