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World Bank Approves Significant Increase in Lending to India

March 14, 2012

Agreement Allows for US $4.3 Billion Increase in Support to India

WASHINGTON, March 14, 2012 - The World Bank announced today a new innovative and flexible financing arrangement for India, one of its largest client countries, allowing it to obtain substantial additional financing from the International Bank for Reconstruction and Development (IBRD), the Bank’s middle-income lending arm.

This arrangement, while facilitating a US $4.3 billion increase in support to India, is designed to maintain IBRD's net exposure within the limit of US$ 17.5 billion established by the IBRD for lending to a large, highly creditworthy borrower like India.

The new arrangement will allow for special bonds to be issued by the World Bank and purchased by India, to offset additional planned lending. This will enable India to continue accessing long-term, low-interest IBRD finance for development projects aimed at improving the lives of its people, one third of whom are yet to make their way out of poverty.

“Without taking this action, it would have been difficult for the Bank to assist India meaningfully as it tackles the remaining large challenges of lifting some 300 million out of poverty,” said World Bank Vice President for South Asia Isabel Guerrero. “This new arrangement will work towards supporting India’s development needs, showing the Bank can be innovative, flexible and responsive to the differentiated needs of our client countries.”

Like other emerging economies, India is faced with the challenge of removing bottlenecks in infrastructure and human skill development that can constrain its ability to sustain non-inflationary, rapid and inclusive growth. This has led to growing demands for the Bank’s low-cost financing and the institution has been exploring innovations to meet these calls for its services. The new move is in line with previous commitments by the World Bank that the Bank strives to leverage its financial and knowledge resources to help India as it steps up its response to its development challenges.

In line with its aim to support the Government of India’s development goals, the World Bank has nearly 80 active projects in India, with several large projects in the critical area of infrastructure. Funding for active World Bank Group projects includes US$ 9.2 billion in interest-free credits from the Bank’s fund for the poorest, the International Development Association (IDA); US$ 14.6 billion from IBRD;  and a committed portfolio of US$ 3.57 billion from the Bank’s private sector arm,  the International Finance Corporation (IFC). The World Bank Group in its last fiscal year (ending June 2011) made US$ 6.32 billion available to India, including US$ 2.07 billion from IDA, US$ 3.47 billion from IBRD and US$ 775 million from IFC.

The new financing arrangement was approved by the World Bank’s Board of Executive Directors on 13 March.

Media Contacts
In Delhi
Sudip Mozumder
Tel : 91-11-41479210
In Washington
Alison Reeves
Tel : (202) 473-8955