India to contribute $18 billion to BRICS forex reserves pool
India will contribute $18 billion to the 100 billion dollar foreign-exchange reserves pool that is currently being established by the BRICS group in order to help member nations "in case of any problems with dollar liquidity."Updated: Jul 08, 2015 16:32 IST
India will contribute $18 billion to the 100 billion dollar foreign-exchange reserves pool that is currently being established by the BRICS group in order to help member nations "in case of any problems with dollar liquidity."
Brazil, Russia, India, China and South Africa have signed an agreement to set up the USD 100 billion pool, with maximum USD 41 billion coming from China.
India's contribution of USD 18 billion to the Pool will be same as that of Brazil and Russia. South Africa would chip in USD 5 billion.
"The central banks of Brazil, Russia, India, China and South Africa have signed Operational Agreement on July 7, 2015 in Moscow. The Agreement outlines the terms of mutual support for member states in the framework of the Agreement on BRICS Pool of Conventional Currency Reserves," the Russian Central Bank said in a statement.
The fund will be an "insurance instrument" that members nations could draw on if they experience problems with their balance of payments. The Pool will go into force on July 30.
The Operational Agreement details the working procedures of the Pool to be observed by BRICS central banks, and defines their rights and obligations.
"The Pool is tasked to ensure mutual provision of US dollars by the central banks of BRICS members in case of any problems with dollar liquidity. Thus, this new insurance network is designed to maintain financial stability of its member states," the statement said.
The Agreement on setting BRICS Pool of Conventional Currency Reserves was signed on July 15, 2014 at the summit in Fortaleza (Brazil).
The agreement was signed in Moscow after a meeting of the Finance Ministers and heads of the central banks of the BRICS countries.The Pool would help BRICS members to maintain financial stability in case of volatility in dollar exchange rate.
India's foreign exchange reserves dipped by a marginal USD 237.5 million, to USD 355.221 billion, in the week to June 26 on account of slight decline in a key component, the Reserve Bank of India data showed.
The agreement on the insurance pool comes ahead of the two-day Summit of the BRICS leaders in the Russian city of Ufa. The Summit could look at the possibility of starting credit facility in local currency by the BRICS Bank.
The first head of the Bank is noted Indian banker K V Kamath.
The BRICS nations account for nearly USD 16 trillion in GDP and 40% of the world's population.