Presentation on Export Credit

and Investment opportunities

The Foreign Services Institute

February 16, 2015

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EXPORT-IMPORT BANK OF INDIA

Set up in September 1981 under an Act of Parliament to finance, facilitate and promote India’s

international trade and investment. Commenced operations in March 1982.

Wholly owned by Government of India as an instrument of policy.

Under administrative control of Ministry of Finance, Department of Financial Services. Works

closely with Ministries of External Affairs, Commerce & Industry.

Objectives: “… for providing financial assistance to exporters and importers, and for functioning

as the principal financial

institution for coordinating the working of institutions engaged in financing export

and import of goods and

services with a view to promoting the country’s international trade…”

“… shall act on business principles with due regard to public interest”

(Export-Import Bank of India Act, 1981)

Development Financial Institution for Export

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Rationale for setting up

A Policy Response to Crisis Conditions………

In 1981, following the oil price shocks, India’s exports were $8.4 bn, imports $14.2 bn, Trade Deficit

$5.8 bn, Current Account Deficit $2.7 bn, Forex Reserves $5.7 bn. The numbers speak for themselves.

Indian exports were primarily commodities, few manufactures, low value added, low pricing power.

Value added manufactures like engineering goods and projects needed long credit terms to overseas

customers, but commercial banks were risk averse and had asset liability issues.

Moreover, the banking system had a host of other priorities : agriculture, SMEs, housing; corporate.

A need was perceived for a dedicated and specialized institution to address the market gap.

An institution whose sole focus would be internationalization of Indian companies, boosting export

competitiveness, seeking to level the playing field for Indian companies.

A Policy Bank, serving as an instrument of government policy, but not dependent on handouts.

The logic of Exim Banks

A Policy Response to Crisis Conditions………

Exim Banks all over the world are responses to crisis : ECGC in 1919, Exim USA in 1931, JBIC after WW II,

KEXIM after the Korean War.

Exim Banks are a response to market failure : they address transactions that the regular banking system

is unable or willing to support for reasons of high risk, long tenor, breach of prudential limits, or simple

lack of expertise and experience.

In effect, Exim Banks operate at the margin and should cover at most 5% of national exports.

Undertake high-risk cross-border transactions and have a high-risk business model due to tenors,

exposures and pro-cyclicality.

Typically sovereign owned and rated on par with sovereign.

Varying degrees of sovereign support.

OPERATIONAL PHILOSOPHY

International Trade

Financing Promoting Facilitating

Through

Variety of Financing Programmes

Value Added Business Advisory Services

Research and Analysis

Catalyst for Financing

Projects Products Services

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Fund and Non-Fund Portfolio as on December 31, 2014

The Bank is in full compliance with RBI prudential norms with regard to exposures, investment valuation, provisioning and capital adequacy.

Gross NPAs to gross loan assets stood at 3.05%; Net NPAs to net loan assets stood at 0.63%.

Export Finance55%

Term Loan to Exporters

19%

Overseas Investment

Finance19%

Import Finance

4%

Working Cap-ital Loan for

Exporters2%

Export Facili-tation

1%

Total Loan Assets: Rs. 80,417 crore

Financial Guarantee

10%

Perfor-mance

Guarantee21%

Retention Money

Guarantee1%

Bid Bond Guarantee

0.08%

Advance Payment Guarantee 18%

Stand By Letters of

Credit44%

Letters of Credit6%

Non Funded Portfolio: Rs. 11,263 crore

PAT and Return on Capital` crore (as on 31st March)

` 1,606 crore transferred to GoI as Return on Capital over the past decade

2009-10 2010-11 2011-12 2012-13 2013-14

794

1122

14931704

2099

513 584 675.1 742 710

150 185 205 263 339

Operating Profit PAT Balance of Net Profit to GOI

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NET WORTH` crore (as on 31st March)

2009-10 2010-11 2011-12 2012-13 2013-14

1700 20002300 3059

37592832

32303700

41804551

ReservesPaid up Capital

45325230

60007239

8310

Net Worth

The Bank’s Capital to Risk Assets Ratio (CRAR) as on March 31, 2014 was 14.32%

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FINANCING PROGRAMMES

Financing Program (Various Currencies)

Export Credit

Medium / Long Term

Lines of Credit

Buyer’s Credit

Supplier’s Credit

Short Term

Pre / Post Shipment

Credit

Import Credit

Import Loan for capital goods

Bulk Import Loan for Raw Materials

Loans for Exporting Units

Term Loans for expansion/ diversification / new projects/ export

product development/ export marketing / research & development

Term Loans for overseas equity investment

Direct equity stake in Indian/ Overseas ventures of exporting

companies

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LINES OF CREDIT

LOC is a proactive mechanism to promote exports of goods and services from India to target countries.

