India’s largest private sector lender,ICICI Bank Ltd, said the Export-Import Bank of Korea (Korea Exim) has sanctioned a loan of $200 million (Rs822 crore) to it, for investments with South Korean links in a bid to boost trade between the two countries.
ICICI Bank will receive the “untied two-step loan” from Korea Exim and then lend to Indian firms that have equity participation from or business relationships with Korean firms. ICICI Bank will use the money to cater to foreign currency requirements of firms in sectors such as automobiles, auto ancillaries, power, transportation, plastic and consumer electronics.
The agreement was signed in Mumbai by K.V. Kamath, managing director and chief executive officer of ICICI Bank, and Cheon-Sik Yang, chairman and president of Korea Exim. This is the first loan of its kind to be extended by Korea Exim. But ICICI Bank entered into a similar arrangement with the Export Import Bank of Japan, also known as Japan Bank For International Cooperation, under which it has drawn about $150 million of the $200 million loan agreed upon.
“Korea has (made) significant contributions to our country, be it in the field of automobiles or electronics. Korean companies have become household names in India today and we believe that this is a suitable time to establish a line of credit for Indian firms having Korean linkages,” Kamath said. He added that the bank’s move will help grow trade between the two countries. Trade between South Korea and India has risen from $4.5 billion in March 2006 to $6.3 billion in March 2007.
Under the agreement, Indian companies can get loans of tenures of 0-3 years, 4-10 years and 10-14 years from ICICI Bank. “Different rates of interest will be applicable to each tenure, and corporates will get the flexibility of anything from a small working capital loan to a large infrastructure or power project, which are typically long-term in nature,” said Chanda Kochar, deputy managing director of ICICI Bank.
Yang expressed his confidence in ICICI Bank’s wide range of business networks. “We believe this facility will significantly benefit Korean companies’ investment plans in India. We are also ready to resume dialogue with ICICI Bank, once this line of credit is fully utilized.”