The agreement was signed in the presence of Finance Minister Arun Jaitley and his Bangladeshi counterpart A M A Muhith. The new Indian line of credit, worth a staggering USD 4.5 billion, will be used to fund 17 major projects in Bangladesh, which include electricity, railroads, roads, shipping and ports.
As with previous LoC agreements, Bangladesh will pay an interest rate of 1% a year. It will have 20 years to pay back the loans, with a grace period of five years.
The USD 4.5 billion deal was announced during Prime Minister Sheikh Hasina's visit to India in April. Jaitley's trip to Bangladesh was used to finalise the agreement. Under the agreement, Bangladesh would have to purchase 65 to 75% of the services, goods or works from the Indian market with the money to be provided under the third LoC following the precedence of the previous two nearly identical agreements.
Bangladesh has two other LoCs open with India: the first one was signed in 2010, and the second one in 2016.
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