Exim Bank extends and operates LOCs at the behest of the Government of India besides its own LOCs to overseas entities.

LOCs serve as a market entry mechanism to Indian exporters and provide a safe mode of non-recourse financing option to Indian exporters.

During April – December 2014, 12 LOCs amounting to US$ 1,497.71 mn were extended.

Operative LOCs – 189 covering 63 countries across continents, aggregating US$ 11.51 bn (as on December 31, 2014).

A Catalyst for Trade Promotion

Africa

62.0%

Asia34.0

%

LAC2.0%

CIS2.0%

Geographic Distribution of LOCs

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Lines of Credit

Two LOCs aggregating US$ 80 mn were extended to the Government of Rwanda for financing the 28 MW Nyaborongo Hydro-power project in Rwanda.

The project is slated to be Rwanda’s biggest hydroelectric power plant and would be a boost to Rwanda’s national power grid.

Would cater to 25% of total electricity demand of Rwanda

Examples of Projects Supported

Lines of Credit

Two LOCs extended to Government of Sri Lanka aggregating US$ 798.96 mn for re-construction of Railway Lines in Northern Province of Sri Lanka.

Achieved significant progress during 2013-14 and have enhanced the accessibility, safety and speed of train travel in Sri Lanka.

The Omanthai to Pallai Railway line project was completed during September 2013.

The Madhu Road to Talai Mannar and Pallai to Kankesanthurai Railway line projects are expected to be completed in FY 2014-15.

Examples of Projects Supported

Lines of Credit

Two LOCs aggregating US$ 26.88 mn extended to the Government of Gambia for Construction of National Assembly Building Complex in Gambia.

The total built up area for the National Assembly is around 4468 square meter and will be a 3-storied building containing main assembly hall, visitor gallery, auditorium and related facilities.

Examples of Projects Supported

Lines of Credit

Exim Bank has extended an LOC of US$ 55.60 million to RUE Grodnoenergo, Belarus for reconstruction of Grodno-II Power Plant [100-130 MW] project in Belarus.

The project has been commissioned in February 2014.

Examples of Projects Supported

Lines of Credit

An LOC of US$ 25 million has been extended to the Government of Mozambique for financing IT park project in Mozambique involving setting up of and developing a Science and Technology Park as well as a Technological Development and Innovation Centre.

The project has been completed and training is being imparted.

Examples of Projects Supported

LOCs: Select Examples Tanzania: Supply of tractors, pumps and equipments

The project was the result of the recommendations of a high level team of Tanzanian Ministry of Agriculture that visited India in order to learn from the Indian experience of Green Revolution. The Tanzanian Government was keen to adopt mechanized and irrigated farming in Tanzania, to reduce the dependency on manual operations.

Though initially intended to import tractors and pumps, the Tanzanian Government later proposed that an assembly plant could be set up in Dar-es-Salaam. The contract, under the approved LOC, envisaged supply of tractors, pumps, spare parts, training, assembly operations, after sales service support and assembly line equipment.

The project has contributed to Tanzania's 'Food Sufficiency Programs' aimed at making it a food surplus country by providing a major thrust to farm mechanization and agricultural productivity.

Ethiopia: Sugar Development Projects Sugar economy is central to the progress of Ethiopia’s agriculture sector. Ethiopian Government’s

plan for revamping their sugar sector, rehabilitating the existing factories and creating a large new green-field project.

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LOCs: Select Examples

LOC of USD 15 million was extended to the Government of Benin, which included contracts valued at USD 10.25 million for supply and commissioning of meter gauge diesel electric locomotives, coaches, container rail flat wagons with maintenance spares, aimed to promote regional transport linkages with neighbouring landlocked countries.

