On which side of the BOP account is the loan taken from world Bank recorded?

credit side of capital account

The correct answer is Option 2: credit side of capital account

When a loan is taken from the World Bank, it represents an inflow of capital into the country. This type of transaction is recorded in the capital account of the Balance of Payments (BoP).

Since the loan represents an inflow of capital into the country, it is recorded on the credit side of the capital account.

The capital account keeps track of the net change in a nation's assets and liabilities during a year. An asset is any one of the forms in which wealth can be held, for example: money, stocks, bonds, Government debt, etc. Purchase of assets is a debit item on the capital account. If an Indian buys a UK Car Company, it enters capital account transactions as a debit item (as foreign exchange is flowing out of India). On the other hand, sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account. When the country receives loan, it is an inflow of foreign exchange and hence it is recorded on the credit side.