Announcement of India Moves Ahead with Industrial and Financial Sector Reforms and Acts to Meet Growing Demand for Housing on April 4, 1988

· FOR IMMEDIATE RELEASE ·NorldBank 1818 H Street. N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 88/59 Contact: Richard Kollodge (202) 477-4507 INDIA MOVES AHEAD WITH INDUSTRIAL, FINANCIAL SECTOR REFORMS; ACTS TO MEET GROWING DEMAND FOR HOUSING WA~HINGTON, April 4, 1988 -- India's efforts to further restructure the country's industrial and financial sectors and to meet the growing demand for housing will receive support from two World Bank loans totaling $610 million. Industrial and Financial Reforms Three years ago, India began implementing industrial and financial reforms that place greater emphasis on market forces. Since then, the country's development finance institutions (DFis) have assumed more responsibility for identifying viable industrial projects. The first World Bank loan, for $360 million, will provide technical and financial assistance to India's two largest DFis, the Industrial Development Bank of India and the Industrial Credit and Investment Corporation of India Limited. The loan funds will help these DFis meet their long-term need for resources and increase their ability to identify projects in a less-regulated financial environment. Industrial investments financed under the project are expected to generate about 28,000 full-time jobs. The project will also provide technical assistance to the government's major steel company, Steel Authority of India Limited, to help it restructure its operations and comply with the government's environmental regulations. Housing Development The second loan, for $250 million, will partially finance a project designed to help meet India's growing demand for housing by increasing the availability of private mortgage financing. The project will provide financial and technical support to the Housing Development Finance Corporation (HDFC), the country's only significant private housing finance company. Funds provided by the project will enable HDFC to extend its market-oriented lending operations to a broader group of middle- and lower-income borrowers in more areas of the country. About 70,000 mortgages will be financed under the project. Support for market-oriented housing finance through the HDFC will also encourage greater mobilization of financial resources from the household sector. The World Bank loans are for 20 years, including five years of grace, with a variable interest rate, currently 7.72 percent, linked to the cost of the Bank's borrowings. They also carry an annual commitmen~ charge of 0.75 percent on the undisbursed balances. Note: Money figures are in U.S. dollar equivalents.