The Export-Import Bank of the US (US Exim Bank) wants to provide a massive US$6 billion in letters of credit (L/Cs) to Indian carriers for acquiring aircraft from US producers.

The US' export credit agency has set this ambitious target in line with its remit to provide credit assistance to US exporters - and it is also offering pre-approved L/Cs of US$2.2 billion to eight Indian financial institutions for onward lending against imports from the US.

Aircraft commitments

"Our commitments to aircraft purchases from India will rise in the future. We are planning to offer L/Cs of US$6 billion to airlines in India for buying aircraft from the US," said US Exim Bank chairman and President James H Lambright during his May visit to India.

Lambright is signing eight agreements for offering L/Cs to financial institutions during his visit.

Financial institutions

US Exim Bank is offering L/Cs of US$250 million each to Industrial Development Bank, Infrastructure Development Finance Company, Punjab National Bank, State Bank of India and the India Infrastructure Finance Company.

Indian Renewable Energy Development Agency, Infrastructure Leasing & Financial Services and Power Finance Corporation are being offered L/Cs of US$50 million, US$100 million and US$800 million respectively.

Cut price L/Cs

"These dollar-denominated L/Cs are available at half the rate at which they are available in India. These include the Libor-linked interest rate, margin on that and a guarantee fee, which changes with the longevity of the loan," Lambright said.

US Exim Bank's current exposure to Indian companies is US$3.5 billion, accounting for 6 per cent of the bank's total global exposure.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.