Reserve Bank of India (RBI) on Thursday issued a notification to initiate the $500 million line of credit provided by India to Sri Lanka, which would enable it to buy petroleum products.
The island nation is going through one of its worst economic crisis mainly due to the Coronavirus pandemic.
Export-Import Bank of India (Exim Bank) entered into a patch on February 2, 2022 with Sri Lanka to provide the $500 million line of credit for purchasing petroleum products.
In a notification, RBI said that out of the total credit by Exim Bank, goods, works and services of value of at least 75 per cent should be supplied by the seller from India.
The remaining 25 per cent of goods and services may be procured by seller (Sri Lanka) from outside India.
The agreement under the line of credit came into effect from February 18, 2022.
As per conditions of the credit line, the terminal utilization period is six months from the date of signing of the agreement or other extended date agreed at the request of borrower.
However, the extended date should not be beyond 12 months from the date of the agreement, the RBI said.
Sri Lanka is currently reeling under a severe foreign exchange crisis with falling reserves. The country is also grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports.
It’s power generation has been hit by the foreign exchange crisis as the fuel for operating thermal power plants is in short supply. The power regulators have warned of five-six hours a day of rolling power cuts over the next few days.