History of World Bank

World War II not only affected multifarious trade but also caused the loss of life and property in many countries. In order to establish peace in the world, it was necessary that attention should be paid to the reconstruction of shabby economies and the economic development of underdeveloped countries.

For the fulfillment of these objectives, the plan of the International Bank for Reconstruction and Development was accepted at the Bretton Woods Conference. This bank is also known as the World Bank and it was also established as a supplementary institution along with the International Monetary Fund. The World Bank was established on 27 December 1945 AD and it started work on 25 June 1946 AD.

IBRD is known as World Bank along with other affiliated institutions, currently, the world bank is a group of the following institutions-

(i) International Bank for Development and Reconstruction (IBRD), 

(ii) International Development Association (IDA), 

(iii) International Finance Corporation (IFC), 

(iv) Multilateral Investment Guarantee Association (MIGA), 

(v) International Center for Settlement of Investment Disputes (ICSID). 

India is a member of all the others except ICSID. The Second World War had not only unbalanced the Versatile trading system, but also caused great damage to life and property in many nations. The economy of the countries taking an active part in the war (eg- Germany, France, England, etc.) was badly destroyed. Therefore, for the sake of international peace, it was necessary that attention should be paid to the reconstruction of these war-affected economies. Along with this, it was also thought that the development of underdeveloped countries should also be done according to the earlier plan.

As a result of this idea, in July 1944 under the Brettenwood Conference, the World Bank for Reconstruction and Development was established along with the International Monetary Fund in December 1945. It started functioning in June 1946. The World Bank and the International Monetary Fund are subsidiary institutions of each other.

What is World Bank? 

International Bank for Reconstruction and Development is called International Bank for Reconstruction and Development in English. The International Bank for Reconstruction and Development, also known as the World Bank, was established according to the UK Budds Agreement for the reconstruction and economic development of underdeveloped and demolished countries.

World Bank Definition in English - The World Bank is an international organization dedicated to providing financing, advice, and research to developing countries to aid their economic growth. The bank operates primarily as an organization that seeks to fight poverty by providing developmental assistance to middle and low-income countries. 

• World Bank Headquarters – Washington, D.C, United States
• World Bank President 2021 – David R Malpass
• World Bank CEO – Anshula Kant

Objectives of World Bank

According to Section 1, the World Bank has the following objectives:

1. To provide assistance in the construction and economic development of the member states

The main objective of the World Bank is to provide financial assistance in the reconstruction work of the destroyed member countries' economies and to make the economic development of those countries possible by providing adequate monetary and industrial assistance to the developed member countries.

2. Providing facilities for foreign capital investment

The World Bank encourages investors to invest their capital in other countries. For this, the World Bank guarantees its capital. If a sufficient amount of capital is not available for investment, then the World Bank provides development loans to the member countries from its own resources.

3. Promoting Long-Term International Trade

The World Bank corrects the trade balance of backward member countries by increasing their means of production and encouraging the international balance of trade.

4. Converts Wartime Economy to Peacetime Economy

The then purpose of the establishment of the World Bank was to help the member countries to convert their wartime economy as soon as possible after the end of the Second World War so that their economy can become stable.

What are the features of the World Bank? (Characteristic Of World Bank)

• The World Bank is an international organization that provides financing, mentoring, and research to developing countries to help them advance their economies.

• The World Bank and the International Monetary Fund (IMF) serve both international governments established together under the Bretton Woods Agreement.

• The World Bank expanded to form the World Bank Group with five cooperative organizations, sometimes referred to as the World Bank.

• The World Bank Group provides a range of proprietary financial support, products, and solutions to international governments as well as research-based thought leadership for the global economy.

• The World Bank's human capital project seeks to help nations invest in and grow their human capital to build better societies and economies.

World Bank Membership 

Any country in the world that accepts the Bank Charter and which is a member of the International Monetary Fund can become a member of the World Bank. Though initially, the number of members of the bank was 44 now it has increased to 125. According to Section 9 of the World Bank, any member country may terminate the membership of the bank at any time by giving written notice to the bank. At the time of relinquishing its membership, the government of the member country has to fulfill all its responsibilities by the specified date. At present, the number of member countries is 189.

establishment of the world bank

The organization of the World Bank consists of a Board of Governors, an Executive Steering Committee, a Chairman, and other officers and employees. The Board of Governors, in which all the powers of the Bank are vested. There is one representative from each member country. The Board of Governors is to meet once a year. Although this meeting is of formal importance, but in spite of this, this economic meeting is important from the point of view of exchange of views on important international monetary and financial problems at an informal high level.

The number of members of the Executive Governing Board is 20. Of these, 5 operators are appointed from those 5 countries, which get the position of the first 5 largest shareholders in the capital of the bank. At present, representatives of the United States, England, West Germany, France, and India are the directors of the executive committee. The remaining 15 directors are elected by other members. Ordinarily, except for a few matters, the Board of Governors has delegated its powers to the executive directors in respect of all other matters. 

