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The central government plans to offload some of the interest cost on aid given to partner countries. This will allow it to make greater intensive use of the letters of credit (LOC) it offers as development aid to countries.
At a time when India’s neighbours are requesting more aid, the government reckons this will expand the use of the rupee loans it offers. India’s Exim Bank has a portfolio of 310 LOCs, with credit commitments aggregating $31.96 billion to 66 countries. The sum is substantial, considering India’s fiscal breadth.
Under the new deal, countries will be encouraged to finance the interest equalisation
