ADB chief turns down FM's demand

The ADB on Saturday virtually rejected finance minister P Chidambaram's demand to reduce its lending rates to pre-2000 level, saying the interest rates on its loans are "extremely low".

"We lend at about libor+10, which is extremely low when explained in the long term nature of these loans," Haruhiko Kuroda, president of ADB said here.

Earlier in the day, Chidambaram had asked Manila-based ADB to reduce its loan charges to the levels prevailing before year 2000, saying financial parameters of the bank had been robust and cost of funds were critical to
its business.

To a question on the finance minister's suggestion, Kuroda said because of strong financial conditions of the bank, it had reduced charges on loans by lowering the cost of funds in many ways.

Chidambaram, who is also the chairman of the ADB's board of governors, said the commitment fee should either be eliminated or substantially reduced through improvements in operations and internal efficiency of the bank.

ADB's lending had some borrowing cost, including interest payment and commitment fee and was based on London inter bank offer rate (Libor), and interest rates fluctuated on the basis of market rates, Kuroda said.