$4.3 bn okayed in World Bank bonds

Will raise India's net borrowing limit; also approves capital infusion in IIFCL, Exim Bank, Backward Classes Finance Commission

The government approved a proposal on Thursday to invest $4.3 billion (Rs 27,400 crore) in World Bank bonds. This will help India get additional funding from the multilateral agency for infrastructure projects.

The Reserve Bank of India (RBI) would invest in the bonds, floated by the International Bank for Reconstruction and Development (IBRD), a lending arm of the World Bank. The bonds are of various tenures and RBI would get a return on the investment.

According to senior officials, the move would allow India to get an equal amount of loan from the Bank, taking the country's net borrowing limit to $21.8 bn, against $17.5 bn at present.

At the end of June 2011, the Bank's exposure to the country was $11.4 bn (Rs 72,700 crore). The limit is likely to be breached in 2014-15. The Bank's long-term loans come at a very low rate of interest and any disruption in funding might affect some important projects.

India is also the largest borrower from the Bank. It needs an investment of $1 trillion in infrastructure in the 12th Five-Year Plan (2012-13 to 2016-17). World Bank loans are available at a concessional rate of as low as 0.75 per cent. As of March 2012, net commitments towards India were $23.4 bn across 75 projects in infrastructure, agriculture, education, health and environment.

IIFCl, Exim
The government also approved a proposal to provide capital funds of Rs 400 crore to India Infrastructure Finance Company Ltd (IIFCL) during 2013-14. The infusion comes with a proviso that further release within the authorised capital be made with the approval of the finance minister, subject to budgetary allocations. It will help IIFCL fund viable infra projects through long-term debt, takeout finance and credit enhancement. The Cabinet additionally approved a proposal to provide capital funds to Export-Import Bank of India during 2013-14 of Rs 700 crore, to support its growth.

The government also approved a proposal from the National Backward Classes Finance and Development Corporation for enhancement of authorised share capital from Rs 700 crore to Rs 1,500 crore. The Cabinet also approved licensing of land to concessionaires for four projects to be taken up in the public-private partnership mode and one project on a lease basis, based on tender-cum-auction, for setting up a cement bagging plant at Cochin Port.