LOC of USD 100 mn to the Government of Nepal: Indo-Nepal 400 kV D/C Transmission Line Project connecting Dhalkebar-Bhittamod [Nepal border] to Muzaffarpur [India], being executed by Tata Projects Ltd.

HAL have also executed 2 contracts aggregating USD 13.41 million under GOI- supported Line, for supply of Chetak Helicopters to the Ministry of Defence, Govt. of Suriname.

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PROJECTS/SECTORS FINANCED LOC-RECIPIENT COUNTRIESAgricultural Projects : Burkina Faso, Cameroon, Chad, Cote d’Ivoire, Gambia, Ghana,

Madagascar, Mali, Senegal, Sierra Leone, Sudan, Tanzania

Construction Projects : Gabon, Ghana, GambiaIrrigation : Malawi, Mozambique, Senegal , Laos

Power – Generation : Ethiopia, Mali, Mozambique, Niger, Sudan, Congo DR, Laos, Vietnam, Cambodia

Transmission & DistributionRural Electrification

: Ghana, Mali, Senegal, Burkina Faso, Mozambique

Railway Rehabilitation : Angola, Ghana, Mali, Senegal, Benin, Myanmar, Sri LankaRoad Transportation : Central African Republic, Cote d’Ivoire, Ghana, Niger, Senegal

Technology (Parks And Training) : Cote d’Ivoire, D R Congo, Mozambique, Senegal Sugar Industry Rehabilitation : Ethiopia, SudanDefence & Defence Equipment's : Sri Lanka, Mauritius, Govt. of Suriname

Lines of Credit: Examples of Projects covered18

PROJECT EXPORTS Exim Bank plays the role of a coordinator and facilitator for the promotion of project exports and

serves as focal point of Working Group on Project Exports. Such projects have supplemented the efforts of the host country Governments in achieving their

developmental objectives. As on December 31, 2014, 374 project export contracts valued at ` 1,61,083 crore (approx. US$ 26.85

bn), supported by the Bank, were under execution, in 78 countries across Asia, Africa and CIS by 112 Indian companies.

Sector-wise Country-wise

Eng. & Const.

37.29%

Power Gen & Trnsm.27.80%

Oil & Gas

15.37%

Infra-structure13.71%

Consultancy1.90%

Others3.9%

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Qatar16%

Libya8%

Saudi Arabia8%

UAE7%

Kuwait6%Bhutan

5%Oman

5%

Srilanka5%

Others40%

PROJECT EXPORTS

Promoting Exports of Indian Goods & Services

Direct assistance by Exim Bank to overseas buyers of Indian goods & services;

Provides non-recourse finance to Indian Exporter by converting the deferred credit contract into cash contract;

Indian supplier do not carry any credit or country risk;

Buyer’s credit finance can be a transaction specific financing or it could be a renewable limit, thereby financing the working capital requirement of overseas company.

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Project Exports: Select Examples

Riyadh Metro Project comprising the lines along AlMadina AlMUnawara - Prince Saad Bin Abdulrahman Al-Awwal Corridor, being executed by Larsen & Toubro Ltd. Project valued USD 5.2 billion (Equiv. Rs. 30,844.18 crore) with L&T’s share value USD 1.202 billion (Equiv. Rs.7,117.66 crore). Largest ever contract in value terms secured by an Indian company. L&T is also the leader of the ArRiyadh New Mobility Group (ANM) consortium that has secured the contract.

Al Wakrah bypass road in Doha, Qatar valued Rs. 3,610 crore, being executed by L&T. Border Infrastructure Project awarded by The Royal Army of Oman, Sultanate of Oman

valued Rs. 1,382 crore, being executed by Engineering Projects (India) Ltd. 400kV 225 km Overhead Transmission lines in Tanzania valued Rs. 382 crore, being executed

by KEC International Ltd. Other examples: Tanzania: Contract for upgrading road project; D R Congo: Execution of

hydroelectric power project; Sierra Leone: Project of rehabilitation of existing water facility; Senegal/Nigeria: Transmission projects; Mauritius: Construction of Cyber Towers.

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Buyers Credit Under NEIA

... to boost Project Exports from India

Under the Programme, the Bank finances and facilitates project exports from India by way of extending credit facility to overseas sovereign governments and government owned entities for import of goods and services from India on deferred credit terms.

