India will soon be largest borrower from US Exim Bank Our Bureau
New Delhi, Aug. 10
In the next two or three years, India is slated to be the largest borrower from the US Export-Import Bank (US Exim Bank), according to Mr Raymond J. Ellis, Vice-President, Strategic Initiatives Division, US Exim Bank.
Mr Ellis was speaking in context of the Government’s massive infrastructure spending plans in the 11th Five-Year Plan at an interaction with industry representatives, organised by FICCI.
Currently, at an exposure of $7.2 billion, India is the third largest borrower for the bank, he added. He further added that the US Exim Bank has already approved $2.45 billion in medium and long-term funding to nine Indian financial institutions under the India Infrastructure Facility.
“The largest amount at $800 million will go to the Power Finance Co, while the other eight institutions would get funds in the range of $100 to $250 million,” Mr Ellis told Business Line. The other approved institutions include the ICICI Bank, State Bank of India, Punjab National Bank, India Infrastructure Finance Company Ltd, IDFC and IL&FS.
The US Exim Bank is the US Government’s official export credit agency which provides an assurance of credit, or a loan guarantee, for goods and services provided by the US personnel, said Mr Ellis. “Our main advantages are lower interest rates and longer repayment periods,” he said.
Long-term financing
The bank assists exporters by guaranteeing long-term financing to creditworthy buyers, in both the private and public sector, for the purchase of US goods and services. With the bank’s guarantee, buyers can obtain competitive term financing from lenders, where otherwise finance is not available or the interest rates are unviable. According to Mr Ellis, on medium and long-term guarantees the bank can finance up to 85 per cent of the project cost, while the buyer needs to make a cash payment of the remaining 15 per cent.
The bank also charges an exposure fee determined by parameters such as the country risk, repayment period, credit risk of borrower, percentage of cover.
The exposure fee, which is a percentage of the financed portion, is around 5 per cent in a standard finance model, said Mr Ellis.
Moreover, the bank also has a Direct Loan facility, where it directly gives fixed-rate loans to creditworthy international buyers for purchase of US products.
According to Mr Ellis, the bank already has a major footprint in India. It has already financed Air India's purchase of Boeing aircraft at an exposure of $3.67 billion, besides providing guarantees for Reliance Infocomm's purchase of CDMA infrastructure and the upgrade of Reliance's Jamnagar refinery.