Executive directors are responsible for all the functions of the bank. The executive directors meet every month. Each operator gets voting rights according to the amount of money in his country. The chairman of the bank is the chairman of the executive committee of directors. Although he does not get the right to vote, he has the right to give decisions. He is the chief officer of the bank and he looks after all the general affairs of the bank.

world bank capital

Initially, the authorized capital of the bank was $ 1000 million divided into parts of $100,000 each. A total of $9400 million of this capital was received in 44 member countries. 

What is the amount of a member of the World Bank and in how many parts it is divided?

The amount of each member is divided into the following three parts:

(a) Every member has to immediately deposit 2% of his total amount with the bank in the form of gold or dollars. This amount can be utilized by the bank by giving loans independently.

(b) Every member has to pay 18 percent of his total amount in the form of currency of his nationality.

(c) The remaining 80 percent of the total amount can be availed only when required.

In this way, 20 percent of the authorized capital of the banks is received in the form of gold or dollar and various currencies of the members. In this way, the World Bank helps in the reconstruction and development work of the member nations by using the capital due as credit instruments.

Functions of the World Bank The World Bank does not have the right to deal directly with private individuals or institutions. It does this work only through the governments of the member countries. The amount of loan that any country should get does not depend on the capital of that country, generally, the World Bank does not give loans from its own capital, but only encourages and guarantees personal loans. Before giving the guarantee, the bank obtains the guarantee from the government of that country and can thoroughly investigate for what purpose the loan is being taken and to what extent the demand of the borrower is correct. 

How does the World Bank give loans? 

The World Bank provides loans in the following three ways:

1. Guaranteed loans

The World Bank takes guarantees from the governments of needy countries by guaranteeing them to the private investors of a member country. The World Bank considers it appropriate to guarantee loans given by others rather than giving loans itself. The bank charges its commission on such guarantees given.

2. Providing loans by borrowing

The World Bank itself can borrow capital for lending to member countries. This is done only when it is not possible to arrange a sufficient amount of credit through other means. The government of the country that asks for a loan from the World Bank has to guarantee the payment of principal and interest. The rate of interest at which the bank itself obtains the loan gives loans to the member countries at a higher rate and thus makes profit itself.

3. Lending through own means

The World Bank can give loans up to a certain limit from its own capital, but this can happen only when the loan arrangement cannot be done in both the other means.

Benefits to India as a member of the World Bank

India is a fundamental member of the World Bank as it accepted its membership from the very beginning. It has got a permanent place in the Executive Board of the Bank. He got the opportunity to preside over the annual meeting of the bank in 1960. He has benefited a lot from the membership of the meeting, especially since the economic planning system has been started in India. 

India received the following benefits from the World Bank:

(1) Financial aid

The World Bank has given a lot of help in the work of economic development of India. India has received a maximum loan from World Bank. So far, India has received loans of about $ 1276 million from the World Bank. The economic development of the country has been possible in various fields only through the use of these loans. The attitude of the World Bank towards India's five-year plans is commendable.

(2) Assistance in the organization of foreign exchange

Whenever India faced a foreign exchange crisis, the bank has assisted it. For example, when the foreign exchange crisis arose in 1958, the bank gave a loan of $100 million to India.

(3) Facility of ordinary loans

Till now, India has been getting only specific loans, which can be used only for the work for which it has been provided. But financial benefits cannot be availed from this type of loan. That is why India requested the bank to give it a normal loan (Block Loans) which India can use as per its wish. The bank has accepted this request from India.

(4) India's beneficiary plan in the meeting of the lender countries

The World Bank has not only done the work of providing loans to India but also by meeting with those countries, that want to provide loans to India, before their collective meeting of the need of India. In 1956, he emphasized the need to help India by meeting in Washington the five heads of the World Bank - America, England, Canada, West Germany, and Japan. As a result of this meeting, India received assistance of $ 600 million in the form of a loan for the Second Five Year Plan. This is the first meeting of its kind which was organized by the World Bank for the development of a semi-developed country.

(5) Technical Assistance

The bank has sent its teams of experts to India several times to study the various schemes related to the economic development of India. A representative of the Bank stays in India to inquire about the progress of various schemes which (scheme) have been completed through the credit assistance of the Bank. In November 1951, a group of bank experts came to study the development plan of the country. In 1952, the President of the World Bank, Eugene Black himself came to India and got information about the plans of the country. 

After the visit of the Chairman of the Bank, other officials of the Bank had come to study the plans for which India had asked for a loan from the World Bank. In February 1954, a mission bank came to India to study the industry potential in individual sectors. At the invitation of the Government of India, a delegation of the bank came in April 1965 for the purpose of studying the economic condition of the country and the second five-year plan.

(6) Mediation in Pakistani dispute

The World Bank has sincerely served the interests of India and Pakistan by ending the canal water dispute between India and Pakistan. By successfully ending this conflict, the World Bank has added a new chapter in the economic history of the underdeveloped countries and has proved well that the World Bank is protecting the interests of permanent world peace.