16-Jan-2019: Cabinet approves recapitalisation of Export-Import Bank of India
The Union Cabinet has approved the recapitalization of EXIM Bank. The details are as follows:
- Issuance of Recapitalization Bonds by Government of India to the tune of Rs. 6,000 crore for capital infusion in Export Import Bank of India (Exim Bank).
- The equity will be infused in two tranches of Rs. 4,500 crore in FY 2018-19 and Rs.1,500 crore in FY 2019-20 respectively.
- The Cabinet also approved an increase in the authorized capital of Exim Bank from Rs. 10,000 crore to Rs. 20,000 crore. The recapitalisation bonds will be on the lines issued to Public Sector Banks.
Major Impact:
- Exim Bank is the principal export credit agency for India. The infusion of capital into Exim Bank will enable it to augment capital adequacy and support Indian exports with enhanced ability.
- The infusion will give an impetus to anticipate new initiatives like supporting Indian textile industries, likely changes in Concessional Finance Scheme (CFS), likelihood of new LoCs in future in view of India's active foreign policy and strategic intent.
Background: Exim Bank of India (Exim Bank) was established in 1982 under an Act of Parliament as the apex financial institution for financing, facilitating and promoting India's international trade. The Bank primarily lends for exports from India including supporting overseas buyers and Indian suppliers for export of developmental and infrastructure projects, equipment, goods and services from India. It is regulated by RBI.
1-Aug-2018: Cabinet approves Extension of Concessional Financing Scheme (CFS) to support Indian Entities bidding for strategically important infrastructure projects abroad
The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the first extension of Concessional Financing Scheme(CFS) to support Indian Entities bidding for strategically important infrastructure projects abroad.
Details: Under the CFS, the Govt. of India has been supporting Indian Entities bidding for strategically important infrastructure projects abroad since 2015-16. Since the objectives of the Scheme continue to be relevant, it is proposed to extend the Scheme for another five years from 2018 to 2023.
Financial Implications: Financial implication is towards payment of Interest Equalization Support (IES) to the lending Bank for which budgetary provision will be made by the Department of Economic Affairs every year, as follows:-
|
Year |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
Total |
|
IES Amount (In US$ million) |
6.5 |
10.00 |
18.75 |
29.00 |
32.00 |
96.25 |
|
IES Amount (In INR crore) |
42.25 |
65.00 |
121.88 |
188.50 |
208.00 |
625.63 |
Note: The estimated IES is in respect of existing project only.
Major Impact: Prior to the introduction of CFS, Indian entities were not able to bid for large projects abroad since the cost of financing was very high for them and bidders from other countries such as China, Japan, Europe and US were able to provide credit at superior terms, i.e., lower interest rate and longer tenures which works to the advantage of bidders from those countries.
Also, by having projects of strategic interest to India executed by Indian entities, the CFS enables India to generate substantial backward linkage induced jobs, demand for material and machinery in India and also a lot of goodwill for India.
Implementation Strategy and Targets: Under the Scheme, MEA selects the specific projects keeping in view strategic interest of India and sends the same to Department of Economic Affairs (DEA).
The strategic importance of a project to deserve financing under this Scheme, is decided, on a case to case basis, by a Committee chaired by Secretary, DEA and with members from Department of Expenditure, Ministry of External Affairs, Department of Industrial Promotion and Policy (DIPP), Department of Commerce, Department of Financial Services and Ministry of Home Affairs. The Deputy National Security Adviser is also a member of this Committee. Once approved by the Committee, DEA issues a formal letter to EXIM Bank conveying approval for financing of the project under CFS.
The Scheme is presently being operated through the Export-Import Bank of India, which raises resources from the market to provide concessional finance. Government of India (GoI) provides counter guarantee and interest equalization support of 2% to the EXIM Bank.
Background: The scheme envisages Government of India to provide counter guarantee and interest equalization of 2 % to EXIM Bank to offer concessional finance to any foreign Govt. or foreign Govt. owned or controlled entity, if any Indian entity, succeeds in getting contract for the execution of a project.
Under the Scheme, EXIM Bank extends credit at a rate not exceeding LIBOR (avg. of six months) + 100 bps. The repayment of the loan is guaranteed by the foreign govt.
5-Apr-2018: EXIM Bank extends $4.5 billion loan to Bangladesh for social, infrastructure projects
The Export-Import Bank of India (Exim Bank) will give loans worth about Rs 29,200 crore (USD 4.5 billion) to Bangladesh for financing of various social and infrastructure projects.
The Exim Bank entered into an agreement with the Bangladesh government on October 4, 2017 to extend this line of credit facility on behalf of the Indian government, the RBI said in a notification. Bangladesh will also use this financing facility to import consultancy services from India.
Under the arrangement, financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement.
The goods include plant, machinery and equipment; and services include consultancy services. Life of credit (LoC) is a kind of soft loan that is given on concession rates to the borrower.
26-Mar-2018: Exim Bank extends $500 million loan facility to 15-nation ECOWAS
The Export-Import Bank (Exim Bank) will provide a USD 500 million credit facility to ECOWAS Bank for Investment and Development (EBID) to fund various development projects in the western-south Africa.
The line of credit of USD 500 million to EBID will finance various development projects in the ECOWAS region. With the signing of this line of credit (LoC) agreement, Exim Bank till date has extended four LoCs to EBID, with the support of the government, taking the total value of LOCs to USD 1,000 million.
The LoC of USD 500 million to EBID is an umbrella limit for financing developmental projects in 15-member countries of EBID in West African region -- Benin, Burkina Faso, Cape Verde, Cote d'Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.
These projects entitled to get the funding may belong any sector which is of priority of the governments of any of the member states of EBID.
The Economic Community of West African States (ECOWAS) has a mandate to promote economic integration in all fields of activity of the constituting countries.
27-Sep-2017: Cabinet approves pacts signed by Exim Bank under BRICS mechanism
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to the signing of the (i) Interbank Local Currency Credit Line Agreement and (ii) Cooperation Memorandum Relating to Credit Ratings by Exim Bank with participating member banks under BRICS Interbank Cooperation Mechanism. As both the Agreement and the MoU are umbrella pacts, and are non-binding in nature, the Board of Directors of Exim Bank has been authorized to negotiate and conclude any individual contracts and commitments within their framework.
Impact: The Agreements will promote multilateral interaction within the area of mutual interest which will deepen political and economic relations with BRICS nations.
Signing of the Agreement will position Exim Bank in the international platform along with large development finance institutions, like CDS, VEB and BNDES. At an appropriate time, Exim Bank, leveraging this umbrella agreement, could enter into bilateral agreement with any of these member institutions to raise resources for its business. As and when an opportunity arises for co-financing in commercial terms, by any two member institutions (say India and South Africa), lending in single currency by both the institutions would also be possible.
Background: Exim Bank finances, facilitates and promotes India's international trade. It provides competitive finance at various stages of the business cycle covering import of technology, export product development, export production and export credit at pre-shipment and post-shipment stages and investments overseas.
Interbank Local Currency Credit Line Agreement: The initial Master Agreement on Extending Credit Facility in Local Currency under the BRICS Interbank Cooperation Mechanism had a validity of five years, which has 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 local currency financing under the Master Agreement signed in 2012. 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 materializes in future. Exim Bank 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 subject to national laws, regulations and internal policies of the signatories.
Cooperation Memorandum Relating to Credit Ratings: It would enable sharing of credit ratings amongst the BRICS member banks, based on the request received from another bank. This 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 BRICS nations.
The Agreement and the MoU have also been highlighted in the BRICS Leaders Xiamen Declaration made in Xiamen, China on 4th September 2017.