BUSINESS

India inks $4.2 b loan agreements with World Bank

Special Correspondent

IIFCL will get $2 b including $5 m grant for capacity building



Banks to get $2 billion capital infusion

PowerGrid to strengthen transmission system



NEW DELHI: India on Tuesday inked three agreements with the World Bank for a total loan of $4.2 billion (about Rs. 20,000 crore) for recapitalising some of the public sector banks (PSBs) and supporting development of infrastructure and power transmission projects. Out of the total credit quantum, while the Centre signed a $2-billion loan agreement for capital infusion in a few of the PSBs during 2009-11, representatives of Power Grid Corporation of India Ltd. (PowerGrid) and India Infrastructure Finance Company Ltd. (IIFCL) signed similar loan pacts with the World Bank for $1 billion and $1.195 billion, respectively.

According to an official statement here, the banking sector support loan from the World Bank’s arm, International Bank for Reconstruction and Development (IBRD), is part of the series of measures to stimulate the economy by assisting state-owned banks in maintaining credit growth to contain the adverse effects of the slowdown on employment and poverty, broaden financial inclusion and help production and trade sectors.

Specifics

The specifics of the amount, mode of capitalisation and other terms of capital infusion in individual PSBs are to be decided by the government in consultation with the banks.

The World Bank funding to IIFCL has two components. Apart from the $1.195-billion IBRD loan for long-term financing of infrastructure projects, there is a $5-million grant component for capacity building of IIFCL itself. The loan amount is to help bolster the country’s achievements in infrastructure development and lay the foundation for stronger growth by making long-term funding available to such projects being implemented through public-private partnerships (PPPs) in a range of sectors, including roads, power, airports, and ports.

The $1-billion loan to PowerGrid is for its ‘Fifth power system development project’ which is estimated to cost $1.562 billion and will be completed by June 30, 2015. The objective of the project is to strengthen the transmission system (National Grid).

The loan is to be utilised for strengthening transmission systems for Sasan, Mundra and Krishnapatnam ultra mega power projects (UMPPs) and the South-West interconnection.