Latest news with #MDBs
Mint
2 days ago
- Business
- Mint
India makes a push for cheaper foreign loans in yen, rupee
India is pressing multilateral development banks (MDBs) to lend more in Japanese yen and Indian rupees in an attempt to reduce borrowing costs and manage exchange rate risks more effectively, two officials aware of the matter said. New Delhi has steadily expanded loans and official development assistance (ODA) in yen to gain from ultra-low interest rates and the rupee's appreciation against the Japanese currency. Many of these loans finance infrastructure and development projects. 'Yen rates remain close to zero, and with the rupee having appreciated significantly against the yen since early 2023, yen borrowings, including through Samurai bonds, have emerged as a compelling option," one of the two officials cited above said, requesting anonymity. Samurai bonds are yen-denominated bonds issued in Japan by foreign entities to raise money. The development assumes significance since MDBs such as the World Bank, Asian Development Bank (ADB) and the International Monetary Fund (IMF) play a central role in global finance, especially in developing economies. These institutions lend in dollar as well as other reserve currencies. ADB, which mainly lends in dollars, has also issued rupee bonds. The Asian Infrastructure Investment Bank (AIIB) too lends in yen, euro and rupees. The yen is part of IMF's special drawing rights (SDR) basket of currencies, and can be used depending on borrower preference and availability. India is pushing for loans in yen, the second official confirmed, adding "These loans and ODAs are not free, and we pay interest on them. A lot has changed now with India's rise at the global high table, and we are in a better position to negotiate our terms and conditions with the MDBs," said the second person. 'Also, given our past record, India also happens to be very attractive for these lending institutions as well, given our repayment history and the credit profile. We will follow the strategy which is in our best interest," the person added. An ADB spokesperson said the bank has received a handful of requests from India for yen-denominated loans in the last two years, with three such agreements signed in 2023 and 2024. These include the Delhi-Meerut RRTS Tranche 3 (2023), the Nagpur Metro Urban Mobility Project (2024) and the Amaravati Capital City Development Programme (2024). The ADB spokesperson pointed out that despite the rising interest in yen loans, 20 out of 22 sovereign loans signed by ADB in India in 2024 were in dollars. 'ADB's advice to borrowers is to choose the most financially advantageous termsbased on needs and risk exposure of the project and the borrower's overall external debt portfolio," the spokesperson added. Queries emailed to the spokespersons of India's finance ministry, World Bank, AIIB, IMF and Exim Bank remained unanswered. 'India is expected to expand its yen exposure further as part of a calibrated shift to longer-tenure, lower-cost financing to mitigate exchange rate risks. It will also explore greater use of the domestic currency. However, the dollar will remain dominant in the medium term, given its role as the principal global reserve currency," the official cited earlier said. According to the Reserve Bank of India (RBI) data, yen-denominated liabilities rose to 6.2% of India's total external debt at the end of March 2025, up from 5.8% a year earlier. In absolute terms, this equals $45.6 billion out of the total $736.3 billion in external debt at the end of FY25. India's total external debt rose 10% in FY25. The US dollar still dominated India's external borrowings, accounting for 54.2%, followed by the Indian rupee (31.1%), yen (6.2%), SDR (4.6%), and the euro (3.2%). While the appeal of yen financing is clear, economists caution that since India lacks a deep forex market for the yen, most conversions still happen through cross-rates with the dollar or euro rather than direct market-determined rates, adding layers of complexity. 'Rupee-denominated loans are preferable from a stability standpoint. As for yen borrowings, unless a more efficient and transparent yen market develops, the advantages remain limited. In many cases, dollar- or SDR-denominated loans might still be more practical," said Bhanumurthy N.R., director of the Madras School of Economics. India's yen borrowing strategy is gaining traction across both bilateral and multilateral channels. In FY24 alone, India signed yen loan agreements with the Japan International Cooperation Agency (JICA) worth over ¥276 billion (around ₹15,600 crore), funding metro rail, logistics, and renewable energy projects. In FY25, JICA followed up with six ODA agreements worth ¥191.7 billion ( ₹11,181 crore) to support urban transport, water infrastructure, environmental protection, and livelihood programmes, including Delhi Metro Phase IV, Chennai's desalination plant, biodiversity projects in Punjab, and an aquaculture initiative in Assam. A separate ¥84.3 billion loan for Mumbai Metro Line 3 took the year's total to ¥276 billion ( ₹15,655 crore). 'India's push to secure more yen- and rupee-denominated loans from MDBs reflects a prudent effort to lower external borrowing costs while reducing exposure to the volatility of major foreign currencies like the US dollar," said Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap Llp, a financial advisory firm. 'From a bond market and risk perspective, rupee-denominated MDB funding is a strong fit. It eliminates currency mismatch, enhances debt predictability, and aligns well with India's broader strategy of deepening its local currency bond ecosystem. Yen-denominated loans, though historically low-cost, now come with added complexity due to heightened forex volatility and an uncertain interest rate trajectory in Japan," he added.
