World Bank approves USD 4.3-billion loan to India

Washington, Sep 23 (PTI) The World Bank will provide USD
4.3-billion loan for 4 Indian projects, including USD 2
billion for recapitalisation of state-owned banks.

The assistance would "bolster infrastructure investments,
enable public sector banks to expand credit and strengthen
power transmission networks to meet the growing demand," said
a World Bank release.

The four loans, approved by the World Bank's executive
board yesterday, include USD 2 billion loan to enhance banks'
capital, USD 1.2 billion loan to infrastructure financing
company IIFCL, USD 1 billion to help address power deficiency,
and USD 150 million to improve water supply in Andhra Pradesh.

Officials of the multilateral lending agency said the
development policy loans have no conditions attached and would
be disbursed in a single tranche after January 1, 2010, unless
the Indian government prefers in installments.

Further, there is a second development policy loan that
would be considered by the World Bank in six to seven months
time and this, too, would be disbursed in a single tranche.

"Today's support will help maintain credit growth and
continued infrastructure investments. Supporting
infrastructure is particularly important during the current
crisis, not just to sustain the domestic economy at a time of
reduced global demand, but even more to lay the foundations
for stronger future growth," World Bank Country Director for
India Roberto Zagha said.

The World Bank's USD 2 billion Banking Sector Support
Loan, with a 30-year maturity, would help India's select
public sector banks expand credit for infrastructure
development, small and medium enterprises, and the rural
economy.

Preferring to call it "injection of capital" instead of
"recapitalisation" as the latter could mean banks are short of
capital, Zagha said liquidity is not an issue with the banks
as the Indian banking sector has done "remarkably well".

There has been an increasing demand on public sector
banks after private and foreign banks slowed their lending and
deposit taking due to the global financial crisis, the World
Bank said. The loan would further strengthen the Indian banks
for the phase of economic recovery ahead, it added.

A 28-year loan of USD 1.195 billion has been granted to
the India Infrastructure Finance Co Ltd (IIFCL) to help India
achieve its vast infrastructure agenda on roads, railways,
ports, airports, communication and power sectors.

The loan to IIFCL is designed to support its role to
catalyze private financing for public-private partnerships in
infrastructure and stimulate the development of a long-term
local currency debt financing market, the World Bank said.

The development lender also approved a 30-year, USD 1
billion loan for the Fifth Power System Development Project.

It would help Powergrid, the national power transmission
utility, to expand power transmission network, especially
in the western, northern and southern parts of the country,
it said.


The fourth loan of USD 150 million was approved for the
Andhra Pradesh Rural Water Supply and Sanitation Project, the
World Bank said. The soft loan carries a 0.75 per cent service
fee and a maturity of 35 years.

The project is designed to improve water supply and
sanitation services in 2,600 villages across 6 districts of
the state. It aims to provide piped water to 2.1 million
people and extend sanitation services to 1 million people who
currently do not have access, it said.

While the International Bank for Reconstruction and
Development (IBRD) would provide loans for the banking sector,
Powergrid and IIFCL, International Development Association
(IDA) would finance the project in Andhra Pradesh.

IBRD is an arm of the World Bank that aims to reduce
poverty in middle-income and credit-worthy poorer countries by
promoting sustainable development and IDA is the Bank's
soft-lending arm. PTI MG
SDE