New Development Bank (BRICS Bank)

New Development Bank (BRICS Bank)

New Development Bank (BRICS Bank)

• Agreed in 5th BRICS summit held in Durban, South Africa in 2013
• 6th BRICS summit held in Fortaleza, Brazil, 2014, signed the document for $100 billion BRICS Development Bank and a reserve currency pool worth over another $100 billion
• Headquartered at Shanghai with African Regional Centre at Johannesburg
• 1^st President – India, Chairman of the Board of directors – Brazil, Chairman of Board of governors – Russians

Terms & Objectives

• Primary focus of lending will be infrastructure projectswith authorized lending of up to $34 billion annually
• Will have starting capital of $50 billion, with capital increased to $100 billion over time
• Brazil, Russia, India, China & South Africa will initially contribute $10 billion each to bring the total to $50 billion
• No member can increase its share of capital without other 4 members agreeing – a primary requirement of India
• The bank will allow new members to join but the BRICS capital share cannot fall below 55%
• Official Languages – Chinese, English, Russian, Portuguese, 22 official languages of India

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 Contingent Reserve Arrangement (CRA)

• Provision of support through liquidity & precautionary instruments in response to potential short-term balance of payments pressures
• To provide protection against global liquidity pressures including currency issues where members’ national currencies are being adversely affected by global financial pressures.
• Total $100 Billion – China will contribute $41 billion, Brazil, Russia and India would give $18 billion each, and South Africa would contribute $5 billion

Why BRICS Bank Born

• BRICS – Collectively 1/5^thof World GDP and 2/5^th of world population
• No reforms in IMF or Word Bank > Highly dominated by USA & G7
• To defend BRICS economy from volatility in dollar exchange rate
• In the long run, it’ll make Chinese Yuan as an alternative to US Dollar, for global financial system

RBI Governor – “we did not setup BRICS bank to challenge World bank and IMF. This bank is setup only to provide “patient money” to BRICS nations, because World Bank and IMF are taking too much time to reform themselves.”

• Formation and Purpose: The New Development Bank (NDB) was established in 2014 by the BRICS countries(Brazil, Russia, India, China, and South Africa) to fund infrastructure projects in emerging economies and promote sustainable development.

• Headquarters: The NDB’s headquarters is located in Shanghai, China, with regional offices in South Africa, Brazil, and India.

• Initial Capital: The bank was initially endowed with a capital of $50 billion, which was later increased to $100 billionin 2021.

• Objective: The primary goal of the NDB is to support infrastructure and sustainable development projects in BRICS and other developing countries, providing loans and financing for projects that promote economic growth and poverty reduction.

• Project Areas: The NDB focuses on projects related to infrastructure, renewable energy, green energy, transportation, education, healthcare, and water and sanitation in emerging economies.

• Lending Mechanism: The NDB offers low-interest loans and financial aid to BRICS countries and other developing nations, aiming to reduce the dependence on Western-controlled institutions like the IMF and World Bank.

• Partnerships and Collaborations: NDB partners with other financial institutions such as the Asian Infrastructure Investment Bank (AIIB) and World Bank to co-finance large-scale projects.

• India’s Role: India is a major contributor to the NDB and has been actively involved in the bank’s operations, advocating for development projects in South Asia, especially in sectors like clean energy, transportation, and digital infrastructure.

• Green and Sustainable Financing: The NDB has committed to financing green and sustainable projects, aiming to promote projects that are in line with global climate goals such as the Paris Agreement.

• Expansion of Membership: While initially established by BRICS countries, the NDB has expanded its membership to include other emerging and developing nations, including Bangladesh, United Arab Emirates, and Egypt.

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