The Cabinet has approved signing of Interbank Local Currency Credit Line Agreement and Cooperation Memorandum relating to Credit Ratings by Exim Bank with member banks under BRICS Interbank Cooperation Mechanism. These agreements were highlighted in BRICS Leaders Xiamen Declaration adopted in Xiamen, China in September 2017.
Cabinet has authorized Board of Directors of Exim Bank to negotiate and conclude any individual contracts and commitments within their framework as both agreements are non-binding in nature.
Significance of Agreements
They will promote multilateral interaction within area of mutual interest which will deepen political and economic relations with BRICS nations. It will position Exim Bank in international platform along with large development finance institutions of BRICS member countries.
They will enable Exim Bank to leverage these agreements and can enter into bilateral agreement with any of these member institutions to raise resources for its business. It will enable lending in single currency by any two member institutions.
Exim Bank finances, facilitates and promotes India’s international trade. It provides competitive finance at various stages of business cycle covering import of technology, export production, export product development and export credit at pre-shipment and post-shipment stages and investments overseas. It raises resources in off-shore market in diverse currencies and swaps to mitigate the risk.
Cooperation Memorandum Relating to Credit Ratings
It enables sharing of credit ratings amongst BRICS member banks, based on request received from another bank. It serves as ideal mechanism to mitigate credit risks associated with cross-border financing. It can also serve as pre-cursor to proposal of having an alternate rating agency by BRICS nations.
Interbank Local Currency Credit Line Agreement
It is a framework mechanism to extend credit lines in local currencies to the BRICS’ Interbank Cooperation Mechanism (ICM) members. The initial Master Agreement on Extending Credit Facility in Local Currency under BRICS ICM had validity of five years and expired in March 2017. Under it some member banks of BRICS had entered into bilateral agreements for local currency financing under Master Agreement signed in 2012.