With China trying to grab control of the soon-to-be rolled out Brics development bank, India has backed a proposal where each member country will contribute $10bn each and keep $50bn as the maximum limit for the start-up capital of the new bank.
China, however, has been pushing for a start-up capital of $100bn with the suggestion of making Shanghai the bank’s headquarters. The bank is scheduled to be officially launched during the July 15-17 Brics summit in Brazil, which will be attended by Prime Minister Narendra Modi.
China also proposed to contribute more than its share to the bank, which would give Beijing greater control over its affairs. China, sources said, want more influence on the Brics bank as it sees even the Asian Development Bank as having “excessive influence of the US and its allies”.
However, officials familiar with the development said that majority of the bloc was in favour of equal contribution for an “initial capital of $50bn”.
“The matter has to be settled through consensus,” sources said. Part of the $10bn will be paid immediately and the rest of it will be callable capital-- to be made available to meet bank’s obligations.
“Membership of the bank to other countries will be decided later, however, the Brics will retain control of the bank as a whole,” said the officials.
The bank is seen as an alternative to global lending institutions such as the IMF and the World Bank. But sources said the new bank would not be modelled upon the global lending institutions where major contributors control the affairs of the banks.
Among the goals of the Brics bank is to provide funding for infrastructure projects, and create a ‘contingent reserve arrangement’ worth $100bn, which will help member countries counteract future financial shocks.
The bank was first proposed in 2012 and was approved at the Brics summit in South Africa in 2013. Sources said the summit would also take note of the US Congress not ratifying proposals to give more powers to emerging markets in the IMF.