The $100 billion New Development Bank (NDB), also known as the BRICS bank, which comprises of the members of the BRICS grouping of emerging market nations — Brazil, Russia, India, China, and South Africa — will start lending in local currency by April 2016 and its member countries will be the primarily focus of the bank, K.V. Kamath, the President of the NDB told the Press Trust of India (PTI) on Friday. positive singles
The $100 billion New Development Bank (NDB), also known as the BRICS bank, which comprises of the members of the BRICS grouping of emerging market nations — Brazil, Russia, India, China, and South Africa — will start lending in local currency by April 2016 and its member countries will be the primarily focus of the bank, K.V. Kamath, the President of the NDB told the Press Trust of India (PTI) on Friday.
“I think we will start the lending process sometimes early first quarter next year … the idea is that by April next year, we will create a state of projects from all the member countries (for lending),” Kamath told PTI in an interview.
Kamath said that the NDB will look at various instruments of credit to the member countries, which require huge resources for development, but also noted that a decision to open membership for other countries will be considered in the next few months by the NDB’s Board of Governors.
News Conference By Vladimir Putin Following The BRICS And SCO Summits http://t.co/0D9XeUeTsV
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Kamath denied that the NDB would compete with Asian Infrastructure Investment Bank (AIIB) and said “we will work together and have collaboration and cooperation.”
When asked if the bank’s $100 billion in capital was sufficient, Kamath said “$100 billion is about the capital other large multilateral development banks have. So it is substantial capital. It will be used over a number of years.”
When asked to comment on a view that the BRICS bank had been set up to undermine the U.S. dollar as it will lend in local currencies, Kamath said “I will put it like this. In developing countries, particularly BRICS, there are pools of capital which can be tapped and lent. Local currency financing is what we will look at in addition to hard currency finance. We will look at all pools of capital in addition to hard currency.”
Local currency credit will protect the BRICS countries from currency fluctuations and volatility and “it is critical that we do it,” Kamath said.
Russian President Vladimir Putin, while justifying the setting up of NDB, recently said that “The international monetary system itself depends a lot on the U.S. dollar, or, to be precise, on the monetary and financial policy of the US authorities. The BRICS countries want to change this.”
The BRICS Development Bank will become one of the world’s leading financial institutions, Russian Economic Development Minister Alexey Ulyukayev said on Tuesday during an interview with Rossiya 24 channel, Russia’s TASS news agency reported.
“This will probably be one of the world’s leading institutions, which will focus on infrastructure projects, on the most important areas that allow expanding the specific areas and to promote private and public businesses,” Ulyukayev said.
BRICS will remain the key driving force of the global economy, China’s Deputy Foreign Minister Chen Goping told reporters on Monday.
“BRICS member states will retain the role of the main driving force of global economic growth in the future,” he said, adding that “after the difficulties caused by reforms, there are even bigger opportunities for growth opening up for BRICS.”
In July 2014, a historic milestone for the BRICS group was reached as the group signed a document to form the the $100 billion New Development Bank in addition to the $100 billion currency reserve pool — also known as the Contingent Reserve Arrangement (CRA).
On Tuesday, a day ahead of the SCO and BRICS Summit, the BRICS launched its NDB and signed an agreement on their CRA.
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The BRICS currency reserve pool, or CRA, will primarily support the balance of payments of the member nations and help them to weather any financial squeezes.
The currency reserve pool will be an “insurance instrument” for the five nations and will go into effect on July 30, Russian Central Bank Governor Elvira Nabiullina said in Moscow on Tuesday.
Emerging market nations hold around two-thirds of the $11.6 trillion in global reserves and have seen a drop in their holdings last year as a result of global Central Banks selling dollars to offset capital outflows and to shore up their currencies. Later this year they will face a crunch if the U.S. Federal Reserve raises interest rates, which will thus drain dollars from their markets.
In addition to the NDB and CRA, Russia has recently proposed an alternate to the SWIFT global interbank payment system for the BRICS group, in a move which would further ramp up de-dollarization efforts and threaten the U.S. dollar’s global hegemony.
The launch of the BRICS bank is seen as a first step in breaking the dominance of the U.S. dollar in global trade, as well as dollar-backed institutions such as the IMF and the World Bank, both U.S.-based institutions that BRICS countries have had little influence within.
The new bank will be used to finance new infrastructure and development projects in the BRICS countries, in addition to other emerging market countries.
The NDB will be headquartered in Shanghai, and will first be led by India, followed by Brazil, and then Russia.
China has pledged to contribute a total of $41 billion to the NDB, which will give it the largest voting rights, at 39.5 percent.
In related news, on June 29 the Chinese-led Asian Infrastructure Investment Bank (AIIB) officially launched, following a signing ceremony of the bank’s articles of association that took place in Beijing.
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The AIIB is expected to not only complement the NDB, but China’s broader regional infrastructure plan, known as “One Belt, One Road” initiative, or the New Silk Road project, which aims to increase connectivity by building infrastructure such as a network of railways, highways, oil and gas pipelines, power grids, internet networks, maritime, and other infrastructure links across Asia, Europe, the Middle East, Africa, and even as far as South America.
The BRICS group was established in 2010, when South Africa joined Brazil, Russia, India, and China in what was previously known as BRIC. The BRICS group represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP, and 30 percent of the world’s GDP based on PPP. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total.