India plans to increase WB borrowing limit

India plans to increase WB borrowing limit

India plans to increase WB borrowing limit

In a move that is expected to improve capital inflows to India and help shore up rupee, the cabinet on Thursday will consider a proposal to enhance country’s borrowing limit with the World Bank by an additional $4.3 billion.

India’s existing borrowing limit with the World Bank is $17.5 billion. A higher borrowing limit will enable the bank to expand its loans to India.

 “If the proposal is considered India can get a larger sum of money from the World Bank for investing in infrastructure sector,” a senior finance ministry official said.

Under the proposal, India will borrow the money from the International Bank of Reconstruction and Development (IBRD), a subsidiary of World Bank.

 For quite sometime, the finance ministry has been working on ways to secure higher borrowing limits to India. India's single borrower limit (SBL) with the World Bank, which currently stands at $17.5 billion will increase to $21.8 billion once the proposal is considered.

SBL refers to the cumulative amount disbursed to a country and not yet repaid. The World Bank follows the single country exposure limits, but it does not have any annual ceilings on the amount that it can lend to a country.

A higher SBL implies the deepening trade and economic ties between India and the US, the largest shareholder in the World Bank. IBRD extends short term loans to the countries at low interest rates.