Time of India
2 days ago
- Business
- Time of India
FM Nirmala Sitharaman calls for Global South unity to tackle uncertainties
Nirmala Sitharaman (File photo) NEW DELHI: Finance minister Nirmala Sitharaman on Friday stressed the need for decisive collective action by the Global South to deal with multiple uncertainties arising out of fiscal constraints in several economies and evolving geopolitical dynamics. She was speaking at the annual meeting of Board Governors of the New Development Bank (NDB) in Rio De Janeiro, Brazil on 'Driving Development: Fostering Innovation, Cooperation, and Impact through a Multilateral Development Bank for the Global South'. Sitharaman said the meeting is taking place at a defining moment for the Global South, as the world grapples with multiple uncertainties arising from fiscal constraints in several economies, climate transition issues and evolving geopolitical dynamics. "In response to these challenges, our collective action must be decisive, inclusive, and forward-looking," she said. The New Development Bank (NDB) has been established by BRICS nations. She noted that MDBs play a pivotal role in complementing our efforts in tackling these uncertainties. "MDBs have a distinctive comparative advantage in their ability to catalyse both public and private investments by offering a package of technical expertise, concessional financing, and effective risk mitigation tools thereby widening our policy options," she said. Sitharaman added that NDB has emerged as a key partner-channelising development finance, supporting resilient infrastructure, and fostering meaningful cooperation across the Global South through a pragmatic approach. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Mint
2 days ago
- Business
- Mint
India for collective action by Global South to deal with current challenges: FM
New Delhi, Jul 4 (PTI) Finance Minister Nirmala Sitharaman on Friday emphasised the need for decisive collective action by the Global South to deal with multiple uncertainties arising out of fiscal constraints in several economies and evolving geopolitical dynamics. She was speaking at the Annual Meeting of Board Governors of the New Development Bank (NDB) at Rio De Janeiro, Brazil on 'Driving Development: Fostering Innovation, Cooperation, and Impact through a Multilateral Development Bank for the Global South'. Sitharaman said the meeting is taking place at a defining moment for the Global South, as the world grapples with multiple uncertainties arising from fiscal constraints in several economies, climate transition issues and evolving geopolitical dynamics. "In response to these challenges, our collective action must be decisive, inclusive, and forward-looking," she said. The New Development Bank (NDB) has been established by BRICS nations. She noted that MDBs play a pivotal role in complementing our efforts in tackling these uncertainties. "MDBs have a distinctive comparative advantage in their ability to catalyse both public and private investments by offering a package of technical expertise, concessional financing, and effective risk mitigation tools thereby widening our policy options," she said. In this context, Sitharaman added that NDB has emerged as a key partner -- channelising development finance, supporting resilient infrastructure, and fostering meaningful cooperation across the Global South through a pragmatic and responsive approach. "India reaffirms its steadfast commitment to inclusive, sustainable, and innovation-led development of the global south," she said. Sitharaman said India's efforts led to the landmark inclusion of the African Union as a permanent member of the G20 to ensure that the Global South plays a pivotal role in discussions about issues impacting them. She told the gathering that the Indian economy has demonstrated remarkable growth and resilience in the post-pandemic era. Strong focus on macroeconomic stability, targeted efforts to promote digitalisation and inclusive policy design have been instrumental in achieving this, despite facing multiple domestic and external challenges. "India is poised to remain one of the fastest growing economies globally in the coming years," she said. She further said over the past decade, NDB has emerged as a credible institution with its client focus, agile response and financing several key infrastructure projects. As the Bank enters its next phase of growth, it must focus on strategic priorities, she said. "Mobilising private capital is key to sustaining growth given the limited fiscal space and competing demands for public capital expenditure. NDB should play a catalytic role in unlocking private sector capital," she said. Special focus must be placed on tailored support for Small and Medium Enterprises, especially women-led enterprises, to ensure inclusive participation, economic development and promote gender equity, Sitharaman added. She said that NDB has shown that a Global South-led institution can deliver development solutions that are timely, trusted, and context-specific. The Bank should foster cross-country partnerships to promote knowledge exchange, policy innovation, and technical cooperation, Sitharaman said. "India stands ready to collaborate with NDB in sharing successful models, such as our achievements in digital public infrastructure, scaling up renewable energy adoption, for broader replication," she said, adding that robust governance and transparent institutional mechanisms are vital for enhancing the credibility and effectiveness of the NDB. Continued focus on accountability, responsiveness, and stakeholder trust must remain a priority to ensure the Bank's long-term sustainability, she said while assuring India's continued cooperation with NDB, the member countries, and the stakeholders in this journey.
