---
title: "India's Lines of Credit (LOC): How They Work"
description: "Lines of Credit are India's concessional loans via Exim Bank under the IDEAS scheme, tied to Indian goods and services. See how they differ from grants and FDI."
url: "https://modeldiplomat.com/learn/glossary/lines-of-credit-india-development-partnership"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Lines of Credit are concessional government-to-government loans extended through the Exim Bank of India under the Indian Development and Economic Assistance Scheme to finance infrastructure and capacity projects in pa…
- What is the difference between an Indian Line of Credit and a grant?
- Who administers India's Lines of Credit?
- Why must 75 percent of an LOC be sourced from India?
- Which regions receive the most Indian Lines of Credit?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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## Positions at a glance

### Supporters

The instrument has attracted scrutiny on several fronts. Critics note slow implementation, with a significant share of committed amounts undisbursed owing to bureaucratic delays, weak project preparation, and capacity constraints on the borrower side. The tied-procurement requirement, while supporting Indian industry, has drawn comparison with China's Belt and Road lending and raised questions about value-for-money and the narrowing of competition. Debt-sustainability concerns intensified after defaults and crises in recipient countries, prompting India to position its terms as more transparent and concessional than alternatives. The 2020 IDEAS revision and the strengthening of the DPA's monitoring role were direct responses to these critiques, alongside efforts to accelerate the Africa portfolio and diversify project sectors.

### Opponents

The procedural cycle begins when a partner government identifies a project and requests financing through diplomatic channels, usually via the Indian mission and the MEA. The DEA appraises the request and, if approved, the Government of India and the borrowing government conclude a framework that authorises Exim Bank to extend the credit. Exim Bank and the borrower then sign a Line of Credit Agreement specifying the amount, tenor, moratorium, interest rate, and commitment fee. A defining feature is the sourcing condition: under IDEAS, a minimum of 75 percent of the contract value of goods, works, and services must be procured from India, reinforcing the instrument's dual character as both development finance and export promotion. The borrower selects projects, but execution contracts are awarded to Indian companies, with disbursements made by Exim Bank directly to the Indian exporter against shipping and performance documentation.

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Example

In 2017, India extended a USD 4.5 billion Line of Credit to Bangladesh through Exim Bank — its largest single LOC — financing railway, port, and power-sector infrastructure under the IDEAS scheme.

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