Maharashtra Clears Loan Guarantee for Metro Expansion

• 19 Jul 2025

Why in the News? 

The Maharashtra government has approved a loan guarantee for six Metro projects being implemented by the Mumbai Metropolitan Region Development Authority (MMRDA).  

• These projects are part of MMRDA's broader goal to create a 300-km metro network by the end of the decade. 

Key Points 

• Government Approval: The approval facilitates continued funding from international financial institutions, ensuring that the ongoing construction work for these Metro corridors proceeds smoothly. 
  • The approval allows for the continuation of tendering and contracting activities for these Metro lines. 
• Construction and Planning: These Metro corridors are either under construction or in advanced planning stages, requiring significant funding due to the complexity of both elevated and underground alignments. 
• Project Costs: The cumulative cost for the six Metro corridors exceeds Rs 36,000 crore, and the financial support is vital to avoid delays and prevent cost escalation. 
• Funding from Multilateral Agencies: With the government guarantee, MMRDA can now approach agencies like the Asian Infrastructure Investment Bank and the Asian Development Bank to secure loans for the projects. 
• Loan Repayment: The responsibility for repaying the loans, including interest and other liabilities, rests entirely with MMRDA, while the state's role is limited to acting as a guarantor. 
  • The state guarantee is crucial to meet the eligibility criteria set by the funding institutions, preventing potential delays in negotiations or costly financial restructuring. 
• Expected Benefits: The new metro lines are expected to ease congestion in various areas, improve connectivity between key regions, provide a vital link to the airport, and serve a large number of daily commuters, thereby reducing road traffic. 

Note:  

• A ‘guarantee’ is a legal obligation for a State to make payments and protect an investor/lender from the risk of default by a borrower. 
• A guarantee, as per the Indian Contracts Act, 1872, is a contract to “perform the promise, or discharge the liability, of a third person in case of his default. 

Asian Development Bank (ADB)  

• About: ADB is a multilateral development bank established in 1966 with a mission to foster economic growth and cooperation in the Asia-Pacific Region.  
• Headquarters: Located in Manila, Philippines.  
• Membership: Comprises 68 members, including 49 from Asia and the Pacific, and 19 from other regions.  
• India and ADB: India is a founding member and the 4th largest shareholder (after Japan, the US, and China) of ADB.  
• ADB's Support to India: ADB aligns its support with India’s priorities for sustainable, climate-resilient, and inclusive growth, in line with its ADB’s Strategy 2030 and the country partnership strategy for 2023–2027.  

Asian Infrastructure Investment Bank (AIIB) 

• About: The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank established in 2016 with a mission to finance infrastructure for tomorrow, focusing on green, sustainable, and connected infrastructure in Asia and beyond. 
• Headquarters: Located in Beijing, China. 
• Membership: Comprises 110 approved members as of 2025, spanning Asia, Europe, Africa, Oceania, South America, and North America. 
  • Membership includes both regional (Asia and Oceania) and non-regional countries, reflecting a broad international reach. 
• India and AIIB: India is a founding member and the second-largest shareholder of AIIB, after China. India holds about 7.6% of the voting shares. 
  • India is also the largest borrower from AIIB, having secured more project financing than any other member country.  
  • India’s infrastructure projects have received more than USD 10 billion in funding as of 2023, covering sectors such as transport, energy, and urban infrastructure.