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Leaders of the five BRICS nations (Brazil, Russia, India, China and South Africa), on Tuesday agreed to create a new multilateral development bank to fund infrastructure investment needs. The bank’s launch, along with the setting up of a $100-billion crisis fund to contain currency volatility, are seen as counterweights to the US -dominated financial institutions such as the IMF and World Bank. A Primer:
What is BRICS bank?
A development bank that the world’s leading emerging economies, the Brics grouping, has decided to set up.
How does it differ fromcommercial banks?
It is a multilateral development finance institution that will engage in public sector lending for development purposes. The clients are its member governments, who are also its shareholders.
What is its mandate?
The bank will fund infrastructure projects in developing nations.
What is the contingent reserve arrangement (CRA)?
The five Brics countries have also decided to set up a $100-billion currency reserves pool to help countries forestall short-term liquidity pressures.
How will the CRA be funded?
China, the region’s largest economy, will contribute to the largest share of $41 billion. Russia, India and Brazil will contribute $18 billion each, while South Africa will contribute $5 billion.
Where will the bank be based?
It will be based in Shanghai
How will it be governed?
India will preside over its operations for the first five years, followed by Brazil and then Russia.
What will the bank be called?
New Development Bank
How will it be funded?
The bank will begin with $50 billion divided equally between its five founder members. Another $50 billion is expected to come from other members who join in
When will it start lending?
Can others join as members?
The bank’s membership will be open to other countries, under the condition that the share of Brics countries cannot fall below 55%
What are the financial resources of International Monetary Fund?
The IMF, conceived in July 1944, oversees the international monetary system. It provides short-to-medium term credits and supplements currency reserves of members through the allocation of special drawing rights. It draws its financial resources principally from the quota subscriptions of members.
What about the World Bank?
The World Bank was conceived in July 1944 along with the IMF. It seeks to promote the economic development of the world’s poorer countries, assists developing countries through long-term financing, provides special financial assistance to the poorest developing countries whose annual per capita GDP is less than $865 among others.
What is the Asian Development Bank or ADB?
ADB was conceived amid the post-war rehabilitation efforts of the early 1960s to foster economic growth in Asia. The ADB opened on December 19, 1966, with 31 members. It helps developing member countries tackle poverty by providing loans, technical assistance and grants for development activities.