Indian government extends SCF settlement period and cuts interest rate

Dechen Dolkar

The Government of India (GoI) has extended the settlement period and reduced the interest rates of the Standby Credit Facility (SCF) to two rupees, a financial aid from India.

The Government of India provided INR 3B in June 2012 and INR 4B SCF in March 2013.

According to the Indian Embassy press release, the settlement period is extended for another five years with a reduced interest rate of 2.5% from July 2022.

The two stand-by credit facilities, granted at an interest rate of 5%, were due to expire on June 30, 2022.

The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the extension of the settlement period and interest rates.

The press release states that India and Bhutan enjoy exemplary relations of friendship and cooperation based on trust and mutual understanding. India is Bhutan’s largest trading partner. These standby credit facilities serve to promote bilateral trade by facilitating payments in India and meeting Indian rupee requirements in Bhutan.

The GoI released SCF INR 3B to Bhutan in June 2012, which was to be repaid within five years ending in June 2017. In April 2017, the former Minister of Finance of Bhutan, during his meeting with the Minister Indian Finance, requested the GoI to extend the settlement deadline of the SCF INR 3B received in June 2012 by one year. In June 2017, the GoI approved this request for an extension.

In June 2018, Bhutan requested a further four-year extension until June 2022

The SCF INR 4B was originally due to be redeemed in March 2018. The term was extended by three years to March 2021 and then by another 15 months to June 2022.

Similarly, as part of Bhutan’s post-pandemic economic recovery, the Indian government extended the SCF of Nu 7B at an interest rate of 2.5% on the amount drawn.

According to the Embassy of India, this facility will be useful to the government of Bhutan to ease the pressure on its rupee reserves at a time when major foreign exchange earning sectors such as tourism have suffered due to the Covid pandemic. -19.

The press release said the facility would ease pressure on Bhutan’s rupiah reserves due to the high current account deficit, increased government spending to stimulate the economy and the central bank’s easy credit policy. to stimulate public spending.

Stephen V. Lee