The global lender, World Bank has announced a lending of $14 billion to India for recapitalizing public sector banks, speeding up infrastructure programs and fighting against poverty.

"The World Bank Group is tailoring its assistance to India both to fast-track much-needed infrastructure development and to support the country's seven poorest states achieve better living standards," the Bank said.

The Bank's acting country director to India, Rachid Benmessaoud said that out of the extended loan amount $3 billion will be taken to focus on sectors that are being affected by the global financial crisis to a greater extend. These sectors include state-owned and housing banks, small- and medium-sized enterprises and infrastructure. The needs of 27 state-run banks would be evaluated by World Bank over the next month.

Benmessaoud said that, "the capital market is drying up in India and we have seen that a number of commercial state banks are not able to access long-term financing. Because of the financial distress, certain companies will not be able to repay these banks so their non-performing assets are likely to increase."

The World Bank plans to provide $14 billion over the period of three years. The support will be extended under two separate schemes for 7 poorest states and 7middle-income states. Rajasthan, Madhya Pradesh, Chhattisgarh, Orissa, Bihar, Jharkhand and Uttar Pradesh were categorised as the low-income states, where the World Bank would focus on poverty reduction programmes.

World Bank Economic Adviser Giovanna Prennushi said, "The strategy is designed to boost support to these states, but also not to forget about the poorest people in India's middle income states."

The new strategy will also support some middle-income states like Andhra Pradesh, Karnataka, Punjab, Tamil Nadu, Haryana, Gujarat, and Maharashtra.

However, the Bank will closely scrutinize these developmental projects. "The World Bank and the government will jointly implement a more rigorous project selection process than in the past," said Benmessaoud.

The lending would focus on infrastructure development, especially providing India's poorest with electricity and water. It will also strengthen the capacities of local authorities so that they can use federal money in an efficient manner.