India to extend $2bln Line of Credit to Bangladesh

India will soon be providing Bangladesh $2 billion line of credit for development of water, rail and road transport, official sources say.

A deal for this is expected to be signed during the Indian prime minister’s visit to Dhaka on June 6.

The officials said the Indian high commission have already officially informed the Bangladesh finance ministry about the quantam of the Line of Credit.

Additional secretary of the Economic Relations Division, Asif Uz Zaman told bdnews24.com they have sent a list of 13 projects to the high commission but did not specify the amount of credit sought for each.

The funds would be used for development of the railway, power, health, education, ICT and water transport  on a priority basis.

Finance ministry officials said the terms of the LOC will be same as the previous $1 billion line of credit  extended by India , under which at least 75 percent of the goods and services for the projects would have to be procured from India.

The credit will also have an interest rate of 1 percent which is a little higher than World Bank loans.

India gave Bangladesh $1 billion line of credit in 2010.

The then Indian finance minister and now President Pranab Mukherjee later announced that no interest would be charged on $200 million of the $ 1 blillion loan.

The rest $800 million , on which 1 percent interest would be charged, is being used to implement 14 projects, seven of which have already been completed.