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IIF/2005/PR-REL 5th January, 2005

TSUNAMI : Financing Disasters - New Mechanism

Jan. 05, IIF, New Delhi : Prof. J.D. Agarwal, Professor of Finance and Chairman, Indian Institute of Finance has urged the Government to set up a National Bank for Reconstruction and Development (NBRD) with a seed capital of Rs. 100 crores and a proportionate contribution from all the states in the country. The Bank should raise capital from the general public to have a minimum capital base of Rs. 100 crores. It should also be allowed to raise funds from International agencies such as World Bank and Asian Development Bank as well as Indian financial institutions and banks to finance the states to reconstruct and develop the disaster torn areas. The bank may consider granting loans to the states / NGOs.

According to Dr. Agarwal with a seed capital of Rs. 100 crores the bank would be able to finance any natural calamity to the extent of Rs. 1000 crores without having any burden on treasury and public exchequer. In a period of 5 to 10 years, the bank would be capable to fund any disaster upto Rupees ten thousand crores opines Dr. Agarwal.

According to him, the world community had setup an International Bank for Reconstruction and Development (IBRD) in 1945 to reconstruct the World war II torn economies of the world. IBRD was later known as World Bank and has helped economies like Japan and erstwhile West Germany and UK to rebuild their economies in a very short time. The same would work very well for India if NBRD is setup.

Dr. Agarwal says that he had made this suggestion to the then government, when the earthquake in Bhuj caused devastation. He strongly feels, if this bank would have been setup at that time, it should have been financially capable enough to partially take care of the disaster caused by Tsunami.

India is a great country. It is a subcontinent in itself, in the vastness of India we witness both man made and natural disasters. Every year, we witness floods in some part of the country and drought in another, earthquakes and now Tsunami devastation. Instead of depending only on PM relief fund and contingency funds setup few years back, India need to develop a self propelling system along the lines suggested above says Prof. Agarwal.

Deepak Bansal
Press Secretary
Indian Institute of Finance
Ph : 27136257, 27136437, 27451212

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