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The Union Cabinet, on Wednesday, approved establishment of the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA) to be jointly set up by Brazil, Russia, India, China and South Africa.
The development bank, with an initial capital of $ 100 billion, will help all five countries to raise and avail resources for their infrastructure and sustainable development projects, an official release said.
India will hold the Presidency of the bank for the first six years. The NDB will be based in Shanghai, China.
The BRICS group had decided last year to create a development bank which would also help them to cope with economic crises in the future.
“The BRICS CRA proposes to provide short-term liquidity support to the members through currency swaps to help mitigating balance of payment crisis situation, in case such a situation arises,” the release said.
The CRA will enter into force and the NDB will begin operations only after all member countries deposit their instruments of ratification with Brazil.
Central Banks of the member countries will also have to finalise an Inter-Central Bank Agreement containing the operational details of swap transactions and the Standing Committee's Operational Procedures before the arrangement can be operational. So far, infrastructure financing in India has been done from two public sources: government and existing multilateral development banks. These have been supplemented by private sector contributions through Public-Private Partnership projects.
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