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Cabinet approves buying $4.3 billion World Bank bonds



Updated On - Monday, 16 September 2013

13 September 2013

NEW DELHI: The union cabinet on Thursday approved a proposal to invest $4.3 billion in bonds of International Bank for Reconstruction and Development (IBRD), an arm of the World Bank, which will make India eligible for higher borrowing from the multilateral lender.

Under the arrangement, the Reserve Bank of India will subscribe to special private placement of bonds by the IBRD, a lending arm of the World Bank.

"The IBRD would be able to lend to India $4.3 billion above the Single Borrower Limit of $17.5 billion, i.e. up to $ 21.8 billion," the government said in a statement after the cabinet meeting, The bonds would be of various tenures and the RBI would get return on investment.

India's headroom for borrowing from the World Bank is reaching the limit and investing in these bonds is expected to widen the scope for more loans. The share of multilateral debt, which is usually at concessional rates and of long tenure, fell to 13.2% at the end of March 2013 from over 20% at the end of March 2007.

"The additional borrowing space will enable Government of India to commit new projects with World Bank (IBRD) assistance," the government said. The cabinet also approved the proposal to provide capital funds to Export-Import Bank of India (Exim Bank) during 2013-14 to the tune of Rs 700 crore.

The capital infusion is expected to enable the bank to support exporters to secure large overseas projects through on-lending. "It will also help the bank to grow its loans & advances portfolio at 14% which will be below the targeted rate of 19% as per the Medium Term Business Strategy (MTBS) of the bank," the government said.

Published by: The Economic Times

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