The New Development Bank (NDB), originally known as the BRICS Development Bank, is a global development bank founded by the countries of the BRICS (Brazil, Russia, India, China, and South Africa). The leaders of BRICS signed the Agreement creating the NDB during the sixth BRICS Summit in Fortaleza (2014). It is a crucial topic in the Economy syllabus for the UPSC Examination. The article below briefs the New Development Bank followed by detailed explanations.

What is a New Development Bank?

• It is a multilateral development bank established by the BRICS countries in 2014 at the 6th BRICS Summit in Fortaleza, Brazil.
• It was established to support infrastructure and sustainable development efforts in the BRICS and other underdeveloped emerging economies, with a focus on innovation and cutting-edge technology, to accelerate growth.
• Its headquarters is in Shanghai, China.
• The NDB was granted observer status in the United Nations General Assembly in 2018, laying the groundwork for active and effective collaboration with the UN.
• Furthermore, the NDB "must work with international organizations and other financial bodies, as well as provide technical help for Bank-supported initiatives."

New Development Bank: Member Flags

History

• India suggested the establishment of the bank at the 4th BRICS meeting in Delhi in 2012.
• The meeting's major topic was the formation of a new development bank.
• At the 5th BRICS summit, held in Durban, South Africa on March 27, 2013, BRICS leaders agreed to establish a development bank.
• On February 27, 2016, the NDB signed a Headquarters Agreement with the Government of the People's Republic of China and a Memorandum of Understanding with the Shanghai Municipal People's Government regarding the Headquarters of the bank in Shanghai.

Objectives

The NDB's key objectives are to

• support member nations' development,
• encourage economic growth,
• promote competitiveness and facilitate job creation, and
• construct a knowledge-sharing platform among developing countries.
• To promote infrastructure and sustainable development initiatives in member nations that have a major development impact.
• To develop a global network of collaborations with other multilateral development banks and national development banks.

Membership

• The New Development Bank Agreement came into force in July 2015, following the official declaration of all five signatories. Brazil, Russia, India, China, and South Africa are among the Bank's five founding members.
• The bank's Articles of Agreement provide that all members of the United Nations are eligible to join, but the BRICS nations' voting power must never be less than 55 percent.
• Some experts believe that expanding the NDB's membership is critical to the bank's long-term success since it will help it increase its operation.
• The NDB intends to gradually grow membership in accordance with its General Strategy: 2017–2021, so as not to overburden its operational and decision-making capability.
• Bangladesh, the United Arab Emirates, and Uruguay joined the NDB in September 2021. Egypt was welcomed as a new member of the NDB in December 2021.

Governance

• A Board of Governors oversees the NDB. The Board is made up of the BRICS countries' finance ministers.
• The voting power of each member is determined by their shareholding in the NDB.
• At the moment, all members have equal voting rights.
• All UN members are welcome to join the Bank, but the BRICS countries can never have less than 55 percent of the voting power.
• The NDB's President is chosen from among the member countries. The remaining members are represented by four vice presidents.
• India's K. V. Kamath was the NDB's first President. Brazil's Marcos Prado Troyjo is the second and current President (since 2020).

NDB Key Areas of Operation

Key Areas of Operation

Achievements

1. Innovations

• One of the NDB's founding elements was lending in local currencies to safeguard borrowing countries from a strengthening dollar.
• Another first is that the bank recognizes borrowers' environmental and social standards as limits for compliance, while still honoring its members' rules.

2. Partnership With Other Development Banks

• It has formed alliances with major development banks, including CAF, the Latin American regional development bank, the China-led Asian Infrastructure Investment Bank, and the World Bank Group.

3. AA+ Credit Rating

• The NDB's credit rating is AA+, one level below that of major development banks like the AIIB.
• This is despite the fact that many of its members, particularly Brazil and South Africa, are experiencing domestic economic difficulties.

4. Emission of Various Bonds

• The bank has successfully issued several bonds, including 'green bonds' in 2016, and has now approved 42 projects in member nations totaling more than USD 12 billion, significantly more than the AIIB's about USD 8 billion portfolios.

Milestones Of BRICS Bank

Issues

1. Less disbursal of Loans

• Despite the fact that the bank has approved over USD 12 billion in loans, it has only disbursed less than USD 1 billion, a pitiful statistic.

2. Political Unrest

• Relations between China and India deteriorated, sanctions against Russia made lending to Russian enterprises difficult, and political instability and economic problems afflicted both South Africa and Brazil.
• Continuing to advance the interests of developing nations in the face of a difficult political climate has proven to be a difficult undertaking that member countries do not appear to have excelled at.

3. Sustainability Issues

• Despite recently approving loans for climate change mitigation and adaptation in Brazil and renewable energy in India, the NDB has labeled several environmentally problematic projects as sustainable without disclosing the criteria it uses.
• The paving of the Trans-Amazonian highway in Brazil, a very controversial road that many environmentalists blame for causing deforestation in the world's largest tropical rainforest, is one of its sustainable projects.

Major Projects funded by NDB in India

• It has pledged support for several important infrastructure projects in India, including the Mumbai Metro rail, the Delhi-Ghaziabad-Meerut Regional Rapid Transit System, and a variety of renewable energy projects.
• The NDB has authorized 14 Indian projects totaling roughly USD 4.2 billion so far.
• India announced a one-billion-dollar financing agreement with the NDB in 2020 to improve rural jobs and infrastructure.

Significance

• Environmental and social sustainability, according to the NDB, is critical to solving infrastructure gaps and sustainable development demands by national laws and regulations, as well as its purpose.
• The Bank's policies and the NDB Environmental and Social Framework combine sustainability and sound management concepts.

Conclusion

The New Development Bank plans to prioritize projects that promote the development of renewable energy sources. The Bank claimed that it aims to collaborate with other institutions to expand 'green' funding and promote environmental conservation. In the future, the NDB has expressed its interest in sponsoring projects that meet high environmental criteria, particularly those in the fields of energy, railways, and motorways.