Close on the heels of the World Bank clearing multi-sectoral $543.30 million Andhra Pradesh Economic Restructuring Loan (APREL), the J-Exim decision to go ahead with the core sector line of credit comes as a big morale-booster for the Indian economy in the context of US and Japanese sanctions and the Moody's downgrade of India rating to the below investment grade.

Finance secretary Montek Singh Ahluwalia had last week indicated that at least three more loan proposals amounting to over $500 million would be approved shortly.

Speaking to The Financial Express, Industrial Development Bank of India chairman SH Khan said: "We had approached the J-Exim for a fresh line of credit and it has agreed to extend it. The confirmation reached us a couple of days back." According to sources, the new J-Exim line of credit tothe IDBI will be to the tune of about $300 million. The J-Exim has reportedly assured other term lending institutions as well about its core sector line of credit.

"The total J-Exim line will be to the tune of $500 million. The entire line is meant for core sector financing. The development makes it amply clear that the impact of sanctions and Moody's downgrade of India rating is exaggerated," a senior institutional source said.

The Clinton administration clamped economic sanctions on India in the wake of a series of nuclear tests conducted on May 11 and 13. The Japanese government immediately followed suit. Both the governments have, however, made it clear that all humanitarian aids and transactions with the non-government sector will be kept out of the ambit of sanctions.

"We have had no problems with the J-Exim. We have already drawn a $300 million J-Exim line for infrastructure financing. Recently, we had approached them for a fresh line and they have said yes to it," Khan said. Besides the coresector line, the IDBI had recently got approval for a $150 worth of J-Exim line to finance Indo-Japanese joint ventures.

"The IDBI will have no problem... The total lines of undrawn credit are at the moment pegged at about $500 million. In addition to that, we have foreign funds parked in swap deals. Since there will not be much of demand for foreign currency this fiscal, I don't foresee problems in disbursing foreign currency funds," Khan said.

Currently, the IDBI is enjoying eight credit lines of multilateral agencies. It has fully drawn the old $300 million J-Exim line. The partially drawn lines include J-Exim line for joint ventures, IBRD line for financing projects for pollution control and ADB line for funding the energy sector.

The Industrial Credit & Investment Corporation of India (ICICI), the second largest term-lending institution, has in its kitty about $200 million worth of undrawn lines of credit, which include $50 million J-Exim line for funding joint ventures and $150 million ADB linefor core sector financing.