3 min readNew DelhiUpdated: Feb 4, 2024 04:37 PM IST
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.
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,” a senior government official told The Indian Express.
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.
A Ministry of External Affairs spokesperson was not available for comment.
Officials said 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.
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In the first Supplementary Demands for Grants for 2023-24 tabled in Parliament in December, Rs 9,013.72 crore was provided to the MEA for providing a loan to EXIM Bank against invocation of guarantee by the Bank for loans to other countries. “An equivalent amount will be recovered from the Guarantee Redemption Fund. An amount of Rs 4,655 crore sanctioned as an advance from Contingency Fund of India will be recouped,” it had said.
For about four decades, the Department of Economic Affairs had been extending Lines of Credit (LOCs) to “friendly developing foreign countries” on behalf of the government. 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.
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