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Multilateral Institutions Division
Asian Development Bank (ADB)
India's Membership of ADB and its Status
India became a member of the Asian Development Bank (ADB) as a founding member in 1966 [ADB Act(990 KB) 
] and [ADB Charter(142 KB) 
]. The Bank is engaged in promoting economic and social progress of its developing member countries (DMCs) in the Asia Pacific Region. The main instruments that it uses to do this are making loans and equity investments, providing technical assistance for the preparation and execution of development projects and programs and other advisory services, guarantees, grants and policy dialogues. ADB has 67 member countries (including 48 regional and 19 non-regional members), with its headquarters at Manila, Philippines. India is holding 6.33% of shares, totalling 672,030 shares {@US $ 12063.5 per share), in ADB as on 22nd September, 2012. India has 5.4% voting rights.
Japan and the US represent the largest shareholders with 15.72% each of shares. China and India are the third (6.49%) and fourth (6.37%) largest shareholders, respectively.
ADB holds Annual meetings in a member country in late April or early May every year. Annual meetings are statutory occasions for Governors of ADB members to provide guidance on ADB administrative, financial, and operational directions. The meetings provide opportunities for member governments to interact with ADB staff, nongovernment organizations (NGOs), media, and representatives of observer countries, international organizations, academe and the private sector. 46th Annual Meeting of the ADB
will be hosted by India during 2-5 May, 2013 in New Delhi.
India borrows from the ADB within the overall external debt management policy pursued by the Government which focuses on raising funds on concessional terms from less expensive sources with longer maturities. We started borrowing from ADB {Ordinary Capital Resources (OCR) only} in 1986. Although India is eligible to draw partly from the Asian Development Fund (ADF) which provides concessional funding, India has consciously opted out of this facility to allow the Least Developed Countries (LDCs) to avail of this facility.
The ADB follows the calendar year for all its programs and projects.
Terms and Conditions of ADB Loans
Graduation Policy
Under the Graduation Policy approved by ADB in December 1998, developing countries are classified on the basis of (i) per capita GNP and (ii) Debt repayment capacity. Modification to this policy has been recently approved by the Board in April, 2008. DMCs are categorized into three groups:
Group A - DMCs with access to only Asia Development Fund (ADF)
Group B - Access to a blend of ADF and OCR
Group C - Access to OCR only
India is placed in Category B, i.e., we have to contribute more than 20% of the total cost of the Loans drawn (usually in the form of counterpart Staff and Infrastructure costs). As stated earlier, although India is eligible for ADF, it does not access the facility in order to avoid crowding out other eligible countries.
Ordinary Capital Resources (OCR) Charges
Rate of Interest
India has been accessing ADB's OCR which is LIBOR-based loan (LBL) product since its introduction on 1st July 2001. Prior to that from 1986, India had accessed Pool based Multicurrency loans. Until June 30, 2001 interest on the earlier loans was 6.70% (US $ loan), but, under the LBL, the interest rate is floating and current applicable rate was LIBOR + 20 bps for loans negotiated on or after 1st October 2007, rate was revised to LIBOR + 30 bps for loans negotiated on or after 1st July, 2010 and further revised to LIBOR + 40 bps for loans negotiated on or after 1st July, 2011.
Commitment charges
For project loans negotiated prior to December 31, 2006 commitment charges are levied @ 0.75% on: (i) 15% of undisbursed loan balances for the first year; (ii) 45% of undisbursed loan balances for the second year; (iii) 85% of undisbursed loan balances for the third year; and (iv) 100% of undisbursed loan balances from the fourth year onwards.
India had been consistently raising the issue of lowering the cost of ADB financing. Keeping in view the overall reduction in the cost of international development finance, ADB has also changed its terms of lending to reduce the cost of lending. For project loans negotiated on or after 1st January 2007, the commitment charges are levied on a flat rate of 0.35% on the un-disbursed loan balances. This has been further reduced to 0.15% for both Program and Project Loans for loans negotiated on or after 1st October 2007.
Front-end Fee
The ADB Board in its meeting on 7th December 2007 announced the elimination of the front-end-fee for all loans negotiated on or after 1st October 2007. Earlier, it was one-time payment of 0.5% of total loan amount.
Maturity Premium :
Maturity-based Pricing concepts and examples(853 KB) and Maturity-based Pricing(2 MB) 
The ADB Board in its meeting in December, 2011 announced the introduction of the following maturity premiums for all the loans negotiated on or after 1st April, 2012 :
- A maturity premium of 10 basis points per annum on loans with an average loan maturity of greater than 13 years and up to 16 years;
- A maturity premium of 20 basis points per annum on loans with an average loan maturity of greater than 16 years and up to 19 years; and
- That the average loan maturity of loans shall not exceed 19 years.
Normal Repayment period
The normal repayment period for a Project Loan is 20 years plus a grace period of 5 years and for the Program Loan it is 15 years plus a grace period of 3 years.
Procedure for posing projects for ADB Financing
The Concept paper for Project is to be prepared as per the "Guidelines for posing, implementation and monitoring externally aided projects(2 MB) " issued by DEA vide letter dated May 9, 2005
Further, the proposed project should include Finance plus(515 KB) elements as per DEA letter dated September 1, 2011 and conform to the guidelines on minimum counterpart funding as per DEA letter dated 14 December, 2011. Please visit link: Review and Rationalization of new Projects(164 KB)
As per the above stated Guidelines, a proposal from a Central Sectoral Ministry should have "in principle" approval of Planning Commission.
In case of proposals by the State Government, the aforesaid Concept paper be routed through the concerned Line Ministry to MI Division in DEA and FRBM clearance from the Department of Expenditure, Ministry of Finance should also be obtained.
A Screening Committee, headed by Joint Secretary(MI), DEA would then scrutinize the proposal for posing to ADB. The proposal to the Screening Committee is to be put in the prescribed format Preliminary Project Proposal Report Format(53 KB)