India, Lanka to discuss recast of $1.3-bn credit line

India will talk to crisis-hit Sri Lanka on restructuring the line of credit of about $1.3 billion.

This line of credit, from Export Import Bank of India (India EXIM Bank) to the island nation, is backed by the Government of India.

EXIM Bank officials said the terms would be firmed up in negotiations the government would conduct and EXIM Bank would participate in them. The near term will be tough. Repayment has been done till the end of March. Restructuring is likely to involve deferring the repayment of the principal, they said. In February, India EXIM Bank and the Government of Sri Lanka had signed a $500-million line of credit agreement to help Colombo to cope with its fuel shortages.

Early this week India said it was “fully supportive” of Sri Lanka’s democracy, stability, and economic recovery after Prime Minister Mahinda Rajapaksa quit amid protests in the country over the government’s handling of the economic crisis.

On April 12, the Sri Lankan government had said it would suspend debt servicing on its foreign-currency obligations amid steeply rising external funding pressures and increasingly widespread social and political protests.

Following this, global rating agency Standard & Poor’s downgraded Sri Lanka’s longterm foreign currency sovereign credit rating to SD (selective default) from CC.

Meanwhile, the financial institution has posted a 190.5 per cent increase in net profit at ~738 crore in FY22 from ~254 crore in FY21. Its loan book grew 13.26 per cent yearon-year to about ~1.18 trillion at the end of March 2022. The capital adequacy ratio improved to 30.49 per cent in March 2022 from 25.89 per cent a year ago.

Harsha Bangari, managing director, India EXIM Bank, said the financial institution in FY22 raised foreign currency resources aggregating $2.05 billion and rupee funds of ~19,046 crore.