ADB in US$ 250 million Bangalore metro loan

The Asian Development Bank (ADB) has loaned US$ 250 million to the Indian government to help with the development of the Bangalore metro system.

The new metro will cost a total of US$ 2.7 billion and consist of 42.3 km of track, rolling stock, stations, and equipment for two key routes across the southern Indian city. It is scheduled for completion in 2013.

The project is being carried out by the Bangalore Metro Rail Corporation, a special purpose vehicle jointly owned by the government of India and the state government of Karnataka.

Funds for the project have also been provided by the Japan International Cooperation Agency and loans from commercial sources - a relatively new financial model for India, leveraging public money, development loans and private funds.

"Metro rail systems are traditionally largely funded by the government, but with state resources increasingly limited and high initial capital costs, a new model is critical for the sector," Hayato Hoshi, investment specialist in the ADB's private sector operations department said.

"This is amongst the first major metro rail systems in India to use a leveraged finance model combining government funds with commercial loans. It is a critical model therefore for infrastructure development in other cities in India given the accelerating demand for timely infrastructure provision," Mr Hoshi added.