World Bank unveils $4.34bn in loans to India

[Naveed Yaseen]

WASHINGTON: The World Bank on Tuesday announced $4.345 billion in loans to India, including $2.0 billion for the banking sector, to help strengthen its economy amid the global economic crisis.

The development lender said its executive board approved on Tuesday loans for projects in five countries, with the loans for India by far the largest.

The World Bank said it had extended a two-billion-dollar loan to support the banking sector, in response to a request from the Indian government to support stimulus measures to counter the worst global downturn in six decades.

“This will help maintain the confidence of the public in the banking sector, prevent shortages of capital from leading to a slowdown in credit growth, and provide a capital buffer to public sector banks to absorb the possible increase in non-performing assets resulting from the global financial crisis and its impact on India’s economy,” the World Bank said.

The loan is for 30 years and includes a five-year grace period in which India is exempt from repayments.

A 28-year loan of $1.195 billion was aimed at increasing the availability of long-term financing for the India Infrastructure Finance Company to provide public-private financing of infrastructure projects.

The “pipeline” of projects under consideration “includes selected power, roads, and ports projects,” it said.

A loan of one billion dollars, maturing in nearly 30 years, would support the Fifth Power System Development Project aimed at strengthening India’s electricity transmission system.

The three loans will be provided by the International Bank for Reconstruction and Development (IBRD), the bank’s institution that aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development.

A $150 million, 35-year credit was granted by the bank’s International Development Association, which helps the poorest country by providing interest-free loans and grants.

The IDA credit is to assist the Andhra Pradesh Rural Waters Supply and Sanitation Project, aimed at improving rural water supply and sanitation services in the southeastern state.

Other loans and credits approved were: 1.0 billion euros to Hungary; $200 million to Latvia; $71.50 million to Nepal; and $65.2 million to Vietnam.

The one-billion-euro ($1.48 billion) IBRD loan to Hungary finalizes a commitment the World Bank made 11 months ago with the International Monetary Fund and the European Union to help Hungary cope with the global crisis.

The 8.5-year loan was extended to support fiscal reforms, a “financial stability program” and pension reforms “and aid in cost containment and deficit prevention in the health sector,” the Washington-based development lender said.

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