The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday gave approval for establishing the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA).
Heads of the five nation BRICS group — Brazil, Russia, India, China and South Africa — decided at their sixth summit in Fortaleza in July last year to create a development bank as well as a reserve fund to finance infrastructure projects and other sustainable development projects.
“It would also reflect the close relations among BRICS countries, while providing a powerful instrument for increasing their economic cooperation,” an official release said on Wednesday.
The $100 billion BRICS CRA would help countries deal with short-term liquidity pressures, provide mutual support and further strengthen financial stability.
The agreement will enter into force and the Bank begin operations only after all member-countries deposit their instruments of ratification with Brazil.
The release added that signing of the agreement for the establishment of the New Development Bank was expected to allow India to raise and obtain more resources for the much-needed infrastructure development, the lack of which was coming in the way of inclusiveness and growth.
Besides, the governance structure and decision-making in the Bank would be equitable unlike the existing multilateral development banks, it added.
India will hold the Presidency of the New Development Bank for the first six years. The Bank will be based in Shanghai, China’s financial hub.
