India has pledged to extend a $500 million credit to Bangladesh for its defence related procurement.

Indian Prime Minister Narendra Modi came up with the pledge of defence deal with Bangladesh at a joint press conference with his counterpart Sheikh Hasina in New Delhi today.

"I am also happy to announce a Line of Credit of US dollars 500 million to support Bangladesh's defence related procurement," Modi said.

Stressing the need for cooperation between the armed forces, he said, "Today, we have also taken a long overdue step by signing an agreement on close cooperation between our armed forces."

Bangladesh will be able to spend the money based on its needs and priorities, Modi assured. "In implementing this line of credit, we will be guided by Bangladesh's needs and priorities."

The Indian leader was highly effusive of Sheikh Hasina's bold leadership in combating militancy and terrorism.

Praising his Bangladesh counterpart's 'zero-tolerance' policy against terrorism and militancy, he said, "We have the greatest admiration for Prime Minister Sheikh Hasina's firm resolve in dealing with terrorism. Her government's zero-tolerance policy towards terrorism is an inspiration for us."