India okays $750m infrastructure loan for Bangladesh

India has approved a USD 750 million loan for Bangladesh to develop trade infrastructure ahead of a visit to Dhaka by Prime Minister Manmohan Singh this week, a senior Bangladesh official said on Sunday.

The money is part of a USD 1 billion credit line India proposed for its eastern neighbour to develop ports and related infrastructure, said Musharraf Hossain Bhuiyan, secretary of the economic relations division of the finance ministry.

"The Indian government has already asked the relevant ministry to disburse the credit for implementing nearly two dozen infrastructure projects under the USD 1 billion credit agreement signed in August last year," Bhuiyan said.

Singh and Bangladesh Prime Minister Sheikh Hasina are expected to sign agreements to swap disputed territory dating back to the 1947 partition of British India, as well as pacts on water rights from major shared rivers, during the September 6-7 trip, the first by an Indian prime minister to Bangladesh in 12 years.

Singh's visit is widely seen as a demonstration of India's willingness to have closer understanding and cooperation with the small neighbour, and remove decades of mistrust.

India helped its neighbour secede from Pakistan in a bloody 1971 war, but relations were frequently fractious after that.

New Delhi also wants Dhaka to allow better transit links across Bangladesh to land-locked north-eastern Indian states.

Bangladesh has offered India the use of the Chittagong and Mongla ports to improve bilateral and regional trade.

But opposition parties, including former prime minister Khaleda Zia's Bangladesh Nationalist Party, oppose such moves, saying they would bring more benefit to India than Bangladesh.