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What is soft loan?

few doubts - What is soft loan? Does WORLD Bank/IMF give soft loan or hard loan?

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  • edited 7:59AM
    Soft Loan is that loan which is given at below market rate. This is usually done to encourage development projects in underdeveloped and developing countries. Example can be the loan or line of credit of 1 billion USD given by India to Bangladesh last year.

    Among the world bank agencies, not all loans are soft loans. IDA, International Development Agency, gives soft loans at very nominal interest rates or even 0 % interest rates.

    IMF does not give soft loan at such. It only gives risky emergency loan to countries - not for development purpose but to meet BOP crisis.
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  • edited 7:59AM
    Adding a point.. soft loans include not only very low rate of interest but also longer repayment periods say 20-35 years..
  • KVAKVA
    edited 7:59AM
    thanks for the answers friends.my doubt is cleared.
  • Then who gives hard loans?
    World bank!!!!

    And if ida is giving at 0%, won't all players borrow from ida ???

    Please throw some light on this
  • rajnibhai said:

    Then who gives hard loans?
    World bank!!!!

    And if ida is giving at 0%, won't all players borrow from ida ???

    Please throw some light on this

    Some agencies of world bank+IMF give hard loan.IDA can lend only to poorest countries,so not all players are eligible.
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  • rajnibhai said:

    Then who gives hard loans?
    World bank!!!!

    And if ida is giving at 0%, won't all players borrow from ida ???

    Please throw some light on this

    IBRD gives hard loans,,, when IDA gives soft loans there is a requirement of some sort of borrowing from IBRD compulsorily,,,,
    further, it is not that there is so much money that all countries can borrow --- no wonder that is where all ur credit ratings, fiscal deficit and other indicators of macroeconomy (that is how safe the money is), plus soft power of India, plus thanks to Gates etc that loans are given to India
  • edited December 2015
    One query related to loans but not related with this topic
    1)I have read lot of times that indian banks are short of cashn n for basel3norms they will hav to have more capital. Why? I dnt get this why banks r having short of capital ? Why they ask to fin ministry to give them more capital?
    2) what is restructuring of loan? Read in one article related to BAD LOANS/NPR. How can it reduce NPR? In the same article one thing is also mentioned that one xyz bank is selling its certain percentage of NPR to some abc ASSETS RESTRICTING COMPANY. ...
    matlab???????

    @federer @trying_tobawesm @KVA
    @ravindra
  • KVA said:

    few doubts - What is soft loan? Does WORLD Bank/IMF give soft loan or hard loan?

    When a loan is offered with a low or no interest rate, then it is called a soft loan. This type of loan is generally provided by the MNC banks to developing nations, which may not be able to acquire a loan at present rates.
    In India, soft loans are provided by the State Bank of India for setting up agricultural business centres.
    This loan is available at almost all SBI IFSC.
    More ventures which are funded by the soft loan scheme are:
    - Soil, water testing labs
    - Agricultural surveillance services
    - Seed testing labs
    - Agri consultancy services
    - units for value addition.

    For more information you can visit the Soft loan by SBI website.
  • A soft loan is a type of loan that is granted either with no interest or negligible rates that are way below the prevailing market interest rates. These loans are generally granted as a form of "aid" to people/ organizations that are not able to borrow money at normal market rates.
    A good example of soft loans would be loans granted by the World Bank or other multinational banks to developing countries for uplifting their infrastructure or improving their economic conditions. The repayment period of these loans is also much long than that of personal loans or any other types of loans. In fact, the repayment option for these loans includes "interest holidays" leading to further extension in the time period than what is assigned. As a result, one observes that soft loans are not provided by your usual banks or financial institutes. In 95% of the cases, these loans are provided by government aid agencies, that can afford to extend the repayment period.
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