World Bank, others to lend a hand to banks for infra funding

Institutional lenders, including World Bank, Asian Development Bank (ADB), and KfW, among others, are looking to team up with public sector banks (PSBs) to fund India’s cash-starved infrastructure and renewable energy sectors. They currently fund government-backed projects individually.

Institutional lenders, including World Bank, Asian Development Bank (ADB), and KfW, among others, are looking to team up with public sector banks (PSBs) to fund India’s cash-starved infrastructure and renewable energy sectors. They currently fund government-backed projects individually.

The World Bank office in Washington DC. (Livement)

The agencies will give cheap loans to government banks, who in turn will lend to the two sectors. The World Bank has already sought the government’s approval for joint funding, while the others are looking to apply soon.

“We are keen to fund projects in partnership with the other banks... There are large chunks of infrastructure projects that can be funded jointly… We have sent a proposal to the finance ministry,” said Onno Ruhl, country director, World Bank India.

The World Bank wants to disburse loans worth $3 billion (around ₹20,100 crore) to the infrastructure sector this year.

The Asian Development Bank has also decided to expedite its loan approval process for the projects in India.

The World Bank, Asian Development Bank, Brics Bank and others have lined up close to $2 billion to be pumped into the renewable sector alone. Banks will not be able to use these funds for any other purpose.

MCLR is the benchmark lending rate. Banks add their margins to the MCLR to arrive at loan rates for different sectors. Loans to sectors that are perceived “risky” attract higher interest rates. Both power and infrastructure are deemed risky by domestic banks, given the high value of stressed assets. In fact, state-run banks have stayed away from lending to these two sectors in the past two years.