The Bank has till date sanctioned an aggregate amount of US$2.18 bn for 16 projects valued US$ 3.49 bn. The Bank has also given in-principle commitments for supporting several projects and the current active pipeline includes 27 projects aggregating US$ 3.65 bn. under BC-NEIA, at the behest of several leading Indian project exporters.

Kalutara Integrated Water Supply Scheme – Implementation of Matugama, Dodangoda, Agalawatta and Neboda Integrated Water Supply Project in Sri Lanka.

The contract valued at US$ 194 mn is being executed by Ion Exchange (India) Ltd., by the Sri

Lankan National Water Supply & Drainage Board.

Terms of BC-NEIA

BC-NEIA is extended by the Exim Bank to the governments of recipient countries or to the underlying project authorities backed by a sovereign guarantee.

The NEIA Guarantee Fee for risk cover, to be borne by seller / buyer, as may be agreed, is a flat rate of 6% of the value of the total principal credit for 150% loss coverage (including exchange fluctuation) irrespective of the tenor of the credit, and the guarantee fee on the interest portion for 150% cover (incl. exchange fluctuation) is a flat 1% p.a. (or 6% if paid upfront) on the amount of interest payable.

At present, a positive list of 51 countries has been identified by ECGC for which Indian exporters can avail Buyer’s Credit under NEIA. The list could be suitably expanded/modified on receipt of credit requests for projects from other countries.

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BC-NEIA: Select Examples

USD 60.69 mn to Government of Sri Lanka for supply, erection and commissioning of 30 MLD Water Treatment Plant and Distribution to 9 reservoirs across the Dambulla region in Sri Lanka, valued USD 81.69 mn being executed by VA Tech Wabag Ltd.

USD 63.39 mn to ZESCO Ltd., Zambia for setting up 132 kV Power Transmission Lines from Lusaka to Luangwa along with distribution network and three 132 kV substations in Zambia, valued USD 63.39 mn being executed by PME Power Solutions (India) Ltd.

USD 31 mn to Petromoc S.A., Mozambique for setting up of an integrated LPG & Bitumen Storage Facility at the Beira Port in Mozambique; valued USD 34.79 mn, being executed by Southern Borewells Pvt. Ltd.

USD 164.90 mn to Government of Sri Lanka for Plant & Design – Build Contract for Civil and Mechanical & Engineering Works for the Aluthgama, Mathugama and Agalawatta Integrated Water Supply Project in Sri Lanka, by Ion Exchange (India) Ltd.

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Other Funded FacilitiesPre Shipment Credit

• Extended to finance funding requirement for project export contracts. • Transaction specific or a renewable limit in Rupee Credit or Foreign Currency.

Post shipment Supplier’s Credit• Credit extended to exporter who in turn extends credit to overseas buyer for export on deferred payment

terms. • Contractual relationship is between Exim Bank and exporter. • Exporter liable to repay loan irrespective of whether overseas buyer pays or not. • Supplier’s Credit can be extended in Rupees or US Dollars.

Export Project Cash Flow Deficit Finance (EPCDF) • Finance for cashflow mis-match during project execution.• Finance in Rupees & US Dollars.

Financing Deemed Export Contracts• Transactions in which goods supplied do not leave country, and payment for such supplies is received

either in Indian rupees or in free foreign exchange.• Facilities under deemed exports contracts:

(a) Export Deficit Cashflow Deficit Financing(b) Capital Equipment Finance(c) Non Funded facilities.

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Non-Funded Facilities

Guarantees

* Advance Payment Guarantee

* Performance Guarantee

* Retention Money Guarantee, etc.

Letters Of Credit

* Inland Letters of Credit

* Foreign Letters of Credit

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OVERSEAS INVESTMENT FINANCEPromoting Overseas Investments/ Acquisition from India – funding options available Equity investment: INR/ FC funding to Indian parent company for its equity/ capital investment in its

overseas JV/ WOS; Indian parent/ promoter loan: INR/ FC loan extended to Indian parent/promoter to overseas venture Funding to Overseas Indian Ventures: Foreign currency loans directly extended to the overseas

venture of the Indian company for capex, working capital, acquisition etc. Direct Equity Investment: Direct equity participation in Indian ventures abroad. Structured finance: Funding Indian parent/overseas JV/WOS/ SPV backed by cash-flow of third party; The Bank has so far provided finance to 494 ventures set up by 391 companies in 80 countries.

