Lines of credit extended to the Sri Lankan government by India Exim Bank could face “difficult times” as the island nation faces its worst economic crisis, a senior bank official said on Thursday.
Export Import Bank of India (Exim Bank), however, said there is no delay in payment from the Sri Lankan government at this time.
The Exim Bank, at the request of the Government of India, extends lines of credit to financial institutions, regional development banks, sovereign governments and other entities abroad to enable buyers from these countries to import development and infrastructure projects, equipment, goods and services from India, on deferred credit.
He extended lines of credit worth $1.3 billion to the Sri Lankan government.
Under the Buyers’ Credit-National Export Insurance Account (BC-NEIA), the development finance institution has an exposure of approximately USD 230 million in the country.
“The LOC side is going to enter into negotiations between the two governments. I don’t think all is well with Sri Lanka. It’s going to be a difficult time,” Exim Bank chief executive Harsha Bangari told reporters. .
“How we navigate Sri Lanka in the short term is going to be a bit difficult, but I’m sure at least the Indian government is fully invested in Sri Lanka,” she said.
While extending the lines of credit, Exim Bank takes risks, which are backed by the Indian government, but it does not do credit appraisals, Bangari said, adding that any decision on the restructuring of the lines of credit will have to be initiated by the Ministry of Finance.
“I am sure that discussions have taken place and that there will be a restructuring imminent. We will become a partner in the negotiations but the table will be set by the government,” she said.
Bangari said the Sri Lankan government made its last repayment on March 31, 2022 and there are currently no outstanding bills.
“Technically, there’s no delay from Sri Lanka today, but that doesn’t mean they won’t be there (in the future). In the future, there might be some stress” , she noted.
Exim Bank has a very small exposure to Sri Lankan banks, but there is no concern about that, she said.
Sri Lanka is facing its worst economic crisis since gaining independence from Britain in 1948. The crisis is caused in part by a lack of foreign currency, which means the country cannot afford to pay for imports of ‘staple food and fuel, resulting in an acute attack. shortages and very high prices.
Regarding the impact of the Ukraine-Russia conflict on the bank’s exposure, Bagari said that none of the development finance institution’s exporters had exposure to Ukraine.
Although the bank has no direct exposure to Russia, it has provided project guarantees to Indian companies that perform contract work for Russian companies.
“We are monitoring this very closely on a daily basis. We are in contact with these companies. We have not seen any signs of stress so far. So on the financial transaction side, we are not exposed,” he said. she declared.
The export credit agency has provided assistance to a few companies in India, which are the licensed manufacturer of the Sputnik vaccine, but there are no concerns about it, she said.
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