The social sector loan for Andhra Pradesh is being approved with American endorsement since it meets the criteria for ``basic human needs'', World Bank sources said. US officials said last week that they would not oppose any loans aimed at meeting basic human needs, defined as anything which related to social sectors where the beneficiaries are poor. This includes sectors like maternal and child health, water and sewerage, low income housing, rural development and education.

The Andhra Pradesh Economic Restructural Loans, the biggest Indian credit which has come up for consideration after the nuclear tests, is a multi-sector loan with a clear poverty focus, Bank sources said. The Bank's executive board was discussing the loan at the time of writing, and sources said theapproval was expected to sail through given the US stand. ``We are not going to oppose the loan,'' a State Department official confirmed.

The fact that the loan was meant for Andhra Pradesh, whose reform-minded Chief Minister Chandrababu Naidu is highly regarded in the Bank, also appeared to have been a factor in its approval. Sources here said the turnaround in the sanctions regime came about following the G-8 meeting in London, where despite the punitive stance adopted by the US and other nations, it was decided not to burden the poor of the sub-continent for the actions of the Indian and Pakistani Government.

``The language there was very deceptive. It sounded harsh and everyone missed the opening which said the countries would not oppose basic human needs loans. Human needs is a broader term than humanitarian,'' one Bank official said.

The change in stance is important because it also provides a precedent for other multi-lateral organisations like the Asian Development Bank and individual countrieslike Japan and the Scandinavian nations to reconsider their position.

The World Bank deferred consideration of nearly $ 1 billion in loans to India last month in the aftermath of the nuclear tests. Most of those loans were then deemed to be in the non-basic sector. US officials have said they will seek to have all such loans postponed.

But Indian officials indicated that they would seek to revisit those loans because some of them could conceivably come under the basic human needs head. Among the loans that have been postponed since the tests are a $ 450-million National Power Grid loan, a $ 275-million state high project loan, a $ 130-million renewable energy project loan, a $ 130-million diversified agriculture project loan, and a $ 76.4-million Orissa health systems loan.

If reconsidered, some of the loans could be classified under the basic human needs category which US officials defined fairly broadly at a briefing on sanctions last week. ``We believe even the energy sector loans should come underbasic human needs because it also affects the poor,'' a senior Indian official said.

India was most affected by the sanctioning of World Bank loans because it was expecting to receive $ 1.9 billion between May 11, when it tested nuclear weapons, and June 30, when the Bank's financial year ends. The Bank had finished lending the approved annual loans worth $ 807 million to Pakistan when it conducted nuclear tests on May 28.

Meanwhile, the US administration is yet to come out with the executive orders relating to banking transactions following the imposition of sanctions. Administration sources said the Treasury Department was still struggling to define the terms because it was ``needed to be done carefully, considering it would be precedent-setting''.

The key sticking point centered around whether the administration would allow US bans to deal with major Indian banks, which, by virtue of having been nationalised, are in effect Government of India entities.

Treasury officials were wrestling with how toget around this boondoggle.