Aggregate assistance for overseas investment amounts to ` 37,139 crore as on March 31, 2014 Select Examples:

Acquisition of a fibreglass company in Belgium; Acquisition of a leading automotive plastic parts supplier in Germany; Acquisition of coal mines in Australia and Indonesia; Setting up a hotel in Tajikistan Acquisition of pharmaceutical companies in Brazil and Australia

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DIRECT EQUITY INVESTMENT IN OVERSEAS VENTURES

Exim Bank will be a minor partner to Indian promoter company in terms of equity holding.

Investment held for maximum 5 years. Divestment price negotiated and agreed upon upfront, based on an

appropriate valuation model or through IPO. Indian promoter company has first right of refusal.

Minimum post-tax return guaranteed by Indian promoter company. Proposals considered so far include companies in chemical,

petrochemical, ceramic tiles, engineering goods and transmission towers sectors.

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LOANS TO INDIAN PROMOTER COMPANIES FOR OVERSEAS INVESTMENT

Loans in Indian Rupees/Foreign Currency provided to Indian promoter companies for:

equity contribution in overseas JV/WOS

onlending to overseas JV/WOS Amount restricted to 80% of Indian promoter company’s investment. Due diligence to include inter alia analysis of benefits likely to accrue to

Indian promoter company and India. Security includes inter alia appropriate charge on borrower’s assets and

pledge of borrower’s shareholding in the overseas JV/WOS.

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FACILITIES DIRECTLY TO OVERSEAS ENTITIES

• Foreign currency loan to overseas JV/WOS of Indian companies towards part financing:

Normal capital expenditure Acquisition of assets/business/brands/patents/rights/other IPRs. Working capital Equity investment in another company• Guarantee facility for: Raising term loan/working capital locally Making deferred payments towards acquisition of shares,

equipment, raw materials, etc. Guaranteeing due performance under supply contracts.

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Overseas Investment Finance

US$ 80 mn to JSW Steel (Netherlands) BV, holding company for

overseas operations of JSW Steel Ltd. (JSW)

The facility is being primarily used for on-lending and supporting

JSW’s overseas operations namely plate & pipe mills in USA, coal

mine in USA and iron ore mine in Chile.

Promoting Overseas Investments from India

During April- December 2014, 23 corporates were supported aggregating ` 3,201 crore for part financing their overseas investments in 12 countries.

The Bank has so far provided finance to 518 ventures set up by 409 companies in 80 countries. Aggregate assistance for overseas investment amounts to ` 40,710 crore.

Example :

Long term facility of GBP 10 mn to Secure Asset Finance Ltd. (SAFL), a UK-based wholly owned subsidiary of Secure Meters Ltd. (SML)

The facility is being used to facilitate exports of high end smart energy prepaid meters manufactured by Indian parent i.e. Secure Meters Ltd.

Structured Finance - SAFL leases out prepaid meters to UK-based utility (gas & electricity) suppliers.

Utility supplier offers these meters to household users without any upfront cost. However, rents of meters are recovered from monthly usage and these lease rentals are escrowed to Exim Bank for servicing the debt

Overseas Investment Finance

Promoting Overseas Investments from India

Research Studies on products, sectors, countries, macro economic issues relevant to

international trade and investment Sector Studies assessing export potential.

Bilateral Trade and Investment Studies.

International Trade Related Studies.

Exim Newsletters Export Advantage (bilingual)

Agri Export Advantage (in English, Hindi and 10 regional languages)

Indo-China Newsletter (bilingual)

Contribution to Public Policy formulation through inputs on WTO aspects, impact of

exchange rates on exports, transaction costs, etc.

RESEARCH & ANALYSIS

Knowledge Building: Research Publications

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To bridge its infrastructure deficit, Africa needs substantial investment.

There is a relative dearth of bankable project export opportunities in Africa.

Opportunity exists for a specialized agency, outside the government, to act as a partner to handhold and speed up the project structuring and transparent procurement process.

