FM Sitharaman asks Asian Development Bank to step up lending to India

Sitharaman said need of the hour is to also increase private sector operations with a view to leverage the limited ADB funds
Finance minister Nirmala Sitharaman on Friday asked Manila-based Asian Development Bank (ADB) to raise its lending to India as the country can absorb $5.5 billion in loans a year.

“Keeping in view the need for a ‘global development’ approach and the long-term perspective of addressing poverty, ADB should expand its quantum and size of lending,” said Sitharaman, at the annual meeting of the board of governors of the bank, through the digital mode.

Sitharaman said India has the absorptive capacity to receive about $4 billion a year from sovereign operations, and about $1.5 billion annually from the private sector financing window.

ADB committed $3.2 billion for sovereign operations and $955 million to private sector in 2019. It was for the first time that the bank committed $4 billion to India in a year.

ADB committed $2.2 billion to sovereign ops so far in 2020. Of this, $1.5 billion has been committed for Covid-19-related activities. Sources said the bank would be meeting or exceeding $3.2 billion that it committed for India in the previous year. It would also be meeting this year the $955 million that it committed for private operations in 2019.

Sitharaman said need of the hour is to also increase private sector operations with a view to leverage the limited ADB funds. This, she added, would stimulate a development multiplier, including employment generation.

The finance minister also said as ADB’s India operations are increasing, the level of representation of Indian nationals at the mid and senior management and staff levels should be commensurate to help convey the perspective of Indian challenges adequately.

Sitharaman said ADB needs to work on strengthening its capital base to expand its lending outreach.

“In this context, India would like to add a cautionary note regarding the large amount of transfers out of ordinary capital resources (OCR) net income to various special funds,” she said.

With a view to strengthening the capital base of its general pool, the management may rather encourage the developed member countries and other potential donors to contribute to the cause that the special funds seek to achieve, the finance minister said.

“We would do well to keep in mind that the OCR pool also finances the concessional loans (COL). So, lowering the risk-bearing capacity of OCR will hurt the interests of some countries that access COL resources,” the finance minister said. She hoped that ADB may also consider more innovative ways towards increasing its net income and asked the bank to consider initiating discussions on the next general capital increase.

The finance minister also emphasised that India plays an active role in the South Asia Sub-regional Economic Cooperation (SASEC) initiative.

SASEC has gained considerable traction with total investments so far amounting to $13 billion in 59 projects, of which ADB financing is $7.5 billion. “To take SASEC’s operations to the levels achieved in similar regional cooperation initiatives, institutional strengthening is called for. We appreciate the close engagement of ADB with SASEC member countries to take this process forward,” she said.

In this context, establishing a regular SASEC finance ministers’ meeting as an apex guidance and oversight body would be a welcome step, she said.

India would be happy to host the first meeting of this platform in 2021, Sitharaman added. The finance minister said for coordinated planning and implementation facilitation of SASEC’s operational plan and for serving as a knowledge centre, the body’s secretariat being envisaged in the sub-region would be a step in the right direction.

“We invite ADB to set up the SASEC secretariat in India, apart from a private sector operations branch office in Mumbai for more committed operational activities in the private sector,” she suggested.

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