DELHI – Even before PM Modi arrived in Brazil for the BRICS (Brazil, Russia, India, China, South Africa) Summit on Monday, the highly anticipated launch of the BRICS “New Development Bank” was making headlines across the developing world.
Intended to facilitate greater financial cooperation between emerging markets, the BRICS bank will seek to check the influence of the IMF, Asian Development Bank (ADB) and World Bank by offering lower cost loans with fewer conditions to developing countries as soon as 2016.
Signing off on the new financial institution yesterday, each BRICS country will contribute US$10 billion in initial capital to the bank (US$50 billion which will ultimately grow to a value of US$100 billion) and work towards the creation of a US$100 billion emergency reserve fund coined the “Contingency Reserve Arrangement” to be used in case of a currency crisis. While initial capital contributions for the bank were split equally among the five BRICS countries, the reserve fund will be comprised of mostly Chinese capital (US$41 billion) followed by US$18 billion each from India, Russia and Brazil and US$5 billion from South Africa.
Although disagreement over the administrative control and location of the new bank ended in compromise (a Brazilian chair of the board of directors, Russian chair of the board of governors, Indian director, headquarters in China and first regional center in South Africa), India’s lobbying for future non-BRICS members to be granted equal voting power resulted in the BRICS countries agreeing to retain a collective share capital of at least 55 percent – and thus ultimate political control – of the institution.