Mint
2 days ago
- Business
- Mint
Sitharaman urges stronger MDB role as Global South faces climate, fiscal, and geopolitical shocks
New Delhi: Finance minister Nirmala Sitharaman on Friday urged multilateral development banks (MDBs) to adopt a stronger and more targeted approach in supporting the Global South, which faces mounting fiscal pressures, escalating climate risks, and deepening geopolitical uncertainty. Speaking at the opening ceremony of the 10th annual meeting of the New Development Bank—formerly the BRICS Development Bank—Sitharaman said MDBs are uniquely positioned to complement national efforts by mobilising public and private capital, offering concessional financing, and deploying sophisticated risk mitigation tools. 'MDBs have a distinctive comparative advantage in catalysing both public and private investments by offering a package of technical expertise, concessional financing, and effective risk mitigation tools, thereby widening our policy options,' she said. MDBs also play a pivotal role in helping countries manage rising uncertainty, she added. These institutions have become critical allies for developing economies navigating a convergence of economic strain, environmental vulnerabilities, and geopolitical shocks. By crowding in private capital and offering financial and technical expertise, MDBs expand the policy toolkit available to the Global South. As momentum builds for reimagining the global financial architecture, MDBs are increasingly seen as central to closing investment gaps and supporting sustainable, inclusive growth across emerging markets. 'Mobilising private capital is key to sustaining growth,' Sitharaman said. 'Given the limited fiscal space and competing demands for public capital expenditure, the New Development Bank should play a catalytic role in unlocking private sector capital.' She also called for a sharper focus on small businesses: 'Special focus must be placed on tailored support for small and medium enterprises, especially women-led enterprises, to ensure inclusive participation, economic development, and promote gender equity.' Under India's G20 presidency, the NK Singh-Larry Summers expert group had called for bold reforms to make MDBs more agile, effective, and aligned with the 21st century's challenges. The panel recommended moving beyond traditional lending to focus on global public goods such as climate and health, and using balance sheets more innovatively to unlock private capital. 'The Capital Adequacy Framework and the 'better, bolder, bigger' reforms outlined during India's G20 presidency in 2023 offer actionable steps,' Sitharaman said. 'Continued focus on accountability, responsiveness, and stakeholder trust must remain a priority to ensure long-term sustainability.'
GMA Network
4 days ago
- Business
- GMA Network
Climate and empowering women must be a priority, development bank bosses say
SEVILLE, Spain — Multilateral development banks need to sharpen their focus on delivering climate action and on empowering women, the heads of two major MDBs in Asia and Europe told Reuters, as they face calls to be bolder, more flexible and inclusive. The president of the European Investment Bank, Nadia Calvino, and of the Asian Infrastructure Investment Bank, Jin Liqung, spoke on the sidelines of the once-a-decade United Nations development financing summit taking place in Seville. The event is overshadowed by criticisms it has shown a lack of ambition and by the absence of the United States, the biggest provider of international aid until U.S. President Donald Trump returned to office early this year. Trump has also withdrawn the United States from U.N. efforts to counter climate change and sought to reverse policy on inclusivity, making many companies and institutions across the globe reticent about championing diversity and sustainability. The AIIB's Jin welcomed civil society's push for MDBs to do more on climate as a "positive force for innovation and greater impact". The AIIB supported "climate-resilient" infrastructure under a broader definition that includes digital, health, and education infrastructure, he said. The EIB's Calvino said high-level climate commitments must translate into tangible investments and projects, naming as an example an initiative for climate-related debt clauses that allows vulnerable countries to pause repayments after disasters. The pre-summit outcomes agreement between U.N. members included a pledge to triple multilateral lending capacity. The U.S. said that crossed one of its red lines as it interfered with the MDBs' independence. Asked about French President Emmanuel Macron's call for MDBs to sacrifice stellar credit ratings to hit those new targets, Jin proposed rating agencies apply different standards to MDBs instead of those used for commercial banks or private companies. Calvino said the current system worked well, with the EIB's AAA rating enabling it to take on higher-risk investments and leverage EU guarantees. The U.S. also objected to the use of the word gender in the outcomes document, saying it did not support "sex-based preferences". Calvino, the EIB's first woman president, said empowering women was "both the right and the economically smart choice ... a no-brainer". Jin said female empowerment was key in the AIIB's investment decisions, pointing to a rural road project in Ivory Coast connecting female agriculturalists in previously isolated villages to main markets to sell products such as cashews and coffee beans.—Reuters
