
The government has signed a $4.5 billion Line of Credit (LOC) agreement with India.
Indian Exim Bank Managing Director David Rasquinha and Economic Relations Division (ERD) Secretary Kazi Shofiqul Azam signed the third LOC agreement titled “Dollar credit line agreement” in Dhaka on Wednesday.
Meanwhile, the Joint Interpretative Notes (JIN) on the Agreement was also signed between India and Bangladesh for the promotion and protection of investments.
Indian Finance Minister Arun Jaitley, who was present in the agreement signing ceremony, told the journalist: “This is the biggest LOC India has given to any country.
“Hopefully, these projects will be implemented quickly."
Regarding the delay in implementation the other LOCs, he said: “The implementation work is getting delayed due to the problem of project selection, land acquisition and local issues.”
The Indian foreign minister said the third Line of Credit (LOC) will help implement 17 projects.
Talking about the other LOCs Finance Minister AMA Muhith said: “The initial trading troubles are now over and we believe that implementation of this agreement would be faster now.”
On Monday, Senior Finance Secretary Hedayetullah Al Mamoon told the Dhaka Tribune that the LOC includes the projects in Bangladesh that India has agreed to finance.
Bangladesh has two other LOCs open with India: the first one was signed in 2010, and the second one in 2016.
These LOCs are collectively worth Tk3.06 billion, but till last year, Bangladesh government has been able to use only $576 million.
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In a joint statement issued after Bangladesh and India signed the agreements in April, Indian Prime Minister Modi announced a new line of concessional credit of $4.5 billion to fund development projects in Bangladesh.
Modi also announced a $500 million credit for defence procurement by Bangladesh.
What does the new LOC offer?
The new Indian line of credit, worth a staggering $4.5 billion, will be used to fund 17 major projects in Bangladesh, most of which are for infrastructural development.
Of the total amount, $1 billion will be used to develop the power evacuation facilities – a system to expel power from the power plant to the national grid immediately after production – of Rooppur nuclear power plant. A significant amount of the loan will also be spent to upgrade 245km of road stretches in three major highways – Benapole-Jessore-Narail-Bhanga, Ramgarh-Baruerhat, and Moynamoti-Brahmanbaria-Sarail – to provide transit facilities to Indian trucks. In addition, the LOC will finance the upgrade of Chittagong and Mongla seaports under the transit and transshipment agreement between the two countries.

The government will use $500 million to develop and upgrade three economic zones (EZs) in Bangladesh for Indian investors: $100 million to develop special EZ in Mirsarai, Chittagong, $100 million to develop special EZ in Moheshkhali, Cox’s Bazar or Payra, Patuakhali, and $300 million for renovation of several other EZs.
Under the third LOC, at least 75% of the procurement for service-oriented projects and 65% for public works projects must be made from India.
Funds can be disbursed in 60 months at maximum after the expiration of the tenure set by commercial contracts under the new deal.
In the existing agreements, it is 48 months for service sector and 72 months for projects.
Waiving of 0.5% commitment charge in the third LOC will be considered by the Indian authority.
Under the new LOC, the Exim Bank of India will open a representative office in Dhaka for smooth implementation of the projects.
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