The Indian soft loan of $1 billion will attract one per cent interest rate.

The Export Import (EXIM) Bank of India will be offering soft loan to the country at one per cent interest rate, informed Indian ambassodar to Nepal Ranjit Rae, during the meeting with finance minister Dr Ram Sharan Mahat, here today.

The line of credit – or popularly known as soft loan – was announced by Indian Prime Minister Narendra Modi during his visit to Kathmandu on August 3-4.

Along with one per cent interest rate, the soft loan also attracts 0.5 per cent commitment fee and 0.25 per cent service charge. An agreement to this effect is yet to be signed.

Earlier line of credit by India used to attract 1.75 per cent. The terms and conditions for the soft loan are yet to be finalised.

Finance Ministry sources claimed that the terms and conditions could be similar to those for the earlier soft loan that had a repayment period of 20 years, apart from an additional 20-year grace period, if Nepal failed to repay on time. However, other conditions include 50 per cent of the goods and goods paid for with the money should be Indian. As loan is provided by Indian EXIM Bank, conditions like requiring buying goods and services from the donor country are usually applied.

But, the government has not been able to spend earlier line of credits. Indian had offered Rs 100 million during the then Prime Minister Girija Prasad Koirala’s India visit. EXIM Bank of India has currently extended a line of credit of $250 million to Nepal for building and maintenance of 11 roads, construction of Koshi and Solu corridor transmission lines and implementation of Rahughat Hydroelectric Project. The loan was offered at 1.75 per cent interest.

India started providing line of credit in 2006 with $350 million.

Meanwhile, Indian envoy, on the occasion, also asked finance minister Dr Ram Sharan Mahat to identify projects to invest the credit.

Mahat named few projects like Budhigandaki and Nalsinggadh hydropower projects, Terai Fast Track and Mid-Hill Highway as the government’s priority, where the line of credit could be used.

According to Finance Ministry’s statement, they also discussed proposed cricket academy and cricket grounds in Pokhara, Bhairahawa and Nepalgunj apart from bridges in Jhulaghat. “They also discussed on signing Power Trade Agreement (PTA) and Power Development Agreement (PDA).”

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