ASSIGNMENT

PROGRAM BBA SEMESTER 6

SUBJECT CODE & NAME BB0030 ROLE OF INTERNATIONAL FINANANCIAL
INSTITUTIONS

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Q. No 1 How has India benefited from International Development Association?

Answer:

India has become the largest borrower from the International Development Association (IDA), the soft
loan affiliate of the World Bank, which helps the worlds poorest countries, with a total borrowing of
$2,578 million.
India is also now the third largest borrower of the International Bank for Reconstruction and
Development (the World Bank), with a total portfolio of $21.9 billion (Rs 98,590 crore).
Among the states in the country, Tamil Nadu is now the largest borrower from the World Bank, with an
exposure of $2.1 billion spread over six projects.
Established in 1960, the IDA aims to reduce poverty by providing interest-free credits and grants for
programs that boost economic growth, reduce inequalities and improve peoples living conditions. It is

the largest sources of assistance for the worlds 79 poorest countries, 39 of which are in Africa. It is also
the single largest source of donor funds for basic social services in the poorest countries.
Since its inception, IDA credits and grants have totalled $222 billion, averaging $13 billion a year in
recent years and directing the largest share, about 50 per cent, to Africa.
According to the banks FY10 Top Ten IDA borrowing countries, India tops the table with $2,578 million,
followed by Vietnam ($1,429 million), Tanzania ($943 million), Ethiopia and Nigeria with $890 million
each, Bangladesh ($828 million), Kenya ($614 million), Uganda ($480 million), Democratic Republic of
Congo ($460 million) and Ghana ($433 million).
IDA lends money (known as credits) on concessional terms. This means IDA credits have no interest
charge and repayments are stretched over 35 to 40 years, including a 10-year grace period. IDA also
provides grants to countries at risk of debt distress.
As for IBRD loans and India, the banks $21.9-billion portfolio in the country covers 77 active investment
projects.

2 What are the types of assistance given by The International Finance Corporation?
Answer: The International Finance Corporation (IFC) is an international financial institution which offers
investment, advisory, and asset management services to encourage private sector development in
developing countries. The IFC is a member of the World Bank Group and is headquartered in
Washington, D.C., United States. It was established in 1956 as the private sector arm of the World Bank
Group to advance economic development by investing in strictly for-profit and commercial projects
which reduce poverty and promote development.[1][2][3] The IFC's stated aim is to create opportunities
for people to escape poverty and achieve better living standards by mobilizing financial resources for
private enterprise, promoting accessible and competitive markets, supporting businesses and other private
sector entities, and creating jobs and delivering necessary services to those who are poverty-stricken or
otherwise vulnerable.[4] Since 2009, the IFC has focused on a set of development goals which its projects
are expected to target. Its goals are to increase sustainable agriculture opportunities, improve health and
education, increase access to financing for microfinance and business clients, advance infrastructure, help
small businesses grow revenues, and invest in climate health.[5]

The IFC is owned and governed by its member countries, but has its own executive leadership and staff
which conduct its normal business operations. It is a corporation whose shareholders are member
governments which provide paid-in capital and which have the right to vote on its matters. Originally
more financially integrated with the World Bank Group, the IFC was established separately and
eventually became authorized to operate as a financially autonomous entity and make independent
investment decisions. It offers an array of debt and equity financing services and helps companies face
their risk exposures, while refraining from participating in a management capacity. The corporation also
offers advice to companies on making decisions, evaluating their impact on the environment and society,
and being responsible. It advises governments on building infrastructure and partnerships to further
support private sector development.
The corporation is assessed by an independent evaluator each year. In 2011, its evaluation report
recognized that its investments performed well and reduced poverty, but recommended that the
corporation define poverty and expected outcomes more explicitly to better-understand its effectiveness
and approach poverty reduction more strategically. The corporation's total investments in 2011 amounted
to $18.66 billion. It committed $820 million to advisory services for 642 projects in 2011, and held $24.5
billion worth of liquid assets. The IFC is in good financial standing and received the highest ratings from
two independent credit rating agencies in 2010 and 2011.
The IFC was established in 1956 to support the growth of the private sector in the developing world. The
IFCs stated mission is to promote sustainable private sector investment in developing countries, helping
to reduce poverty and improve peoples lives.

While the World Bank (IBRD and IDA) provides credit and non-lending assistance to governments, the
IFC provides loans and equity financing, advice, and technical services to the private sector. The IFC also
plays a catalytic role, by mobilizing additional capital through loan syndication and by lessening the
political risk for investors, enabling their participation in a given project. The IFC has worked with more
than 3319 companies in 140 countries since its inception in 1956.

The IFC is one of the fastest growing institutions in the World Bank Group, with a committed portfolio of
USD $32.4 billion for IFCs own account, and $7.5 billion in loan syndications as of Fiscal Year 2008.

It is a public entity, although its clientele consists of transnational, national, and local private sector
companies, operating in a competitive and fast-moving business environment.

While the IFC has made some important gains in transparency in recent years, its information disclosure
and public consultation processes leave ample room for improvement. The Bank Information Center
(BIC) tracks problem projects at the IFC to highlight issues with environmental and social implications.
BIC also examines the effectiveness of the Compliance Advisor Ombudsman mechanism in cooperation
with the Global Transparency Initiative (GTI), advocating for more independent and systematic project
review process at the IFC.

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3 In what way has the Asian Development Bank assisted India? Give current information also.
Answer: The Asian Development Bank (ADB) is assisting in Indias transition to a new pension system
that will help secure the financial future of Indias aging population.
India undertook wide-ranging reforms of its pension system in 2003, including the establishment of an
interim Pension Fund Regulation and Development Authority and the introduction of a defined
contributory pension system called the New Pension Scheme (NPS). At present, participation in the NPS
is mandatory for central government employees, while those working in state governments and other
public and private sector employees, self-employed professionals and informal sector workers may join
the scheme voluntarily.

The Japan Special Fund is providing a $1 million grant for the project. The grant will be managed by
ADB. The grant will help establish a broad-based income security system through pensions, especially for
the informal sector workforce. This should help ease the fiscal burden of the Government and contribute
to the development of the national capital market, as pension funds are important sources for long-term
funding.
India lacks income security coverage and cannot sustain the fiscal burden of its existing pension
system, said Cheolsu Kim, Principal Financial Sector Specialist of ADBs South Asia Department. The
liability related to the unfunded pensions compound Indias public debt problem. The existing pension
system is inadequately funded and unsustainable.
The recurrent expenditure for the central Government pension system has grown from 0.6% of gross
domestic product (GDP) in 1993 to 1.7% in 2002, while total pension liabilities have risen from 9.7% of
net tax revenue to 12.7% during the same period. A recent study estimated Indias unfunded pension
liability at $426.9 billion, or 55.9% of GDP, in 2004, further exacerbating the countrys already high level
of national debt, which accounted for 84.9% of GDP for the period.
The central Government deposits contributions under the existing pension scheme in individual accounts,
and the investment returns are not based on market rates and the supporting infrastructure to implement
the NPS has not been fully established.
The grant will help the Government transition to the NPS and develop the supporting infrastructure. This
will require the Government to provide proper pension products with adequate coverage, develop
marketing channels through service providers, supporting institutions, such as the central record-keeping
agency, and pension fund managers. Pension service providers need to become capable of delivering
quality services to targeted beneficiaries to widen participation in the scheme and ensure regular pension
contributions.
ADB assisted Indias pension reforms of the Employees Provident Fund in 1999, the unorganized sector
in 2003, and selected state governments in 2004.