India and Bangladesh have moved one step closer to sign the third line of credit (LoC) agreement after finance minister Arun Jaitley landed in Bangladesh. The deal will fund infrastructure and social sector projects and it will be worth $4.5 billion.

The deal was announced when Prime Minister Sheikh Hasina visited New Delhi. A finance ministry official announced that two agreements will be signed to implement the third LoC with Arun Jaitley and A M A Muhith presiding over the meeting.

The deal stipulates that Bangladesh should be willing to purchase 65 to 75 per cent of goods or services that will be required to complete the projects from India. India offered the Loc to Bangladesh in April 2017.

In spite of the new deal officials said that the earlier Locs had to overcome many difficulties due to the Indian market having a limited tendering system. The first and second LoC were worth $862 million and $2 billion respectively and some projects have faced implementation issues while other projects were yet to be physically worked on.

The earlier LoCs were signed over two governments. The first one was signed in August 2010 and the second LoC was signed in March 2016. Jaitley is also set to start a new scheme for cashless transactions for visas, which will be operated by the State Bank of India as a representative of the Indian High Commission in Bangladesh.

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