World Bank to grant $1bln loan to India

India seeks amount to recapitalise its PSUs after receiving $2bln last year.

After approving a $2-billion grant last year, the World Bank on Wednesday said it was discussing with India for another $1-billion credit to help shore up capital of its public sector banks.

“Discussions are going on with the World Bank and the government of India to provide another $1 billion (for bank recapitalisation),” World Bank Country Director for India Roberto Zagha said in New Delhi.

The Washington-based lender has already loaned $2 billion to India under Banking Sector Support Loan to help select public sector banks expand credit for infrastructure development and growth of small and medium enterprises, and the rural economy.

Zagha said the discussions for new credit line had just started and it was difficult to say if it could be given to India in the coming fiscal year beginning July 2010.

The executive board of the World Bank had last year approved $2 billion loan with 30-year maturity to help enhance banks’ capital.

Following this, the government has made capital infusion in many public sector banks to increase Tier I (equity) capital above 8 per cent.

View the full story in Live Mint.