India lends Bangladesh one billion dollars

DHAKA — India is giving Bangladesh a billion-dollar soft loan, the biggest credit package New Delhi has ever given to any nation, officials said Saturday, highlighting warming ties between the neighbours.

Relations between the South Asian neighbours chilled between 2001 and 2006 when Bangladesh was ruled by an Islamist-allied government and New Delhi regularly accused Dhaka of harbouring Indian insurgents and fostering militancy.

"It's the largest line of credit the government of India has extended to any country," Deepak Mittal, a spokesman for the Indian embassy in Dhaka, told AFP.

The line of credit also marked the single largest loan Bangladesh has received from any nation, development bank or donor agencies, Dhaka's Economic Relations Division secretary Mosharraf Hossain Bhuiyan said.

Indian Finance Minister Pranab Mukherjee was due to arrive in Dhaka later on Saturday to attend the official signing for the loan.

The money will be used by impoverished Bangladesh to modernise its railway and build other transport and infrastructure.

"The terms of credit are very favourable to Dhaka. The interest rate is just 1.75 percent and will be paid back in 20 years," Bhuiyan said.

Indian officials said Mukherjee's planned presence for the signing of the deal underscored the importance that New Delhi attaches to building better relations with Bangladesh.

The line of credit was announced by Indian Prime Minister Manmohan Singh during his Bangladeshi counterpart Sheikh Hasina's "pathbreaking" visit to New Delhi in January.

It was Hasina's first visit to India since her secular Awami League party was swept back to power with a massive victory in January 2009.