The new project will concentrate on the states of Himachal Pradesh, Jharkhand, Meghalaya, Punjab, Rajasthan, Uttarakhand, and Uttar Pradesh, the Bank said in a statement.
Over the next five years, the project will aim to provide these states with an average connectivity of around 91 per cent by constructing 24,200 km of all-weather roads to benefit an estimated 6.1 million people.
The project will also develop a system for maintaining these roads in good condition over the long term.
"A good road network can generate many commercial and social benefits for rural economies through increasing access to goods as well as services such as health and education," said the World Bank's Country Director for India, Roberto Zagha.
The credit and loan is from the International Development Association (IDA) – the World Bank's concessionary lending arm, which provides interest-free loans with 35 years to maturity and a 10-year grace period, and from the International Bank for Reconstruction and Development (IBRD) which has a 5-year grace period, and a maturity of 18 years.
The program was established in the year 2000 to address the challenge of poor rural accessibility at a time when almost 40 per cent, or 300 million people in the country lacked access to unpaved roads.
And a large part of the existing 2.7 million km of the rural road network were in poor condition, impeding access to markets and increasing transportation costs.
While the PMGSY also called as Prime Minister's Rural Roads Programme has since added 2,74,000 km of new roads, in vast parts of the country, especially in economically weaker and hilly areas, continue to remain inaccessible.
The project also includes USD 60 million in technical assistance to build the capacity of the rural roads agencies, especially in the ongoing management of assets and the sustainable maintenance of roads.