Colombo: India on July 12 agreed to further soften terms of the line of credit (LoC) of $ 100 million already extended to Sri Lanka as the two countries decided to tap the vast potential that exists for enlarging economic co-operation beyond the India- Lanka Free Trade Agreement (FTA).

The concessional terms of a 15-year repayment period with a five-year grace period was applicable to the second and third tranches.

After talks visiting External Affairs Minister Yashwant Sinha had with Sri Lankan leaders, it was agreed that this relaxation would be applied to the unutilised balance of the first tranche also, a joint statement issued said.

''The two sides shared the vision about the vast potential that exists for enlarging our economic co-operation beyond the FTA,'' it said.

The economic content came in for special focus during intensive parleys Sinha had with Sri Lankan Prime Minister Ranil Wickremesinghe and his counterpart Tyronne Fernando.

During the parleys, the Foreign Ministers noted with satisfaction the momentum in the economic relationship between the two countries, the statement said.

They acknowledged the progress made in the expeditious resolution of outstanding issues relating to tea, garments and cement under the FTA at a meeting of senior officials last week.

The Sri Lankan side sought Indian assistance for restructuring of its Railway sector. India has had extensive involvement in the development on this sector in the island nation.

PTI