The Government of India (GoI) has extended the settlement period and reduced interest rates of the two rupee standby credit facilities (SCF), financial assistance from India.
The GoI provided INR 3B in June 2012 and INR 4B SCF in March 2013.
According to the press release from the Indian Embassy, the settlement period is extended by five more years with a reduced interest rate of 2.5 percent with effect from July 2022.
The two standby credit facilities, extended at an interest rate of 5 percent, 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 ties 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 within India and meeting Indian rupee requirements in Bhutan.
GoI released INR 3B SCF to Bhutan in June 2012, which was to be repaid within a five-year period ending in June 2017. In April 2017, the former finance minister of Bhutan, during his meeting with the Indian finance minister requested GoI to extend the deadline for settlement of SCF INR 3B received in June 2012 by a period of one year. In June 2017, GoI approved this request for an extension of the deadline.
In June 2018, Bhutan requested another four years extension till June 2022
The SCF INR 4B was originally due for repayment in March 2018. The duration was extended by three years till March 2021 and then by another 15 months till June 2022.
Similarly, as part of Bhutan’s post-pandemic economic recovery, the GoI has extended SCF of Nu 7B at an interest rate of 2.5 percent on the utilised amount.
According to the Indian Embassy, this facility will be useful to the government of Bhutan in easing pressure on its rupee reserves at a time when major foreign currency earning sectors such as tourism has suffered due to Covid – 19 pandemic.
The press release states that this facility would ease pressure on Bhutan’s rupee reserves on account of the high current account deficit, higher government spending to boost the economy, and the central bank’s easy credit policy to boost public spending.