The Indian government is working out a transitional arrangement with the the World Bank to avail loans lower than the market. Now the World Bank would not lend India soft loans to India as the country has graduated into a middle-income country. But it lends loans, till 2021, at higher than its prevailing concessional rates but lower than the market rates.
The loans offered by World Bank come at a time when the Indian government is battling with a problem of high current account deficit and dwindling capital flows and slow economic growth lead to lack of funding for its social and infrastructure projects. The multilateral institution lends to countries under its two arms — the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD).
IDA, which provides concessional or interest-free loans, is primarily meant for low income economies, while the IBRD provides longer maturity loans at a higher rate for middle-income economies.
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