World Bank approved $ 4.3-billion single tranche loan for India

$ 4.3-billion single tranche loan for India
NEW DELHI: In a significant development, the World Bank on Tuesday approved ‘single tranche’ loan worth $4.3 billion for four specific projects in India aimed at strengthening select public sector banks (PSBs), the country’s power network and other infrastructure facilities, and improve water supply in Andhra Pradesh.
According to a World Bank statement here, the assistance approved by its executive board in Washington would “bolster infrastructure investments, enable public sector banks to expand credit, and strengthen power transmission networks to meet the growing demand,” for energy in the country.
Support loan
Out of the massive total assistance being extended by the multilateral lending agency, nearly 50 per cent by way of a $2-billion ‘Banking sector support loan’ is for recapitalisation of select state-owned banks with the objective of greater credit expansion which would also help in maintaining the government’s economic stimulus programme that has been put in place in the wake of the global financial crisis.
Credit growth
The loan, the media statement said, would help maintain credit growth levels, support social banking and employment growth, and help strengthen the economic recovery ahead.
Another loan worth $ 1.2 billion being extended to India Infrastructure Finance Company Ltd. (IIFCL) is to support the financing company’s role of catalysing private funding of public-private partnership (PPP) projects in infrastructure and stimulate development of a long-term local currency debt financing market.
Power deficit
To help address the problem of acute power deficit in the country, the World Bank has decided to provide a $1 billion loan to the Power Grid Corporation of India (PowerGrid) for its ‘Fifth power system development project.’
As for the loan for Andhra Pradesh, an amount of $150 million is being provided for the State’s rural water supply and sanitation project to help improve water supply and sanitation services in 2,600 villages across six districts.
In particular, a notable feature is that the development policy loans have no conditions attached and are to be disbursed in a single tranche after January 1, 2010, unless the Indian government would like to avail the assistance in instalments.
Another loan?
Moreover, another development policy loan is also to be considered by the Bank within six to seven months for disbursement in a single tranche.
Participating in a video conference interaction with the media here from Washington, World Bank Country (India) Director Roberto Zagha said: “Today’s [September 22] 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.”
The World Bank’s $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.
Injection of capital
Dubbing the banking support loan as “injection of capital” — rather than recapitalisation as that would imply shortage of capital — Mr. Zagha pointed out that liquidity was not an issue with the country’s state-owned banks as the banking sector had performed “remarkably well.” Coming to specifics, the $1.195-billion loan granted to IIFCL is for a 28-year period and will help India achieve its vast infrastructure agenda pertaining to roads, railways, ports, airports, communication and power sectors. The loan to PowerGrid is for a 30-year period to help the nation’s power transmission utility in expanding its network, especially in the western, northern and southern regions.