Govt gives ₹ 9,000 cr to Exim Bank as loans extended to foreign countries turn NPAs
- With loans to some countries extended through Exim Bank of India being classified as “doubtful debt” in 2023-24,
- The Ministry of External Affairs has provided Rs 9,013.72 crore to the financial institution after it invoked Government of India (GoI) guarantee on these loans.
Key Highlights
- The Exim Bank had to invoke the guarantees after decade-plus old loans extended to some African countries turned into non-performing assets.
- Lines of Credit (LOCs) are given to other countries and some of these to African countries have turned into NPAs.
- They have been classified as doubtful, but not written off
- The MEA has provided a further Rs 4,383.40 crore in 2024-25 towards payment to Exim Bank towards guarantees
- That may be invoked against doubtful debts, indicating more such loans to countries might get classified as NPAs in the coming years.
- Government-supported LOCs to countries of Asia (excluding Bangladesh, Nepal, Bhutan) Africa, Commonwealth of Independent States region and Latin American region are extended under the Indian Development and Economic Assistance Scheme.
- Once guarantees are invoked by a financial institution or a public sector undertaking,
- The funds are paid out of the Guarantee Redemption Fund established in the Public Account of India since 1999-2000.
- An equivalent amount will be recovered from the Guarantee Redemption Fund.
- For about four decades, the Department of Economic Affairs had been extending Lines of Credit (LOCs) to “friendly developing foreign countries
- These LOCs were ‘Government-to-Government’ credit lines as the agreements were signed between the Indian government and the government of the recipient country.
- Till 2003-04, the LOCs were G-to-G and accordingly, the full amount covered by the LOCs used to be provided in the Budget.
- Since 2003-04, this system has been substituted by extending GoI-supported LOCs through Exim Bank of India.
Prelims Takeaway
- Lines of Credit
- Exim Bank