Understanding some external
Grant ? Grant is the provision of money from one
party (the donor) to another (the recipient) where the money
is not required to be paid back. It is a gift to the borrower.
However, in the case of grants made by a donor to fund Madhya
Pradesh State related activities, in fact the grant is made to
the Government of India (GOI), not to the Government of Madhya
Pradesh (GoMP). While the GOI is not required to pay back the
grant to the donor, but the GoMP must repay 70% of the funds
received for the activities to the GOI at a centrally fixed
rate of interest.
What is Loan ? Loan is the
provision of money from one party (the donor) to another (the
recipient) where the money must be paid back. Usually the
lender of the money requires that the market interest rate is
charged on the loan. However, in the case of loans made by a
donor to fund a Madhya Pradesh activity, the loan is made to
the GOI, not to the GoMP. While the GOI is required to pay
back all of the loan, the GoMP is only required to repay 70%
of the loan received to the GOI at a centrally fixed interest
rate. This rate of interest is not linked to the rate of
interest that the GOI must repay to the donor.
What is Soft Loan ? Soft
loan is a loan where the interest charged on the loan is lower
than the market interest rate. The difference between the
market interest rate and the soft loan interest rate is given
by the donor as a gift. However, in the case of soft loans
made by a donor to fund a Madhya Pradesh activity, the soft
loan is made to the GOI, not the Government of GoMP. While the
GOI is required to pay back all of the soft loan, the GoMP is
only required to repay 70% of the funds received to the GOI at
a centrally fixed interest rate. This rate of interest is not
linked to the rate of interest that the GOI must repay to the
What is Technical Assistance (TA) ?
Technical assistance is a vital element in development
assistance. It helps developing countries in:
Identifying, formulating, and implementing projects,
Improving the institutional capabilities of governments and
Formulating development strategies,
Promoting the transfer of technology, and
Fostering regional cooperation.
It should be noted that in special case of the Asian
Development Bank, there are several technical assistance
PPTA - Project preparatory technical assistance for the
preparation of feasibility studies and detailed engineering
for bankable projects;
PITA - Project implementation technical assistance covering
consulting services for project implementation and initial
operation, including the training of project personnel;
AOTA - Advisory technical assistance supporting institutional
strengthening, sector and policy studies, and
non-project-related human resource development; and
RETA - Regional technical assistance addressing issues of
interest to the region or a sub-region or a group of
individual developing member countries.
What is Bilateral Assistance ? Bilateral
means two-sided. Bilateral assistance is the provision of
loans, grants or technical assistance directly to one country
from another country (the "Donor Country").
What is Multilateral Assistance ?
Multilateral means many-sided. Multilateral assistance is the
provision of loans, grants or technical assistance to one
country from a central pool organisation (the "Donor
Organisation") which obtains its money from a number of
different donor countries. The World Bank and the Asian
Development Bank are examples of such central pool