With Prime Minister Narendra Modi delivering speeches in BRICS summit and the Indian media going gaga over a BRICS Development Bank, let us know what this bank actually is.
What is BRICS Development Bank?
BRICS Development Bank is essentially a bank formed for providing financial assistance to the emerging economies of the BRICS countries.
The membership of the BRICS Development Bank is initially being held by the core BRICS group. This would include Brazil, Russia, China, India and South Africa.
The bank will have an initial authorised capital of $100 billion. The initial subscribed capital shall be of $50 billion to be equally shared by the founding-members.
Where is the headquarter?
The headquarter of the Bank is in Shanghai, China.
Who is the President?
India is the first President of the Bank. India’s presidency will be followed by Brazil and Russia who will have five years term each under an agreement reached after intense negotiations among the five
Where are the regional offices?
The New Development Bank Africa Regional Centre will be established in South Africa concurrently with the headquarters.
Who are in the Board of Governors?
The first chair of the Board of Governors will be from Russia, while the first chair of the Board of Directors shall be from Brazil.
What will the bank do?
The New Development Bank will be lending money from the common fund to developing countries who are otherwise completely dependent on funding agencies like the International Monetary Fund (IMF) and the World Bank. This fund then can be used for long term projects or to overcome short term crises without being subjected to the Bretton Woods System.
New Development Bank is supposed to help the emerging economies who do not wish to get funds from western organizations.
What are the concerns?
For India, China makes up for the major concern. The currency domination of the loans are a major concern area. For example, if the loans are meted out in Yuan, the Chinese currency could become the next US dollar. India would not want China to take over centre stage and slow down its own growth.
Also, in order to remain apolitical, unlike IMF and World Bank, the Development Bank will have to device a solid loan policy.
Also, China will be holding a major stake in the currency reserve fund. This will be like an emergency fund that would shield the developing countries from major crises. The members will have to make sure that China doesn’t become proxy of the US.
When will it start?
A period of six months has been provided for ratification of the agreement by respective Parliaments of the member-nations except in the case of India where no parliamentary endorsement was required. The member- countries have six months thereafter, to pay the first of the seven installments for the corpus.
Given this time frame, the bank is expected to get going in about two years.