Talks planned for India to restructure $1.3-billion credit line to Lanka

BY S VENKAT NARAYAN     

Our Special Correspondent

 NEW DELHI, May 14: India will hold talks with Sri Lanka for restructuring the island nation’s $ 1.3 billion Line of Credit (LoC), seeking to assist its southern neighbour battling a severe economic crisis.

The Indian government backs the LoC from Export Import Bank (EXIM Bank).

The exact terms of the loan will be finalized in talks that the Indian government will conduct and the EXIM Bank will participate in.

Repayments on credit have been done till the end of March 2022. The restructuring is likely to involve deferment on repayment principal, said sources in EXIM Bank.

In February 2022, India’s EXIM Bank and Sri Lanka’s government signed a $500-million LoC agreement to help Colombo to cope with its current fuel shortages.

India said this week it is “fully supportive” of Sri Lanka’s democracy, stability and economic recovery, responding after that country’s Prime Minister Mahinda Rajapaksa quit amid massive protests against the raging economic crisis.

On April 12, the Sri Lankan government said it will suspend debt servicing on its foreign-currency obligations amid steeply rising external funding pressures.

Standard & Poor’s has downgraded Sri Lanka’s long-term foreign currency sovereign credit rating to ‘SD’ (selective default) from ‘CC’.

Meanwhile, EXIM Bank has posted a 190.5 per cent increase in net profit at INR7.38 billion on FY22 from INR2.54 billion in FY21. Its loan book grew by 13.26 per cent Year on Year to INR1.17 trillion at the end of March 2022. The capital adequacy improved to 30.49 per cent in March 2022 from 25.89 per cent a year ago.

EXIM Bank Managing Director Harsha Bangari said the bank raised foreign currency resources aggregating $2.05 billion and rupee resources aggregating INR190.46 billion in FY22.

In FY23, the institution plans to raise about $3 billion, depending on the market conditions. About $1-1.5 billion will be raised by issuing long-term securities and balance through short-term loans. The domestic borrowings will be around INR200 billion in 2022-23, Bangari said.