Export-Import Bank of the US (Exim Bank) has committed $8.2 billion worth of credit exposure towards assisting eight Indian financial institutions to fund various kinds of projects in India’s infrastructure sector. Out of the total corpus, over $6 billion has been set aside exclusively to fund the requirements of the Indian aviation sector. However, Exim Bank’s loan facility, provided at competitive interest rates, can be availed by Indian infrastructure or aviation firms only if they buy equipment or services from American companies. The access to this corpus is allowed only after an Indian firm enters into an import agreement with an American company.
To disburse funds in India, Exim Bank has associated with financial institutions like State Bank of India, Industrial Development Bank of India, Infrastructure Leasing & Financial Services, Infrastructure Development Finance Company, Punjab National Bank, India Infrastructure Financial Company Limited, Indian Renewable Energy Development Agency and Power Finance Corporation.
Addressing a news conference in Mumbai on Tuesday, Exim Bank president Jim Lambright said, “We have already pre-approved a line of credit to eight Indian financial institutions to facilitate Indian companies’ infrastructure or aviation sector transactions that involve the usage of goods or services exported from US. We have approved one transaction for equipment and supplies involved in the construction of a medical college in Bhopal through our relationship with Punjab National Bank.”
“Compared to the rupee market loan, the cost of borrowing from us in India through our associate Indian financial institutions would work to be as low as 50%, as it’s a dollar denominated Libor-based financing backed by US government. It would also be less than the cost of borrowing from other overseas sources, as commercial lenders to Indian companies price their financing with respect to Indian economy related risks. Whereas with our bank’s involvement, the lenders would obviously price their financing with respect to the US government risk,” added Lambright.
Lambright said that Exim Bank currently has around $3.5 billion exposure to Indian corporates. “Our largest Indian borrowers presently include Jet Airways, Air India, and Reliance Industries.” According to Lambright, the Exim Bank corpus is available to Indian firms that are ready to award American companies the contracts to construct nuclear power projects in India.