The BRICS development bank, informally known, as the New Development Bank is a multilateral development bank that will fund development projects and foster economic growth in the BRICS (Brazil, Russian India, China and South Africa) countries that are the newly industrialized economics.
The bank attempts to foster sustainable development by mobilizing resources for infrastructure, supporting public as well as private projects primarily through loans, guarantees and equity participation. Moreover, it will also collaborate with international organizations and other financial entities in order to provide technical assistance for development projects. This bank somewhat poses as a threat to the US dominated funding institutions such as the World Bank and International Monetary Fund because the BRICS economies together make up 41.4% of the total world population and account for 25% of the global GDP.
The headquarters is in China and K.V. Kamath, an Indian has been appointed as the president. The inaugural Chairman of the Board of directors will be Brazilian and the inaugural chairman of the Board of Governors, Russian.
The initial startup capital is US$ 50 billion where each member contributed $10 billion for the total to sum up to US$ 50 billion; however, this reserve will be built up to be US $100 billion. The fund consists of $10 billion of "paid in capital" and $40 billion to be "paid upon request". Out of the total capital of $100 billion, China will contribute $41 billion, Brazil, Russia and India will contribute $18 billion and South Africa will give $5 billion. NDB is scheduled to start lending in 2016.
Each member cannot increase its share of capital without the consent of other four members and the capital share cannot fall below 55% when new members are allowed to join. The bank with authorized lending up to $34 billion annually for the development projects. Lastly, each participant country will be assigned one vote and none of the countries will be able to practice veto power. The bank has also invested in a Contingent Reserve Arrangement that will serve as a provision of support through liquidity and precautionary instruments in the case of global liquidity or balance of payments pressures.
The bank promises full transparency regarding its proceedings that can be validated by the fact that the bank will publish an annual report on the reviewed statements of accounts and it will also transmit a summary of financial position to its members quarterly. Further, there will be published reports available related to the Bank's purpose and functions. The bank has yet to elaborate on its own rules of procedure and specific regarding access to its documents. It will apply sound banking principles to its operation such as it will not finance any activity to a member if that member objects to the given financing, the bank will not allocate disproportionate amount of its resources to be used for benefit of any member and it will maintain diversification in all of its investments and any loan, investment, or other types of financing undertaken in the ordinary operations of the Bank will be only used for procurement in member countries of goods and service produced in member countries (except in any case in which the Board of Directors determines to permit procurement in a non-member country of goods and services produced in a non-member country in special circumstances making such procurement appropriate).
The NDB identifies environment sustainability as a crucial factor to consider when it comes to carrying out investments for infrastructural growth and guarantees climate resilience. The bank will consider projects revolving around reducing the environmental impacts of existing infrastructure, modifying existing infrastructure to changing climate and designing new infrastructure to promote environmentally sustainable lifestyles such as the use of renewable energy.