The World of the Banks


I started working with the World Bank (WB) as a short term consultant in 1989. My work as a consultant with Asian Development Bank (ADB) began in 1993. So past nearly 25 years I have been associated with these two Development Financing Institutions (DFIs) as a consultant. In some sense I have been an “insider” but really not part of their “system”. Some envy this position.

In this long period of engagement, I worked in India as well as in several countries of Asia and African regions. I had an opportunity to be with some of the outstanding staff of these institutions, consultants and the clients. And I really cherish this experience. This was a great learning to me.

In some of the Bank assignments, my job was to help prepare the projects, assist in application of safeguards, participate in the supervision missions, build client capacities or prepare Implementation Completion Reports (ICR).  ICRs were eye-openers and I never missed the opportunity.

Most of the times, I used to be involved in the dialogue with the Central Ministries (like MoEF) or the State Governments/Departments (or the Pollution Control Boards) and Intermediary Financing Institutions (like IDBI/ICICI in India). These interactions really helped to understand the “puzzle” – and gave me a good insight of the “dynamics”

Amongst the grueling missions that we all had to go through, there were occasions of fun and laughter – and of course the situations of frustrations! Evening dinners during some of the missions used to get philosophical sometimes – questioning the very paradigm of “development” and the “role” of the DFIs. With the changing times, priorities and economies, we now wonder whether these Banks have any worthwhile role left to play. Today, these institutions look redundant.  No wonder you see emergence of new players like the New Development Bank or Asian Infrastructure Investment Bank.

General impression of the clients (i.e. the Governments in most cases) was that these Banks are extremely bureaucratic when it comes to procurement process and compliance with environmental and social safeguards. In specific, clients used to be really weary of the requirement of public consultation and disclosure. Some felt that Banks are doing some kind of “arm twisting” before doling out the moneys and influencing (or interfering?) the policies of the Government. To be fair however I feel that Banks often added a value to the project – of course barring a few exceptions.

I remember a meeting I did with State Environmental Protection Administration (SEPA) of China in Beijing in the ninety’s. I was stressing the need of stepping up the process of public participation in decision making. The Chief of SEPA smiled and said – “You (i.e. Bank) are supporting less than 2% of China’s infrastructure investments and do you expect us to “comply” with your advice at such a meager financial contribution? By the way, people who make decisions here are all elected from the provinces and so there is no need to go back and ask or involve people. People elected know the best and will protect the interest of people they represent”. Today China is still struggling on how to implement an effective public consultation process (although a lot is written on paper).

Reactions from the Government of India were no different. When we used to go as a Bank team to MoEF, the concerned Additional and Joint Secretaries used to ask me to stay in the room for a while after the meeting with Bank was over. With me alone in the room, they used to then air their reservations/concerns on Bank’s requirements or impositions and ask me to “mediate”. My job was then to find an “amicable” solution.

Governments, in general, used to be interested to basically pick up as much free or cheap money available (like IDA) from these Banks. Compliance and reporting to the Bank requirements was to essentially meet the requirements on paper. The ICRs often revealed  poor sustainability of the projects that were Bank-financed or the institutional capacities that were built. This was mainly because there was no real ownership of the Governments. Often the projects were “Bank-driven”

I remember meeting Director General (DG) of Department of Environment of one of the neighboring countries. I was explaining the need to introduce market based instruments apart from enforcement of the environmental regulations. I was in DGs room with a Joint Director (JD) who was my good friend. The DG was watching cricket match on a TV that was placed in his room while I was speaking. I was offering Bank’s technical assistance. I realized that DG was hardly listening to my “pitch”. I whispered to the JD that there is no point for me to continue as DG is quite distracted and is not listening. The JD smiled and said “No he is actually listening to what you are speaking. If he does not like, he generally asks me to increase the volume of the TV. Since he hasn’t told me to do so yet, this means that he likes you!”

