cover image: Govt plans to offload some of interest cost on aid given to partner nations - The central government plans to tweak letters-of-credit rule

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Govt plans to offload some of interest cost on aid given to partner nations - The central government plans to tweak letters-of-credit rule

8 Jun 2022

Under the new deal, countries will be encouraged to finance the interest equalisation portion of the LOC, but as bilateral transactions with India. [...] “It will marginally raise the cost of these for recipient countries, but only in the long term,” said a government official privy to the discussions. [...] In the initial period of the LOC, when there is usually a moratorium on repayment and the needs are the highest, the countries will not need to pay interest charges. [...] The Reserve Bank of India has worked with the US Federal Reserve, the Bank of England and others on a World Bank led programme to develop general principles for credit reporting applicable to all countries. [...] In the aftermath of the Covid-19 pandemic, the challenge is to ensure countries continue to receive them, even if they slip up on payment schedules.
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