Exim Bank of India is expected to relax one of the key conditions for projects under the $ 4.5 billion line of credit granted to Bangladesh for smooth implementation of projects.
The last round of negotiations ended on Monday. Shahidul Islam, additional secretary of the Division of Economic Relations, headed the Bangladesh side and Amit Kumar, deputy secretary of the Foreign Ministry, on the Indian side.
An agreement can be signed on 4 October by ERD and Indian Exim in the presence of the finance ministers of the two countries. Indian Finance Minister Arun Jaitley is expected to visit Dhaka next week.
Indian Prime Minister Narendra Modi has pledged a new $ 4.5 billion line of credit to Bangladesh during Prime Minister Sheikh Hasina's visit to India in April, total commitment of the neighboring country since 2010 until reaching $ 7.5 billion.
Up to 17 projects have been identified to be funded by the new credit line, all of which have green light from the Indian Exim Bank.
At present, 65 percent of the global supply for public works projects must be manufactured in India. But under the new credit line, the import content can be lowered on a project-to-project basis, Islam said The Daily Star.
Development comes after Bangladesh, in negotiations, said that there are many materials that are good in Bangladesh, so importing them from India takes a long time.
However, in the case of service-oriented projects, 75% of purchases must be made from the neighboring country, which is the same as previously.
Another change that would be made in the new loan agreement is that the funds can be disbursed up to 60 months after the expiry of the mandate set by the commercial contract.
Under the existing agreement, it is 48 months for the services sector and 72 months for the projects.
During the meeting, Bangladesh proposed to convert part of the $ 4.5 billion in subsidy. In the first line of credit of $ 1 billion, $ 200 million was converted into grants.
Bangladesh also proposed to waive the 0.5 percent commitment charge. The Indian party said that the decision could not be given at their level; it can be done by the higher authorities.
Last year, Exim Bank of India proposed to open a representative office in Dhaka for smooth implementation of projects under the line of credit.
At the meeting Bangladesh gave its consent to the proposal and stated that Exim Bank may open the representative office after complying with the rules set by the other agencies.
At present, Exim Bank approval is required for the selection of projects and various procurement proposals for projects.
Apart from the implementation of the project, the presence of an Indian Exim Bank office would help in trade and investment related activities, said an ERD official.
"The terms and conditions of the new loan are virtually unchanged except for one or two," said Islam.
India in August 2010 and in March last year committed respectively $ 1 billion and $ 2 billion, and projects in the form of credit are now at various stages of implementation artwork.
Previous credits carry an interest rate of 1% with a repayment period of 20 years and a grace period of five years. It will be the same for the new line of credit.