India to charge 1pc interest on credit announced by Modi

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    Exim-Bank-India1KATHMANDU, AUG 21 – The Indian government has said the interest rate on the $1 billion line of credit, announced during Indian Prime Minister Narendra Modi’s recent Nepal visit, will be just 1 percent.

    In the previous line of credit, which started in 2006 and is worth $350 million, the interest rate is 1.75 percent. The amount is being utilised in various infrastructure projects, including roads and transmission lines.

    Indian Embassy Spokesperson Abhay Kumar confirmed the interest on the soft loan would be 1 percent.

    Compared to the interest rate India imposed on a similar loan to Bangladesh in March this year, the rate offered to Nepal is much lower. Indian and Bangladeshi media reported at that time quoting government officials that the interest rate would be LIBOR plus (London Inter-bank Offered Rate) 2.5 percent.

    In Nepal’s case, however, other terms and conditions for the loan are yet to be finalised. Government officials said the terms and conditions would be similar to those for the previous such credit. In the previous line of credit, India offered a repayment period of 20 years, and an additional 20-year grace period in the event of Nepal’s failure to repay on time.

    Other conditions include 50 percent of the goods and goods paid for with the money should be Indian. Also applicable were 0.5 percent commitment fee and 0.25 percent service charge. “As it is the loan to be received from the Indian EXIM Bank, conditions like requiring buying goods and services from the donor country are usually applied,” said Madhu Marasini, chief of the Finance Ministry’s international cooperation coordination division.

    On Wednesday, Indian Ambassador to Nepal Ranjit Rae met Finance Minister Ram Sharan Mahat and discussed the implementation of the development assistance.

    According to Marasini, who was also present in the meeting, said the Indian ambassador asked Nepal to identify projects as soon as possible so that the pledged amount could be utilised at the earliest.

    Nepal is yet to identify projects to invest the credit. “As the new Finance Secretary has just been appointed, we will soon seek recommendation from line ministries on potential projects,” said Marasini.

    During his meeting with Rae, Finance Minister Mahat named a few projects such as Budhigandaki and Nalsinggadh hydropower projects, Kathmandu -Terai Fast Track and Mid-Hill Highway as the government’s priority, according to the ministry’s statement.

    During the talks, Rae said India was ready to implement the assistance pledged to Nepal. The meeting also discussed constructing a cricket academy, and cricket grounds in Pokhara, Bhairahawa and Nepalgunj as well as bridges in Jhulaghat, according the ministry.

    They also held discussions on signing Power Trade Agreement (PTA) and Power Development Agreement (PDA). According to the ministry’s press release, Rae stressed on holding intensified discussions on contentious issues to reach an agreement as early as possible.

    Source : The Kathmandu Post