What is the BRICS Development Bank?

It is confirmed now. The BRICS summit has sealed the setting up of a new development bank with the membership initially being held by the just the countries that belong to this group. This would include Brazil, Russia, China, India and South Africa.

How big is the bank?
The bank will first have an authorised capital base of $100 billion to begin with. But the subscribed capital base will be $50 billion. This means that while the bank can later expand its base up to $100 billion, right now the countries will contribute equally to build a base of $50 billion for the bank.

Who is the "more equal" partner?
Every partner has got their own share of the pie, but the headquarters of the bank will be in Shanghai, despite India lobbying hard to get it located in India. India gets the first presidency of the bank while the New Development Bank Africa Regional Centre will be established in South Africa concurrently with the headquarters. The first chair of the Board of Governors will be from Russia, while the first chair of the Board of Directors shall be from Brazil.

What will the bank do?
The New Development Bank will be lending money from the common fund to developing countries who are otherwise completely dependent on funding agencies like the International Monetary Fund (IMF) and the World Bank. This fund then can be used for long term projects or to overcome short term crises without being subjected to the Bretton Woods System. The Bretton Woods System refers to rules and regulations decided upon by the Western, industrialised world after the Second World War came to an end. It established the IMF and paved the way for the World Bank, which impose policy compulsions on developing countries while borrowing money. The New Development Bank is supposed to free the developing nations from the shackles of such compulsions. They should be able to borrow money while not compromising on their national economic policies. It does not really matter how big the fund is, but it is the first signal that emerging economies can stand together and challenge the Western regime that impeaches upon the sovereignty of the developing world.

What are the concerns?
For India, China makes up for the major concern. The currency domination of the loans have to be sorted out, because if the loans are meted out in Yuan, the Chinese currency could become the next US dollar. India would not want China to take over centre stage and turn the world into a bipolar one again. Also, China will be holding a major stake in the currency reserve fund. This will be like an emergency fund that would shield the developing countries from major crises. The devil in the bank could be, pardon the cliché, in the details. How loans are actually meted out is crucial here, as the main purpose of the bank is to keep it apolitical unlike the IMF and the World Bank. The members have to make sure that the New Development Bank is not another World Bank, and China is not just a proxy for the US.