The Indian Government has started up a preferential credit fund worth US$300m to finance textile and apparel projects in Vietnam.

According to the Vietnam Textile and Apparel Association (VITAS), the fund will back projects in which Indian equipment and services make up 75% of the value. Each loan carries a ten-year span and an interest rate of 2% per annum, and it is understood Vietnam's Eximbank will disburse any loans.

The credit facility is aimed at assisting Indian businesses to develop their factories in Vietnam as well as encourage Vietnamese enterprises to expand cooperation with Indian partners.

The move will also create an opportunity for businesses once Trans-Pacific Partnership negotiations conclude. The TPP free trade pact is being negotiated among 12 countries - including Vietnam but not India - and is likely to require raw materials to be made locally or sourced from the 12 members.