India may reform credit lines for foreign nations, link with projects

India is considering reforming the lines of credit (LoCs) it grants to other countries to improve its economic diplomacy, persons aware of the matter told Mint.

- Shashank Mattoo & Rhik Kundu

Proposed reforms include granting project-specific and fixed-period LoCs rather than generalized lines spanning several projects, the persons said, requesting anonymity.

These proposed reforms, which come after requests from the borrower nations, will help reduce the interest burden on these countries, one of the persons added.

So far, India has extended over 300 lines of credit to 65 countries with an estimated value of $30 billion.

At present, lines of credit have long maturity periods, with interest moratoriums lasting around five years.

However, the borrower nations may prefer project-specific lines of credit that will reduce their interest servicing burdens, the person cited above said.