Russian president Vladimir Putin said last Thursday (9) that a new BRICS bank would become fully operational and finance energy projects next year as emerging markets attempt to challenge the Western-dominated financial system.
The BRICS nations – Brazil, Russia, India, China and South Africa – which represent 40 per cent of the world’s population, agreed in 2013 to establish their own development bank, with an estimated capital of $100 billion (£63bn).
Crucial to their efforts to undermine Western hegemony is also a $100-billion pool of currency reserves.
Russia – which has suffered huge currency fluctuations and struggled to attract investors since the outbreak of the crisis in Ukraine – sees the bank and the currency reserve pool as an alternative to international financial institutions like the IMF and World Bank that are dominated by the United States.
“The New Development Bank (NDB) will be financing large-scale transport and energy projects and industrial development,” Putin said after talks with the leaders of China, India, Brazil and South Africa in the city of Ufa in the Urals.
Meanwhile, the bank’s first chief, KV Kamath, said the fixed shareholding quota of India or any other member would not be a restriction in terms of loans given by it.
“Our aim will be that we do not see only from the point of view of the lenders, but also from the point of view of the borrowers,” Kamath said.
The ratification process for setting up of the NDB was completed during the BRICS summit, while Kamath, an eminent Indian banker who transformed the country’s top private sector lender ICICI Bank into a financial sector behemoth, will take charge of the institution next Monday (20).
The Shanghai-headquartered bank will finance infrastructure and sustainability projects in the five member countries as also other emerging and developing nations.
The NDB’s initial subscribed capital of $50bn (£32bn) has been equally shared among the five founding members. Equal capital contribution was decided so that the development bank does not fall into the ownership pattern of IMF and the World Bank, with a distorted shareholding.
Asked whether the lending to the member countries would be on the basis of their contribution to the share capital of the bank, Kamath said: “There certainly will be some prudential limits like any other bank, but we do not need to follow the base share capital for determining lending to a country.”