Module: | MODULE A: INTERNATIONAL BANKING
Q172: Consider the following statements regarding the Line of Credit operations of the Export-Import Bank of India:
1. Lines of Credit are sovereign-backed facilities extended by the Bank on behalf of the Government of India to foreign governments and their agencies.
2. The operational framework for extending these sovereign lines of credit is governed by the Indian Development and Economic Assistance Scheme.
3. Lines of Credit extended by the Bank do not require the borrowing country to import any goods or services from India.
Which of the statements given above is or are correct?
2. The operational framework for extending these sovereign lines of credit is governed by the Indian Development and Economic Assistance Scheme.
3. Lines of Credit extended by the Bank do not require the borrowing country to import any goods or services from India.
Which of the statements given above is or are correct?
✅ Correct Answer: A
🎯 Quick Answer:
Option A is correct because only statements 1 and 2 are accurate.Structural Breakdown: These Lines of Credit are structurally governed by the Indian Development and Economic Assistance Scheme.
Statement 3 is strictly incorrect because a foundational condition of these Lines of Credit is that a significant percentage, usually 75 percent or more, of the goods and services for the funded projects must be sourced from India.
Historical Context: India has historically utilized Lines of Credit as a primary tool for economic diplomacy, extending billions of dollars in credit across Africa, Asia, and Latin America to build goodwill and trade relations.
Causal Reasoning: The causal rationale for the mandatory Indian sourcing clause is to create a dual benefit.
It assists developing nations with essential infrastructure while simultaneously creating guaranteed international demand for Indian manufactured goods and consultancy services.