BRICS BANK or formerly known as New Development Bank(NBD) is a financial institution set up by the BRICS nations. It came into existence on 23rd July 2015 ,with its headquarters at Shanghai in China it is aimed at fostering regional cooperation and strengthening infrastructural conditions of not just its member nations but also other developing nations of the world. Though it will officially start working from April 2016 but for now it has got its first President as an Indian K.V.KAMATH.
With an initial capital of USD 50million which can expand up to USD 100 million it is all set to be seen analogous to other international financial organisations like the International monetary fund or the World bank.
1.AN INITIATIVE TAKEN BY INDIA
It shares its history back to 2012 at the 4th BRICS summit held at New Delhi. India showed a need set up a bank which would finance the BRICS nations to build a strong infrastructure and help in stabilising economic conditions.On 27th march 2013 at the 5th BRICS summit held at Durban in South Africa, all the member nations agreed to the proposal of setting up of the BRICS bank which would cater to the financial needs of its member nations. The BRICS bank is entitled to authorized lending of up to $34 billion annually.
2.ONE COUNTRY ONE VOTE
Unlike other international funding organisations which has special rights or veto power given to its founder members, the BRICS nations sets a great example of equality by giving equal rights and power to all of its member nations no matter whether country is small or big or powerful or weak. There is no provision for veto power or any other special rights for a particular country or a group of countries. All the countries own an equal number of shares though the amount of initial fund given by member nations is as per the capability of the nations. The initial total contingent reserve is expected to be $100 billion. However the fund to be supplied by different nations is as follows:
CHINA – $41 BILLION
INDIA – $18 BILLION
BRAZIL – $18 BILLION
RUSSIA – $18 BILLION
SOUTH AFRICA – $ 5 BILLION
3. DEALS IN NATIONAL CURRENCIES
Even though the initial funding has been done in dollars the deals or trading among member countries would be done in regional currencies of the respective nations. For developing countries like India, China , or Brazil dealings in dollars gives rise to huge trade losses thus the use of their regional currencies would not only avoid such loss but also promote healthy trade relations among member nations. This regional currency trading is actually a result of past transactions among countries which proved to be a great success. For example in 1991, the trade between Russia and India done in rupee –rouble format made both the countries great trading partners. Also in 2014, India and china got one step closer in trade relations by making deals in the rupee-Yuan form. It is actually a great way to reduce the monopoly of dollars which has become the most powerful n widely accepted currency of the world.
Though dealing in regional currencies makes it rather slow as compared to that done in dollars still it’s worth practising owing to the huge trade losses faced by these nations when they trade in dollars.
4 . A BOON FOR DEVELOPING NATIONS
Due to globalization weak economic conditions of any single country affects all its trading partners. A number of sanctions have been imposed on Russia by US and EU. This can affect its trading with other member nations which in turn would be a problem for other nations too. Thus, Russia is looking forward to the BRICS bank as a great hope for stabilizing its economic conditions. In the same way, the devaluation of Yuan has made china uneasy and is giving rise to a lot of speculations about the collapse of its economy. The BRICS bank could be a supporting pillar for restoring its economic equilibrium.
Also with its first president as an Indian its can pave the way for improving India’s infrastructural conditions.
5.REDUCING DOMINANCE OF THE US OVER CYBER SECURITY SYSTEM
In the recent BRICS summit held at UFA in RUSSIA in July 2015, the Indian PM Narendra Modi raised the topic of cybersecurity threat among all the important government organisations of the world. The growing dominance of the US in this field has always been a matter of discussion in recent times. Thus this bank would also focus on safeguarding the official and most critical information about all the important trade facts and internal matters of top government offices of its member countries.
6. DIFFERENT FROM THE IMF AND THE WORLD BANK
For more than five decades the International monetary fund and the world bank have been the two major international financial organisations for funding is member nations .The IMF has 188 countries as its member nations and is a US based organisation thus its mandatory to deal in dollars which puts a great burden on developing nations. The world bank being a European organisation again has monopoly over policy decisions . The G-7 nations always have the monopoly over international funds and their lending systems.
The BRICS bank on the other hand has only five members but is more advantageous to its member nations or other developing nations since it gives equal rights and to all members and other developing nations with regard to lending of funds.
7.ONE PROBLEM ONE SOLUTION
All the developing nations of the world are primarily facing the same problem of economic instability, fighting poverty ,unemployment n weak infrastructure facilities. This bank therefore aims at minimising these basic problems being faced by the member countries by providing necessary funds to all the developing nations. Though being alone it is not possible for a single bank to fund all the nations but in collaboration with other private financial institutions it can at least minimise these problems.
Thus ,the BRICS BANK can be seen as a supporting system for all the developing nations of the world and hugely to its member nations .