HYDERABAD: The Union Finance Minister, P. Chidambaram, on Saturday asked the Asian Development Bank (ADB) to scale down its loan charges to pre-2000 levels and undertake a strategic re-adjustment to shift focus from public sector lending so as to facilitate larger private sector investment in member countries.

Chairing a session of the ADB Board of Governors here, Mr. Chidambaram said: "We believe that ADB needs to re-adjust its focus from public sector lending to a more fleet-footed financial intermediary and knowledge bank that helps DMCs [developing member countries] attract more private sector investment through intermediation."

Mr. Chidambaram said by way of the shift in lending focus, the multiplier effect of ADB's assistance through a public-private partnership model would be much higher than the current approach of reliance on mostly public infrastructure projects.

The Finance Minister noted that high energy prices and the possibility of sharp adjustments in exchange and interest rates induced by widening international payment imbalances did pose very evident downward risks. Despite all this, he said he was optimistic on the "outlook for growth in Asia and a healthy demand for Asian output in the next few years."

Turning to the issue of scaling down the rates on loans, Mr. Chidambaram pointed out that ADB's loan charges as compared to the cost of funds from other sources were critical for the bank's business growth. However, since its financial parameters for the past four consecutive years now had been robust, Mr. Chidambaram said: "Loan charges should be restored to the lower levels prevailing before the year 2000."

Approach of consensus

"The commitment fee should not be treated as a source of income and it should be possible either to eliminate or substantially reduce the commitment fee through improvements in operations and internal efficiency of the bank," he said.

As the bank is poised to finalise its medium-term strategy in the next few months, Mr. Chidambaram hoped that it would firm up the means for adequately funding the strategy and on more favourable terms. On the initiatives for monetary and financial cooperation and integration, he said: "I urge the bank to follow an approach of consensus and inclusion rather than being exclusionary... ".

Highlighting India's achievements, Mr. Chidambaram said the country had averaged a growth of nearly eight per cent in the last three years. "It is our constant endeavour to address challenges before us by deepening the reforms and to put the country on a trend growth rate of 8 to 10 per cent to eliminate poverty and achieve the Millennium Development Goals by 2015."

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