(Adds power loan)

DHAKA, June 20 (Reuters) - The World Bank has agreed to lend Bangladesh $102 million for a water project that could benefit two million households and $275 million to held reduce the country's power deficit.

The power loan is for a $400 million project to build a 300 megawatt (MW) power plant at Siddhirganj, just outside Dhaka, that will complement a 240 MW plant being financed by the Asian Development Bank, the World Bank said.

Bangladesh power demand of around 5000 MW outstrips supply of up to 3300 MW.

"The World Bank is supporting ...(the) plant ... to reduce the very large deficits of generation of electricity at peak times that the country now experiencing," a World Bank statement said on Wednesday.

The 7-year water project in selected parts of the country is designed to improve flood control, drainage and irrigation systems, a senior official at Bangladesh's finance ministry said.

The World Bank is providing just over $102 million of the total $136.70 million cost of the project. The remainder of the funding is to come from Bangladesh and the Netherlands, officials said.

"This initiative will benefit about 2 million poor households in gaining access to increased employment opportunities, production in crops and fish," the World Bank said.

Bangladesh suffers flooding in the monsoon season but insufficient irrigation during the lean season. Urban areas suffer from a lack of drinking water.

"We can avoid much of our suffering if we improve our service delivery system by applying modern technology," the official said.

The World Bank said in March that Bangladesh needed to spend $8 billion on the environment in the next 20 years to sustain economic growth and reduce poverty.

In a report, it said a priority was to counter falling water quality in the capital Dhaka, which produces a fifth of the country's economic activity.

($1=68.96 taka)

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