Online edition of Daily News

Entrepreneurs in the manufacturing sector could benefit immensely through this credit line by importing plant, machinery and other equipment with original spare parts and accessories.

The Indian Line of Credit granted by the government of India for the import of goods and services of Indian origin is an attractive offer to move the wheels of industry in the country. The Government is planning to ensure the maximum utilisation of this credit line for the benefit of especially small and medium scale entrepreneurs in this country.

A special Bureau was recently set up under the aegis of the Industries Act as the facilitator in disbursing credit packages and loans under the credit line.

The objective of the Bureau of Services is to promote the growth of the industrial sector and create an entrepreneurial spirit that will encourage long-term investment using this credit line as a vehicle. As this is credit in the form of goods and services, only imports from India will qualify under this credit line.

The credit line is available for existing businesses, new businesses and for individual entrepreneurs. Entrepreneurs in the manufacturing sector could benefit immensely through this credit line by importing plant, machinery and other equipment with original spare parts and accessories.

It is also beneficial for the transport sector as there is a wide range of vehicles available through the credit line, including buses, lorries, trucks, tractors, cars, motor-cycles, scooters and trishaws made in India.

Among the other items that could be financed are consumer durables, food items including sugar, wheat flour, rice, red split lentils and wheat grain. There is a wide range of consultancy services also available through this credit line. If there are any other goods or services which do not come under these categories the Bureau will consider them on a case-by-case basis.

The sectors encouraged under this line of credit are small, medium and micro enterprises, agriculture and agro based industries, manufacturing and industry sector, land based activities of the fisheries sector, food processing, packaging, transport of goods and produce, export oriented projects and import substitution and labour intensive projects.

The Bureau of Services will consider any other ventures which do not come under those categories on a case-by-case basis. The Bureau will also ensure that enterprises and projects financed by the line of credit are environmental friendly.

The Bank of Ceylon is the apex bank of the Indian Line of Credit. Among the nineteen Participating Credit Institutions (PCI) are People's Bank, Seylan Bank, Hatton National Bank, Sampath Bank, Muslim Commercial Bank, Indian Bank and Commercial Bank of Ceylon, DFCC Bank and the National Development Bank. Other financial institutions including Lanka Orix Leasing Co. Ltd., Ceylease Financial services Ltd., Mercantile Leasing Ltd., Ceylinco Leasing Corporation Ltd., People's Merchant Bank, Central Finance Co. Ltd., The Finance Co. Ltd. and The Finance and Guarantee Co. Ltd., also participate in this service.

According to the Head of the Bureau of Services Sarath de Silva each PCI can decide on aspects such as eligibility criteria of its customer, purpose, quantum to be advanced, rate of interest, period of repayment and security in extending the credit facility to the borrowers.

"The Indian Line of Credit can be incorporated into an existing credit package, a proposed credit package or a scheme loan.

Under this credit line the maximum period or repayment will be six years inclusive of a grace period of one year for capital goods. For transport vehicles the repayment period is five years inclusive of an optional grace period of three months.

The repayment period for consumer durables and consultancy services is one year inclusive of a grace period of three months.

There are two stages in extending credit facilities under the Indian line of credit. In the first stage the purchase and sale of goods or services will be by private arrangement between the buyer and seller. The buyer and seller will enter into a sales contract containing specific clauses. This sales contract will be given to the lending institution (PCI) by the borrower and the PCI will send the contract to the Bank of Ceylon. Following the approval the Bank will forward the contract to the Indian Authority concerned.

In the second stage the Indian Authority will decide on whether the export item of service applied for, eligible under the line of credit before approving the sales contract. Once the PCI receives the notification through the apex bank it will open an inoperative Letter of Credit (L.C), on the beneficiary.

Imports are only allowed through LCs in US dollars and the Free on Board (FOB) value of the import. The inoperative LC will be sent to the Bank designated by the Government of India. It will be made operative by the Bank designated by the Indian Government.

Following advising the LC to the exporter and the PCI the export of the item will be made possible by the Indian government which makes the payment to the exporter," de Silva said.

He said that the advantages of the Indian Line of Credit are low rate of interest, long repayment period shorter sailing period and quicker delivery of spares and technical input due to the close proximity of the supplier and low freight charges.

The Bureau will liaise and be a link between the Participating Credit Institutions (PCI), apex bank, the Indian authorities and the Bank representing the Government of India. The Bureau will use its offices to smoothen out any delay in these institutions.

It also acts as an information dispenser by maintaining data of supplies of a variety of machinery and their agents in Sri Lanka. The agents of these products and services that qualify for loans under the credit line can display their brochures at the Bureau counter.

The Bureau will also assist and advise the stakeholders if called upon to do so," de Silva said.