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ADB Extends $100m To India’s Exim Bank

The non-sovereign facility will be used by Exim Bank to boost SMEs, expand jobs and trade

The Asian Development Bank (ADB) is extending a $100 million loan facility to India’s state-owned Export-Import Bank (Exim Bank) to boost the export potential of small and medium enterprises (SMEs) in poor and disadvantaged regions that have largely missed out on the country’s trade boom. The terms of the loan include assurances that Exim Bank will target increased trade and competitiveness amongst small exporters in selected states such as Assam, Madhya Pradesh, Orissa and Uttar Pradesh.

Reportedly, India has made the expansion of SME exports, employment and income in its poorest regions a key objective of its foreign trade policy, as it seeks to mitigate the adverse impacts of the global economic crisis. ADB’s loan is expected to support that goal, by providing Exim Bank with longer term funds for SME development that it has been unable to source through normal commercial financing channels, such as bank loans.

The unsecured loan facility, from ADB’s Ordinary Capital Resources, has a tenor of up to seven years, with a grace period of three years. Loan pricing will be determined by ADB’s Investment Committee and will be benchmarked against dollar-denominated loans and bonds issued by similar Indian financial institutions as well as the credit strength of the Exim Bank.

ADB is also extending a technical assistance grant of $1.55 million equivalent from its concessional Technical Assistance Special Fund to help Exim Bank draft a five-year trade development strategy. Exim Bank will provide additional support of $1 million equivalent. Cheolsu Kim, principal financial sector specialist, with ADB’s South Asia department, said: “The loan facility can be expected to generate employment for 50,000 or more people in strengthened SME export clusters, with an incremental trade volume of $1 billion or more over 10 years.”