What is ADB?
ADB stands for Asian Development Bank. It is a regional development bank that was established on 19th December 1966 with the objective of eliminating poverty in the Asia-Pacific Region.The Asian Development Bank is headquartered in Mandaluyong, Metro Manila, Philippines and has 31 field offices in Asia and Pacific region and representative offices in Washington, Frankfurt, Tokyo and Sydney. The ‘US’ and ‘Japan’ are the largest shareholders in ADB, being the two main donors and have usually been blamed for having extremely impacted the major lending, policy and staffing decisions. ADB is a type of ‘multilateral development bank with the main aim of social and economic development. Initially when ADB was established in the year 1966, there were 31 member countries and currently it has 68 member countries as on 23rd March 2019 out of which 49 members are from the Asian Pacific Region and remaining 19 members from other regions. Any member country can opt out of the membership anytime.
Working and Functions of Asian Development Bank
The ADB or Asian Development Bank was formed or designed majorly on the model of the World Bank which is also an international financial organization which provides loans to world countries for capital projects.The highest policy-making body of the ‘Asian Development Bank’ is the ‘Board of Governors’ that constitutes of one representative each from one member state. The Board of Governors is also responsible for electing the President of the bank who also acts as the chairperson of the Board of Directors and is mainly responsible for managing the bank and its activities.The Asian Development Bank is being headed by a ‘president’ since it was initiated in 1966. The first president of ADB was Takeshi Watanabe from Japan and the current president of ADB is Takehiko Nakao who is also from Japan who was elected as the 9th president of ADB in 2013 and succeeded Haruhiko Kuroda.
- The Asian Development Bank or ADB considers itself as a social development organization, constantly aiming for the elimination of poverty in Asia-Pacific region by means of all-round and long-term economic and environmental growth including regional integration.
- The ADB supports the development of its member countries, the private sector and public- private partnerships by providing loans, grants, equity investments, technical-aid, sharing of information in various sectors such as infrastructure, healthcare services,financial and public administration systems along with assisting nations in getting fully prepared for the negative impact of climate change and also providing support with respect to managing their natural resources in a better way.
- ADB provides two types of loans depending upon the needs.
- It provides hard loans to mainly middle income countries in Asia that are based on commercial terms.
- It provides soft loans to economically weaker or poor countries with comparatively lower interest rates in the region.
- ADB also provides direct financial aid that can be in the form of equity, debt and mezzanine finance to private sector companies, specifically for projects that are aimed towards social good, apart from the financial return rates. (Mezzanine finance or loans are a hybrid or combination of the features of debt and equity financing which are used mainly for small and medium enterprises, infrastructure and real estate.)
- ADB also collaborates on some projects with other developmental organizations to help increase the available funds.
- The Asian Development Bank also allocate multi-project loans.
ADB or the Asian Development Bank also contains an ‘information disclosure policy’ that believes all information that is processed by the organization should be disclosed or shared with the public, till the time there is any particular reason to keep the information privileged. ADB is supposed to share any kind of information and documents whenever asked for, except the information which may threaten or endanger the safety, security or personal privacy and any other privileged information.
Resources of ADB
ADB receives its funding /capital by issuing bonds on the world’s capital markets. The contributions made by the member countries, the earnings reserved from the lending activities and loan repayments.
India and ADB
India has been connected with the Asian Development Bank, since its inception. India was one of the founding members of ADB and presently fourth-largest shareholder. ADB’s operations started in India around 1986 after India proposed to become a borrowing member.
- The very first loan that was approved by ADB for India was done in 1986 which amounted to 100$ million which was directed towards the ‘Industrial Credit and Investment Corporation of India’. This program was aimed at the medium-sized industries and assisted the establishment of new technologies.
- ADB also provided a loan of 300 $ million loan for Financial Sector Program in 1992 with the objective of infusing capital into the banking system which was disturbed at that point of time. It also helped in the development of the finance sector by providing financial aid for other reforms.
- ADB also assisted various state governments, such as a loan of 250 $ million granted to Gujarat, which was the first state to arrange a loan directly.
- Few years back, ADB also assisted India by increasing the share of transport,urban and energy projects, agriculture,water resources management, public resource management along with education and health.
- Recently, ADB being quite active in the power sector of India, also increased its funds for low-carbon solutions, renewable energy and energy efficiency. A project named Green Energy Corridor and Grid Strengthening Project which amounts to 1$ billion, is installing the high-voltage direct current transmission systems technologies, which was aimed to decrease losses and improve the efficiency.
- ADB has also extended a loan of 100$million to ACME Group, which is India’s evolving private sector solar power developer.
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