World Bank approves $4.3 bn loan for infrastructure in India

Of this $2 billion is Banking Sector Support Loan, which will provide budgetary support to India, helping it maintain its broad economic stimulus program by enhancing the capital of select public sector banks.

This loan will help maintain credit growth levels,support social banking and employment growth, and help strengthen the economic recovery ahead, the World Bank said in a media statement.

Another loan of $1.2 billion to the India Infrastructure Finance Company Ltd. (IIFCL) is designed to support its role to catalyze private financing for public-private partnerships in (PPPs) infrastructure and stimulate the development of a long-term local currency debt financing market, the Bank said.

The World Bank also approved another $1 billion loan to the Power Grid Corporation of India for the Fifth Power System Development Project. It is designed to help address India’s acute deficit of power, the bank said.

Lastly, the Bank approved $150 million for the Andhra Pradesh Rural Water Supply and Sanitation Project, aimed at improving water supply and sanitation services in 2,600 villages across six districts of the State.

The loan money will provide piped water to 2.1 million people and extend sanitation services to 1 million.

The money to the Public Banking sector and Powergrid from the International Bank for Reconstruction and Development (IBRD) has a 30-year maturity, including a 5-year grace period. The IBRD loan to IIFCL has a 28 year maturity including a 7.5-year grace period.
The credit from the International Development Association (IDA), the World Bank’s concessionary lending arm, carries a 0.75 per cent service fee, a 10-year grace period, and a maturity of 35 years.

Noting that this is a crucial time to support India, Roberto Zagha, World Bank’s India Director, said: while the worst of the crisis seems to be behind us, doubts linger about the strength of the comeback, partly because the strength of the global recovery is uncertain.

"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," he said.