Proposal to co-promote and invest along with African Development Bank and IL&FS in a Project Development Company (PDC) to develop bankable infrastructure projects in Africa and facilitate & boost Indian Project Export capabilities & participation.

The PDC shall identify and develop infrastructure projects with the objective of providing the private sector an opportunity to invest in and implement such projects.

The PDC shall also assume the turnkey responsibility to establish the contractual, technical and the financial arrangements for implementation of such projects and put together a mitigation framework to address possible risks to enable an efficient implementation.

Promoting Infrastructure Development in Africa34

In the context of India's growing engagement with developing partner countries in Africa, there has been intensification of bilateral and regional cooperation with African countries in capacity building efforts, and infrastructure development, among others.

To augment and strengthen this partnership, an event titled “AFRICA – INDIA PARTNERSHIP DAY: with the theme “Fostering PPP in Project Development and Financing” was organized by the Export-Import Bank of India (Exim Bank), along with the African Development Bank Group and the Government of India, in Kigali, Rwanda, on May 22, 2014, as part of Annual Meeting of African Development Bank Group.

A delegation of 20 Indian companies visited Kigali to participate in this Event, and to demonstrate their capabilities and to share their experiences in development of infrastructure and skills, particularly in energy and transportation sectors.

The Event witnessed very high-level participation from over 250 dignitaries including ministers and senior officials of participating governments, central banks, CEOs of development financial institutions, banks, corporate houses, among others.

Africa- India Partnership Day35

South-South Cooperation

Exim Bank shares its experience and expertise through provision of consulting

assignment and on-site exchange of personnel programmes

During the year, the Bank was commissioned by the Commonwealth Secretariat,

London to assist the Sri Lanka Export Credit Insurance Corporation (SLECIC) to review

its operating policies and suggest new products.

The Assignment included an assessment and best practice identification exercise,

based on which recommendations for interventions for SLECIC were made.

As a part of the assignment, recommendations were also made to enhance the overall

export financing framework in Sri Lanka.

Initiatives on Institution Building and Capacity Development

South-South Cooperation

The MOU will strengthen collaboration between ITC and Exim Bank to help increase enterprise and sector competitiveness and promote capacity-building in trade intelligence, including market analysis and research.

Under the MOU, ITC and Exim Bank will also cooperate on the project on Supporting India’s Trade Preferences for Africa (SITA), which will run from this year to 2020.

The six-year project is aimed at promoting exports from five East African countries – Ethiopia, Kenya, Rwanda, the United Republic of Tanzania and Uganda – to India through investment and skills transfer from the Indian side.

SITA, which is funded by the United Kingdom’s Department for International Development (DFID), will be driven by the Indian private sector and supported by the public sector.

MOU with ITC Geneva to promote India-Africa Trade

Regional Cooperation

Exim Banks of Australia, China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Thailand, Vietnam. Possibility of Iran, Sri Lanka, Turkey.

The 20th Annual Meeting of Asian Exim Banks Forum was held in Jodhpur, India, in November 2014. The theme of the meeting was ‘Evolving Role & Relevance of Asian Exim Banks - Path to 2020’.

The Forum has been conceived and initiated by Exim Bank of India in 1996.

During 2013-14, the Forum conducted 3 training programmes on ‘Commodity Financing’, ‘Learning & Experience Sharing on Conducting Training Workshops’, and ‘Accessing Capital Markets’ in Australia, China and India, respectively.

Japan has since taken over the Chair.

Asian Exim Banks Forum

Recent Innovation

Dealing with Iran risks unpleasant consequences due to sanctions. Yet Iran is an important country of India and needs credit to import from India.

The Export Development Fund (EDF) is an accounting entity under the Exim Bank Act with same management but distinct books of account and audit reports.

EDF is meant for projects / loans not commercially viable or unlikely to be taken up by others. Prior approval of GOI is mandatory for use of EDF.

Structured a Buyers Credit under the EDF to be funded by GOI guaranteed bonds to cover export of projects to Iran.

Similar structure can be used for other difficult cases as well.

Assistance to Iran under the Export Development Fund

Exim Bank helps Indian companies in going Global

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Partner in India’s

Globalizationwww.eximbankindia.in

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