Dhaka, March 7, 2025 – The Indian credit lines (LoCs) granted to Bangladesh, totaling approximately $7.4 billion, are set to be downsized due to significant delays and complexities in executing numerous funded projects. This adjustment comes after a two-day India-Bangladesh bilateral meeting, which focused on reviewing Indian-funded projects in Bangladesh.
India-Bangladesh Bilateral Meeting and Credit Line Review
A joint technical committee will now be formed to finalize the status and funding distribution of these projects. According to a senior official from Bangladesh’s Economic Relations Division (ERD), the process of reducing the funds isn’t being termed as “downsizing.” Instead, it’s being referred to as a “right-sizing” or “rationalization” of the Indian LoCs to ensure the proper allocation of resources.
The official explained that delays were caused by both Bangladeshi and Indian factors. As a result, the current projects funded under the LoCs will face cuts, with the final decision on the amount of funding reductions to be made after further discussions.
Bangladesh’s Indian Credit Lines Breakdown
India extended three major credit lines to Bangladesh since 2010:
- $862 million LoC (signed in 2010) for 15 projects
- $2 billion LoC (signed in March 2016) for 12 projects
- $4.5 billion LoC (signed in October 2017) for 15 projects
However, out of 42 projects under these credit lines, only 14 have been completed, accounting for about $410 million, or approximately 6 percent of the overall commitment. Notably, $1.88 billion has been disbursed as of now, while $254 million has been repaid by Bangladesh (as of June 2024).
Key Challenges and Future Steps for Indian Credit Lines
The Indian credit lines to Bangladesh have been marred by project delays, procurement issues, and the requirement that materials, contractors, and consultants must all come from India. This has further complicated the execution of the planned projects. The bilateral meeting concluded with a decision to review 22 projects worth about $4 billion where no contracts have been signed yet. The ERD official mentioned that feedback from the relevant ministries will also be sought to ensure project alignment with national priorities.
Moving Forward: Separate Projects and Revised Terms
It was also agreed that future projects would no longer be grouped under LoCs but handled as standalone initiatives. Importantly, the interest rate on loans under the credit lines will remain at 1 percent, as reaffirmed by the Indian side during the discussions.
Conclusion: Downsizing of Indian Credit Lines to Bangladesh
The downsizing of the Indian credit lines to Bangladesh reflects ongoing challenges in international development funding, procurement, and execution. As the two countries continue to collaborate on infrastructure and development projects, ensuring efficiency and mutual understanding will be essential for the successful utilization of future loans.
