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Post AIIB, India to reduce banking on World Bank infra arm

By contrast the AIIB has been fast. The Bank, to be headquartered in Beijing, is expected to be operational by next year.

Written by Subhomoy Bhattacharjee | New Delhi |
Updated: July 3, 2015 3:48:27 am
aiib, world bank, imf, Asian Infrastructure Investment Bank, bretton wood, investment, india banking, india bank, business news By contrast the AIIB has been fast. The Bank is expected to be
operational by next year.

The government is expected to reduce its commitment to the Global Infrastructure Facility of the World Bank following the setting up of the Asian Infrastructure Investment Bank (AIIB).

The twenty nations-led multilateral institution will instead aim to take the pole position for infrastructure financing in the Asian region. Led by China, the second largest voting share in the new bank is that of India.

A government official said the global infrastructure facility was too late in coming into operation. “We had worked hard to set it up under the Bretton Woods institutions (World Bank & IMF) but vested interests kept rearing up to delay it.” The World Bank finally set it up in October last year after a gestation of several years due to differences among other things on voting rights, which disappointed the Indian mandarins.


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By contrast the AIIB has been fast. The Bank, to be headquartered in Beijing, is expected to be operational by next year. The memorandum of understanding (MoU) specifies that its authorised capital will be $100 billion and the initial subscribed capital is expected to be around $50 billion. Voting rights of the subscribing countries are to be decided after consultations among the members over fixing the bench marks which were expected to be combination of gross domestic product and purchasing power parity.

The bank is expected to complement the role of Manila-based Asian Development Bank, which had been the lone wolf with the coveted AAA-plus rating for raising funds in the most exciting infrastructure market in the world, Asia.

Speaking about the new bank, Ashok Lahiri, former executive director at ADB said “it is noteworthy that the key stake holders in ADB (Japan & USA) are not members of AIIB. The new voting arrangements in AIIB will certainly mean a different perspective for evaluation of infrastructure projects”.

An India government official said there had been tremendous problem with the rising delay in the approval for World Bank financed projects for infrastructure. Project appraisals often exceeded two years. “Hopefully that clutter will be reduced now,” the official added.



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First published on: 01-07-2015 at 01:18:51 am

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