SOFT LOANS - ECONOMY
News: India has given $15 bn as soft loans to neighbors
What's in the news?
● The volume of India’s soft loans to neighboring countries has increased from about $3 billion to almost $15 billion in the last eight years (2014 -2022).
Soft loans:
●
A soft loan is basically
a loan on comparatively lenient terms
and conditions as compared to other loans available in the market.
● These easier conditions might be in the form of lower interest rates, prolonged repayment duration, etc.
Description:
●
The repayment of these
soft loans might also include interest
holidays.
●
This process of extending
soft loans is also known as soft financing or concessional funding.
●
As the loans extended are
at much easier terms, these are generally not provided by private financial
institutions.
● They are primarily provided by government agencies.
Benefits of soft loans to Lending country:
- Soft
loans are often offered not only as a way to support developing nations
but also to form economic and political ties with them. Example, Japan’s
soft loans to India.
- Nations
exchange credit in return for some important resources like critical
minerals.
- Soft
loans have been an important diplomatic tool to sustain political
influence in the neighborhood and beyond as well as counter the growing
Chinese presence, especially in Africa.