ADB finds lending to India a challenge due to tough financial condition

The bank's income from surplus resources is lower than ever due to diminishing interest rates in advance countries

Takehiko Nakao, ADB
Takehiko Nakao, ADB
Sanjeeb Mukherjee Greater Noida
Last Updated : May 02 2013 | 2:56 PM IST
The Asian Development Bank (ADB) could find maintaining its existing lending level to India a big challenge in the coming years as its income from surplus resources invested in advance countries dips due to softening global interest rates, President of the multi-lateral lending agency Takehiko Nakao said today.

Addressing a press conference, on the occasion of the 46th Annual Meeting Of its Board of Governors,  Nakao said though they would like to increase its lending to India, but even maintaining the current level would be challenge because of the difficult financial conditions that the bank faces.

“Our income from surplus resources is lower than ever due to diminishing interest rates in advance countries, hence even maintaining the current level of lending will be a challenge,” Nakao said.

According to the ADB’s website, ADB’s sovereign lending assistance to India increased from an annual average of about $1.16 billion in 2000–2006 to $1.85 billion in 2007–2012 and the country has been ADB’s largest borrower for the last 3 years (2010–2012).

He said overall economic growth in Asia would be more robust than European nations and the developed world because of strong domestic demand and robust production capacities.

“The advance economies would grow slower than even post-Lehman period,” Nakao said. On the concept of Brics bank and its challenge to global financial agencies like ADB, Nakao said he welcomed the formation of the Brics bank and would cooperate with it, but banking business is difficult as finding good projects, monitoring it, lending etc is a challenge.

The concept of a Brics Bank has been floated by the conglomeration of five major emerging global economies Brazil, China, India, Russia and South Africa.

Nakao said that though expansionary monetary policy in many advance economies has been blamed for creating a bubble, more so in assets and commodity prices, but he thinks that its spill over on emerging economies across the world will be limited.
“I feel that expansionary monetary policy if it causes inflow in emerging economies is welcome and if there is an assets bubble then countries can manage those inflows,” Nakao said, adding that if advance economies did not embarked on a regime of expansionary monetary policy the global recession would have been worse.

On currency depreciation in Japan and its negative impact on the world financial markets, the Presiden of ADB said that his personal view was that the depreciation was necessary to bring out Japan from years of deflation.

 He also refuted criticism that Japan being the biggest shareholder in ADB has a monopoly over the post of President, saying that Japan has always favoured a open, transparent system of President ship of ADB and will have no problem if another worthy contender comes. Nakao is the ninth consecutive year when Japanese has become President.

He said the Board of Governors meeting will focus on infrastructure and poverty reduction as growth in infrastructure not only helps in faster overall economic growth but also helps in quicker elimination of poverty. “Without infrastructure like transport, roads, etc access to health, education etc is limited,” Nakao said.

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First Published: May 02 2013 | 1:50 PM IST

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