The bank will be called New Development Bank, a name suggested by Prime Minister Narendra Modi. The Bank will foster greater financial and development cooperation among the five emerging markets.
Moreover, the five-nation bloc also decided to create a $100 billion fund of currency reserves Agreement (CRA) for members to use during balance of payments crises. Out of the total initial capital of $100 billion, China will contribute $41 billion, Brazil, Russia and India would give $18 billion each, and South Africa would contribute $5 billion. The CRA and the development bank will not only benefit the member-nations but also other developing countries. The two institutions would now be a new instrument of safeguarding the economic stability in the context of the great international financial volatility.
First President from India:
The first President of the Bank will be from India for six years, followed by five-year terms for Brazil, Russia and China.
Besides, each member country has got some role to play in the deal. The first chairperson of the Board of Governors will be from Russia, while the first chairperson of the Board of Directors will be from Brazil. South Africa will establish an African regional center for the bank.
An alternative to Western-led institutions:
The long-awaited bank is a major achievement of the five nations since they got together in 2009. It will help them in having their say in the global financial order created by Western countries along with providing an alternative to financing from the International Monetary Fund (IMF) and the World Bank.
The first President of the Bank will be from India for six years
As said by Brazilian Finance Minister Guido Mantega that unlike the IMF and World Bank which are managed by Europeans and Americans, the bank is democratic in its working. Here each member country is entitled to withdraw different amounts from the joint currency reserves. According to a statement from Central Bank of Brazil, China can withdraw $20.5 billion; Brazil, Russia, and India can takeout $18 billion, and South Africa can tap $10 billion.
Will finance infrastructure projects and head off future economic crises:
The BRICS along with other emerging markets and developing countries continue to face significant financing constraints to address infrastructure gaps and sustainable development needs but with the establishment of this bank they no longer would have to depend on western financial institutions.
Besides, the bank will strengthen cooperation among BRICS countries and will supplement the efforts of multilateral and regional financial institutions for global development.
The Bank would also provide assistance to other countries suffering from the economic volatility in the wake of the United States' exit from its expansionary monetary policy.
The CRA will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.
Undoubtedly, the new bank reflects the growing influence of the BRICS, which account for almost half the world's population and about one-fifth of global economic output. But, here the five nations should ensure that the bank should not be a clone of IMF or World Bank which have dominance of United States.