He then spoke to the DG “Sir, you may like to visit countries where market based instruments are used. Dr Modak- can this visit be sponsored in the Bank project?” The DG switched off the TV and started listening to me more attentively now. Indeed, going to “places” for “training” and attending “policy roundtables” has been one of the greatest interests of most borrowing institutions. Task Managers of the Bank are always hounded by the project directors and administrators for such “capacity building”.

Despite these limitations, we must accept that these DFIs have influenced the environmental governance and environmental infrastructure of most of the developing countries today. If we take example of industrial pollution management in India, we see Bank footprints on programs such as Common Effluent Treatment Plants (CETP), loans extended from IDBI and ICICI to industries on Pollution Prevention and Modernization of laboratories at key State Pollution Control Boards for better monitoring and enforcement. There are now only reminisces as a lot of water has flown under the bridge and the concerned staff has retired.

I encountered in this projects however some hilarious situations. I recall visiting one of the State Pollution Control Boards during ICR that had received Bank assistance. We were checking deployment of office fit-outs, in specific the air conditioners (ACs). We visited all the rooms where ACs were installed but couldn’t locate one. After some thought, the Senior Environmental Engineer said, :Oh Yes, we found that we had one AC in excess but since you had stipulated that it must be located in the “office”, we installed it in one of our executive toilets. Come and I will show you”

On industrial pollution, Bank had supported Government of India two lines of credit – Industrial Pollution Control (IPC) and Industrial Pollution Prevention (IPP). At a location in Gujarat, IPC subsidized a Common Effluent Treatment Plant (CETP) and under IPP, a water use reduction and recycling project was financed at an industry that contributed major effluent load to this CETP. This reduction in the effluent load (that was good) led to major negative impact on the revenue stream of the CETP making the capital investments made earlier not viable!

In IPC, Bank financed innovative projects that were relevant and could be potentially replicated on demonstration. Sixty percent of the investments were provided as grants. One of the projects financed under this scheme was manufacturing of bio-pesticides. Idea was to promote bio-pesticides to alleviate the problem of contamination by chemical pesticides and reduce the disease burden. When I visited the bio-pesticide plant during ICR, the management showed me impressive balance sheet of financial performance. On further discussions, I understood that almost 100% of the production was exported to the EU at a high price point. There was no demand for bio-pesticides in the local market due to lack of promotion and incentives. So in some sense, Bank financing led to protection of soils in the EU rather than in India!

Today we see that both WB and ADB have kind of entangled their investment/assistance operations in the maze of environmental and social safeguards. These safeguards have been continuously updated and evolved and in the process have expanded in scope and expectations. This has happened partly due to the legacy and partly due to an attempt to satisfy all the stakeholders. The “battle” between the Task Managers (who are keen to disburse) and the Environmental & Social Champions of the Safeguards units (who do not want to do any harm) is getting worse – with kind of polarization often leading either to delays or compromise. The project quality is therefore suffering at entry level and affecting the “development effectiveness”. I do see a lot of fatigue in the Bank teams today with less enthusiasm that earlier used to be. Overall, the staff quality has declined over time with attrition of good staff.

You do see now a difference. Twenty years ago, when we used to visit senior officers of Department of Economic Affairs in Delhi as the Bank team, we were ushered to the cabins immediately. Today, the teams have to wait. Sometimes meetings are cancelled or postponed due to other important matters! Clearly, the “World of the Banks” is changing.

Cover image sourced from








  1. Having experienced at first hand, many of the things that you mentioned in this blog, I feel that the world of the banks is really changing. Greater stake holder engagement sometimes ends up in stake holder confrontation. The process could be tweaked to avoid such confrontation. We have a lot to learn.

  2. My personal view is repaying dollar loan has become un-viable and un-attractive due to fall in exchange rates. Interest advantage in international funding when our currency was stable made the bureaucrats/technocrats to work towards acceptance and compliance of safeguards.

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