The Reserve Bank of India (RBI) on Thursday issued a notification to initiate the USD 500 million line of credit provided by India to Sri Lanka, to finance the purchase of petroleum products.

On February 02, the Export-Import Bank of India (Exim Bank) entered into an agreement with the Sri Lankan government for making available a credit line of USD 500 million to Sri Lanka to purchase petroleum products from India.

In a statement, the RBI said: “Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement.”

According to the RBI, out of the total credit by Exim Bank under the agreement, goods, works and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India.

Meanwhile, the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

The RBI said the agreement under the LoC is effective from the 18th of February.

As per the credit line, the terminal utilization period is 6 months from the date of signing of LoC agreement or such other extended date which Exim Bank may agree at the request of the borrower.

However such an extended date should not be beyond 12 months from the date of LoC agreement, the RBI noted.