SBI gives $1 billion loan to Sri Lanka: India had announced a USD 1 billion line of credit to Sri Lanka in March 2022 as part of its financial assistance to help Sri Lanka deal with its economic crisis.
This USD 1 billion line of credit is being extended through the State Bank of India (SBI). Earlier, India had extended a USD 500 million line of credit to Sri Lanka to help it purchase petroleum products.
Now, the government has said that Sri Lanka may settle the transaction in Indian Rupees. The RBI has also released a new circular regarding this. The Reserve Bank of India (RBI) has approved transactions between India and Sri Lanka to be settled in Indian rupees outside the Asian Clearing Mechanism.
RBI Circular
In view of the difficulties being experienced by exporters in receipt of export proceeds from Sri Lanka and State Bank of India’s credit facility agreement dated March 17, 2022 with the Government of Sri Lanka for sanction of Government of India guaranteed USD 1000 million term loan to the latter for financing purchase of essential goods by Sri Lanka from India, it has been decided that such trade transactions with Sri Lanka, falling under the said arrangement, may be settled in INR outside the ACU mechanism.
Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by SBI under this agreement.
The above instructions shall come into force with immediate effect. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned and advise them to obtain complete details of the credit facility agreement from State Bank of India’s office at International Banking Group, Corporate Centre, State Bank Bhavan, Madame Cama Road, Nariman Point, Mumbai- 400021 or from their website https://sbi.co.in/web/international-banking/credit-finance/commercial-loans.