Announcement of Twenty Million US Dollars to ICICI in India on October 28, 1960

FOR IMMEDIATE RELEASE 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 660 SUBJECT: $20 million loan to October 28, 1960 ICICI in India The World Bank today made a loan equivalent to $20 million to the Industrial Credit and Investment Corporation of India. Limited (ICICI), a. privately-owned and managed development bank. Like two earlier Bank loans of $10 million each to the Corporation, this loan will be used to meet the foreign exchange requirements of projects financed by the ICICI. The ICICI, organized with the advice and assistance of the Bank to • promote the growth of private industry in India, was established in January 1955 by private investors of India, the United Kingdom and the United States. It makes long and medium-term loans and equity investments. It has been a vehicle for channeling foreign exchange into industry and for developing the local capital market through its own underwriting activities. In addition, it has provided guidance to industry in financial and managerial policy. In its five and a half years of operation, the ICICI has approved loans and direct equity participations amounting to 154 million rupees ($32 million equivalent) and its undei;w.riting transactions in shares have totaled Rs .84 million ( $18 million). It is usual in the Indian capital market for a substantial part of the capital issues of new enterprises • to be taken up initially by the underwriter and held until the market for the shares has been developed; the ICICI has taken up Rs.36 million 1·, - 2 - ($7.6-million). of shares it has underwritten. The ICICI has already sold acme of these shares, as well as some of its direct equity participations, at a capital gain. If India's targets for employment and. production under the Third Five- Year Plan (1961-1966) are to be achieved, the rapid rate of expansion of private industry in the Second Pla.11 must be maintained. While the ICICI's investment is small compared with the total investment in the private sec= tor, its contribution to the economy is significant. The proceeds from the first two World Bank loans have been allocated to 32 projects in a wtde variety of undertakings including electrical, chemical, mechanical, shipping, textile, fertilizer and building materials industries. These projects on the average may be expected to generate annual net foreign exchange savings at least as large as the amount of foreign exchange invested in them. • About 60% of the ICICI' s loans have been in foreign exchange. During the past yea:r and a half foreign exchange loans averaged $10 million annually. The funds provided by the $10 million Bank loan made in July 1959 have been committed much more rapidly than had. been expected, testifying to the high rate of industrial activity, the vitality of the private sector of the Indian economy, to the ICICI's improved facility in processing applications, and. to the continued shortage of foreign exchange. The $20 million in foreign exchange made available to the ICICI through the first two World Bank loans has now been virtually exhausted, and the ICICI must obtain more foreign exchange if it is to continue its loan operations at the expected rate. The proceeds of the new $20 million loan will help the Corporation to meet the foreign exchange requirements of its • borrowers for the next two years •  - 3 - Including the new loan and. the $20 million lent earlier by the Bank, the ICICI's total resources amount to 421 million rupees ($89 million equi- valent). These resources include Rs.50 million of paid-in share capital, 7Cf/a of which is held by Indian shareholders and the balance by British and American private interests, Rs.175 million of advances and credits from the Government of India and Rs.5 million of retained earnings. The Bank's loan is for a term of 10 years which may be extended to 14 years by agreement between the Bank and the ICICI with respect to individual projects for vm.ich a longer period is appropriate. Interest will be applied to each portion of the loan at the Bank's current rate when such portion is committed for one of the ICICI's projects. Amortization of the loan will begin November l, 1963. The loan is guaranteed by the Government of India. After having been approved by the Bank's Executive Directors, the loan • documents were signed by His Excellency M. c. Chagla, Ambassador of India in Washington, on behalf of the Government of India, 'by Mr. H. T. Parekh, General Manager of ICICI, on behalf of the borrower, and by Mr. Eugene R. Black, President, on behalf of the World Bank • •