Exim Bank to raise Rs.3k cr to ease exports to Iran

The Dollar Business Bureau

Exim Bank, the major export finance institution in India, plans to raise a fund of Rs.3,000 crore from the domestic market to finance purchase of goods and services from India by Iran’s railways and for the development of a port in the Islamic Republic. 

Exim Bank has offered credit lines amounting to Rs.3,000 crore through the Export Development Fund (EDF) to seven banks in Iran for utilising the amount for importing steel rails from India and for the development of Chabahar port. 

Created under the Export-Import Bank Act, the EDF is a distinct fund, which can be used only for some particular activities after the government’s approval. The government has already approved 2.5 lakh metric tonnes of steel exports from India.

David Rasquinha, Deputy Managing Director, Exim Bank said that the Union cabinet has cleared the projects and the earnings from the activities will be utilised to fund these projects. 

For investors, these credit lines are risk-free as these will be fully assured by the government. On its part, Exim Bank will raise finance from the local market to regulate disbursals, he added.

In November 2014, Exim Bank and seven banks from Iran led by the Central Bank of Iran had discussed a framework agreement for funding imports from India by Iranian companies up to an amount of Rs.900 crore, under the EDF.

The surge in the funds to Rs.3,000 crore will allow the Exim Bank to give credit facility to buyers in Iran, that will be secured through sovereign guarantee from the Islamic Republic for the exports.

The Exim bank recorded a net profit of Rs.316 crore during the financial year 2015-16, a 50 percent decline from the previous year's profit of Rs.726 crore.