A new $100 billion bank floated by the BRICS nations on Tuesday opened for business here, over three years after India mooted the idea, making it the first major financial institution from the emerging countries to reduce dependence on the IMF and World Bank. The New Development Bank (NDB) of the five-nation BRICS bloc headed by eminent Indian banker K V Kamath was inaugurated at a colourful function attended among others by Chinese Finance Minister Lou Jiwei and senior officials from BRICS countries.
Kamath, 67, who will be the bank’s president for the first five years, said he was confident of delivering on people’s expectations from the new bank. “Countries should closely cooperate,” Kamath, a former executive with India’s largest private bank ICICI Bank, said. “We will listen carefully to our members and try to offer tailor-made services for them,” he said.
The new bank is created to encourage all-inclusive cooperation among developing countries, led by Brazil, Russia, India, China and South Africa (BRICS), Lou said. “Its creation is to meet urgent demand of such countries in infrastructure construction and beyond,” Lou said. It will complement the existing international banking system, instead of challenging it, he said allaying reports that the NDB coupled with the new China-floated Asian Infrastructure Investment Bank (AIIB), will rival the US-controlled IMF and World Bank. World Bank President Jim Yong Kim was the first to congratulate the NDB on Tuesday.
“We would like to congratulate Mr K V Kamath, President of the New Development Bank, and the founding members — Brazil, Russia, India, China, and South Africa on this — important occasion. We are committed to working closely with the New Development Bank and other multilateral institutions, offering?to share our knowledge and to co-finance infrastructure projects,” Kim said.
“These types of partnerships will be essential to reach our common goals to end extreme poverty by 2030, boost shared prosperity, and to reduce inequalities,” Kim said. The Japan-backed Asian Development Bank (ADB) also greeted the NDB.
In a message ADB President Takehiko Nakao said “We look forward to working with this new member of the global family of multilateral development banks in areas of common interest in Asia and Pacific, including possible co-financing for infrastructure and projects promoting sustainable development, utilising our long experience and expertise in the region”. The operationalisation of the bank roughly three years after India proposed the idea at the BRICS summit in New Delhi in 2012.
The NDB is the first major institution for the five-member bloc of emerging countries as it has been set up with an initial authorised capital of USD 100 billion and initial subscribed capital of $50 billion equally shared among the five founding members.
Unlike the IMF and World Bank, none of the five have veto power and the presidency is rotated every five years. It is backed by a $100 billion contingency fund in which China contributes lion’s share of $41 billion, India, Russia and Brazil contributing $18 billion each and South Africa USD five billion. The bank will stand lending in local currency by April next year and member countries will primarily be the focus of credit facility, Kamath had earlier this month. He said the NDB, with a capital of USD 100 billion, will look at various instruments of credit to the member countries which require huge resources for development. “Basically, credit is what we are looking at. Various instruments of credit that we are looking at,” said Kamath. “Idea is that we will lend for developmental assistance in member countries,” said the former independent director of Infosys and former chairman of ICICI Bank, who has been made the NDB president for five years.