The Asian Development Bank (ADB) has reduced the discount (rebate) rate for term loans linked to London inter-bank offered rate (Libor) from 35 basis points (bps) to 31 bps.
This revision, reflecting the average cost of funds for the Manila-based multilateral agency, will be applicable for the July-December 2009 period. An ADB official said the cut might give an impression that borrowers would have to pay more, but Libor itself had dipped in the six months to June 2009.
According to Bloomberg data, the six-month Libor for dollar-denominated loans in early January was around 1.75 per cent. By June-end, it came down by 64 basis points to about 1.11 per cent. Keeping this decline in mind, the interest rate would be less, said the official. Over 90 per cent of ADB loans extended to governments or entities in India are linked to Libor.
Separately, ADB has reduced the rate for its dollar pool-based loans to 4.68 per cent for July-December 2009, down from 5.03 per cent in the previous six months. This reflects the average cost of borrowings for the pool - 4.28 per cent for January-June 2009 plus a spread of 0.40 per cent.
India used to have outstanding loans under this window till early part of this decade, but it pre-paid these loans in 2003 and 2004, said the official.
