The new development bank will be based in Shanghai, China's financial hub, will become operational in about two years. (Agencies)
India's presidency will be followed by Brazil and Russia who will have five years term each under an agreement reached after intense negotiations among the five country-grouping BRICS -Brazil, Russia, India, China and South Africa.
The announcement about the bank and a USD 100 billion Currency Reserve Arrangement (CRA) that will help countries to deal with short-term liquidity pressures, was made last night at the conclusion of the 6th BRICS Summit in Fortaleza attended by Prime Minister Narendra Modi, Presidents Vladimir Putin of Russia, Xi Jinping of China, Jacob Zuma of South Africa and Dilma Rousseff of Brazil.
Indian officials said that a period of six months had been provided for ratification of the agreement by respective Parliaments of the member-nations except in the case of India where no parliamentary endorsement was required. The member- countries have six months thereafter, to pay the first of the seven installments.
Given this time frame, the bank is expected to get going in about two years, officials said.
For CRA, China will contribute maximum at USD 41 billion followed by India, Russia, Brazil with USD 18 billion each and South Africa with USD five billion to have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation as also strengthen the global financial safety net.
Announcing the setting up of the bank, Rousseff said, "It will help contain the volatility faced by diverse economies as a result of the tapering of the United States' policy of monetary expansion."
"It is a sign of the times, which demand reform of the IMF," she told reporters at the close of the summit.”
Seen as first major achievement of the BRICS countries since they got together in 2009 to press for a bigger say in the world monetary order, created by the West and centered on the IMF and the World Bank, the setting up of the bank was prompted to seek coordinated action following an exodus of capital from emerging markets in view of the global meltdown.
Welcoming the Summit decision, Modi said, "The vision of a New Development Bank, at the Delhi Summit two years ago, has been translated into a reality, in Fortaleza. It will benefit BRICS nations. But will also support other developing nations. And, it will be rooted in our own experiences, as developing countries.”
"The BRICS Contingent Reserve Arrangement gives BRICS nations a new instrument for safeguarding their economic stability. This is an important initiative at a time of high volatility in global financial markets," he said.
The new development bank will be based in Shanghai, China's financial hub, will become operational in about two years.