The Reserve Bank of India (RBI) last Thursday (10) issued a notification to initiate the $ 500 million line of credit provided by India to Sri Lanka, which would enable it to buy petroleum products.
The island nation is going through one of its worst economic crises, mainly due to the Covid-19 pandemic.
The Export-Import Bank of India (Exim Bank) entered into a pact on 2 February 2022 with Sri Lanka to provide the $ 500 million line of credit to purchase petroleum products.
In a notification, the RBI said that out of the total credit by Exim Bank, goods, works, and services of value of at least 75% should be supplied by the seller from India.
The remaining 25% of goods and services may be procured by sellers (Sri Lanka) from outside India.
The agreement under the line of credit came into effect from 18 February 2022.
As per conditions of the credit line, the terminal utilisation period is six months from the date of signing the agreement or other extended date agreed at the request of the borrower.
However, the extended date should not be beyond 12 months from the date of the agreement, the RBI said.
Sri Lanka is currently reeling under a severe foreign exchange crisis with falling reserves. The country is also grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports.
Its power generation has been hit by the foreign exchange crisis as the fuel for operating thermal power plants is in short supply. The power regulators have warned of five to six hours a day of rolling power cuts over the next few days.
(NDTV)
