MUMBAI: Export finance institution Exim Bank plans to raise Rs 3,000 crore from the local market to finance imports from India by Iranian railways and development of a local port there.

The bank has extended credit lines worth Rs 3,000 crore under the Export Development Fund or EDF to seven Iranian banks for using the funds to import steel rails from India and development of Chabahar port.

The EDF is a separate fund notified under the Exim Bank Act and the funds can be utilised only for specified activities approved by the government. The cabinet has already cleared the exports of 2.5 lakh metric tonnes of steel from India. “The Union cabinet has approved the projects and the proceeds from the issue will be used to finance these projects,” said David Rasquinha, deputy managing director, Exim Bank.

For the investors, these borrowings will be fully guaranteed by the government and hence risk-free. Exim Bank, on its part, will raise funds from the market to calibrate disbursals, said Rasquinha. Though Exim Bank officials declined to share pricing details, they hinted that it is likely to be benchmarked to prevailing G-sec rates.

Exim Bank, with a specific mandate to promote India’s exports, has also committed to finance the $1.6 billion strategic Maitree Power project in Bangladesh with support from the government of India. The project is a 50:50 joint venture between NTPC and the Bangladesh Power Development Board.

The bank reported a net profit ofRs 316 crore for 2015-16, less than half of the previous year’s profit of Rs 726 crore. The bank attributes this to higher proactive provisioning for 2016-17.

“We have made an additional provisioning of Rs 450 crore in anticipation of some loans turning bad this year (2016-17),” said Debashis Mallick, deputy managing director, Exim Bank.