File photo of Union Finance Minister P Chidambaram
New Delhi:
Union Finance Minister P Chidambaram has urged the Asian Development Bank (ADB) to increase its annual lending capacity to $20 billion in the next 10 years.
Mr Chidambaram said development needs of member countries are large and growing, speaking at the 47th Annual Meeting of ADB Board of Governors in Astana (Kazakhstan), an official statement said.
"Over the last 5 years, since the last General Capital Increase (GCI), annual lending capacity of ADB under Ordinary Capital Resources (OCR) has been $10 billion to $11 billion," he added.
The minister said the development bank needs to be sufficiently resourced to assist its members to address challenges like fighting poverty or developing infrastructure.
"In this context we should aim to have ADB double its lending capacity over the next 10 years," Mr Chidambaram said.
"I would respectfully urge the members to give this issue a serious consideration and quickly come to an agreement on capital increase with a view of doubling the annual lending capacity of ADB to USD 20 billion in the next 10 years," the Finance Minister further said.
He also requested the members to reconsider the increase in loan charges that was opposed by most of the members.
Mr Chidambaram said the sustainable level of lending (SLL) "can and should be increased" by adopting a comprehensive strategy of augmenting income and reducing expenses.
Besides falling interest rates, rapidly rising administrative expenses and stagnant or declining disbursements are the main reasons behind sharp decline of SLL from $11 billion projected at the time of GCI V, he added.
Actual administrative expenses have been growing at over 10 per cent per annum, while disbursements have averaged only around $6.5 billion, he said.
"Every penny saved through economy in expenditure or earned through interest income will add to our financial position and help us lend more. Instead of looking at these measures, the bank chose to increase loan charges despite stiff opposition from almost the entire clientele."
As a regional bank, ADB in its functioning must reflect the aspirations of its regional members, Mr Chidambaram said.
"We believe that the fundamental solution for enhancing the SLL to a more meaningful level lies in increasing the capital stock of the bank," the minister said.
Mr Chidambaram also said shareholders need to periodically contribute to the capital to help the bank discharge its responsibilities as the agenda circulated by the management outlines capital limitation as the main reason behind the declining SLL.
"In view of the Charter requirement, without adequate capital, we will also not be able to meet the target of 25 per cent share of private sector operations in OCR approvals by 2020," the Finance Minister said.
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