New Development Bank: Highlights

New Development Bank: Highlights

Question: India named veteran banker K.V. Kamath to be the first President of the New Development Bank, popular called the BRICS bank. Discuss the key highlights of this newly formed bank.

• Focus of the bank is investment in infrastructure

• The BRICS bank or NDB is a developmental bank which the BRICS nations have set up to mobilise resources for infrastructure and sustainable development not only in BRICS nations, but elsewhere as well

• The bank’s creation is to complement existing efforts or multilateral and regional financial institutions

• BRICS was born as an alternative to IMF and WB

• BRICS account for 40% of the globe’s population and combined economy of USD 16 trillion

• BRICS account for one fifth of the global economy and garner only 11% of the votes of IMF while developed nations such as US and France have 40% of the voting power

• BRICS was formed due to informal cooperation among nations to fill the gaps in infrastructure financing which current economic institutions such as WB and IMF have not been able to attain
• Bank will commence with subscribed capital of USD 50 billion, divided on an equal basis between 5 founding nations

• Initial total of USD 10 billion has been put in cash for the next 7 years and USD 40 billion in guarantees

• The group also agreed to USD 100 billion currency exchange reserve wherein member countries can tap this during BOP issues

• China will contribute a major chunk of the currency pool while Russia, India and Brazil will give USD 18 billion and SA will chip in USD 5 billion

• China will be eligible to ask for half its contribution while SA will get double its contribution in a crisis; remaining nations will get what they gave

• Bank will be based in Shanghai

• Each President will have a term of 5 years

Facts and Stats

• BRIC was coined by Goldman Sachs economist Jim O’Neill to ascribe the growing prominent role played by Brazil, Russia, India and China in the global economy.

• BRIC country leaders started meeting as a block in 2009

• South Africa joined the group to make it BRICS