"Prime Minister Dr. Manmohan Singh has announced an assistance package of Rupees 500 crores for the rehabilitation and resettlement of the north last year," said Rao, delivering the inaugural address to a two-day seminar on Sri Lanka in New Delhi.
"We have in addition extended the lines of credit worth 416 million dollars for the restoration of railway infrastructure and other infrastructure projects in northern Sri Lanka. Another 382 million dollars are in the pipeline," she added.
"The end of military conflict in Sri Lanka has presented the country with many challenges, and we should not underestimate any of these challenges. The most immediate among them is the plight. They have come out after decades of conflict in northern and eastern Sri Lanka, scarred by their experience and seared by violence in their daily lives," she added.
In October last year, India offered Sri Lanka 100 million dollars to help war refugees return home and rebuild the country's ravaged north.
A similar aid package was given by New Delhi in July 2009, after the Sri Lankan Government announced victory in a 25-year war against Tamil Tiger separatists.
The Indian government faces pressure to protect Sri Lankan Tamils, closely linked to about 60 million Tamils in Tamil Nadu.
India, which once wielded undisputed leverage over the Sri Lankan conflict, maintained a largely hands-off approach over the last two years because of the concerns of Tamils at home.
New Delhi is now keen to ensure that it retains influence in the island and keeps rivals China and Pakistan at arm's length.