BENGALURU - India is likely to propose forming an expert G20 group to look into reforms at the World Bank and to increase lending capacity of the institution for climate financing in middle and low income countries, three sources told Reuters.

The proposal is expected to be tabled at a G20 meeting this week at Nandi Hills summer retreat near India's tech hub Bengaluru, where financial chiefs from the bloc have gathered for the first major event of India's G20 presidency.

The development comes as World Bank President David Malpass held a discussion with Finance Minister Nirmala Sitharaman on Wednesday on addressing debt vulnerabilities, India's finance ministry said.

"India is writing a proposal to form a group for reforms to World Bank," one of the sources said, requesting anonymity as they are not authorised to speak to media.

India's finance and foreign ministries and the World Bank did not immediately respond to a Reuters' request for comment.

"Democratisation of World Bank has been a long term line pursued by India and other countries. Differential financing terms for least developed and developing countries is desirable," a second source said.

India's chief economic adviser on Tuesday said reforms at multilateral development banks would be at the top of the agenda for discussion during the G20 financial chiefs meet.

Sitharaman told Malpass on Wednesday that climate finance was a focus area during India's G20 presidency and multilateral development banks "can play a major role in incentivising private capital, de-risking instruments, and providing greater concessional finance".

U.S. Treasury Secretary Janet Yellen is also expected to press for consensus on reforming multilateral development banks to vastly expand their lending to tackle pressing global challenges such as climate change and conflict.

The World Bank Group's climate change action plan for 2021-2025 has set a target to deploy an average of 35% of the institution's financing in support of climate action.

The Group said in September that it delivered a record $31.7 billion financing in fiscal year 2022 to help countries address climate change, a 19% increase from the $26.6 billion all-time high in the previous fiscal year.

(Reporting by Shivangi Acharya and Sarita Chaganti Singh; Additional reporting by David Lawder; Writing by Shivam Patel in New Delhi; Editing by Alison Williams)