Bangladesh today signed a $4.5 billion third line of credit (LoC) agreement with India for its infrastructure and social sector development.

The agreement was signed in the presence of Union Finance Minister Arun Jaitley and his Bangladeshi counterpart A M A Muhith after the two leaders held talks here.

Economic Relations Division Secretary Kazi Shofiqul Azam signed the deal on behalf of Bangladesh, while Managing Director of the Export-Import Bank of India (Exim) David Rasquinha signed for India.

The new Indian line of credit, worth a staggering $4.5 billion, will be used to fund 17 major projects in Bangladesh, which include electricity, railroads, roads, shipping and ports.

As with previous LoC agreements, Bangladesh will pay an interest rate of one per cent a year. It will have 20 years to pay back the loans, with a grace period of five years.

“Bangladesh has developed significantly on the socioeconomic front in the past seven years,” Jaitley said following the signing of the deal.

“We have stood by Bangladesh’s attempts to develop and we will do so in the future. This significant agreement is a continuation of that effort,” he said.

Speaking on the occasion, Muhith said, “Bangladesh and India have excellent relations at the moment.”

“They stood by us during our independence. We hope they will continue to do so in the future,” Muhith was quoted as saying by bdnews.

The $4.5 billion deal was announced during Prime Minister Sheikh Hasina’s visit to India in April. Jaitley’s trip to Bangladesh was used to finalise the agreement.

Under the agreement, Bangladesh would have to purchase 65 to 75 per cent of the services, goods or works from the Indian market with the money to be provided under the third LoC following the precedence of the previous two nearly identical agreements.