New Development Bank
|Abbreviation||NDB, or NDB BRICS|
July 2014 (Treaty signed)|
July 2015 (Treaty in force)
|Type||International Financial Institution|
The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa). According to the Agreement on the NDB, "the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments." Moreover, the NDB "shall cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank."
The initial authorized capital of the bank is $100 bln divided into 1 mln shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 bln divided into paid-in shares ($10 bln) and callable shares ($40 bln). The initial subscribed capital of the bank was equally distributed among the founding members. The Agreement on the NDB specifies that the voting power of each member will be equal to the number of its subscribed shares in the capital stock of the bank.
The idea for setting up the bank was proposed by India at the 4th BRICS summit in 2012 held in Delhi. The creation of a new development bank was the main theme of the meeting. BRICS leaders agreed to set up a Development bank at the 5th BRICS summit held in Durban, South Africa on 27 March 2013. According to Devex, the name of the bank is believed to have been proposed by Indian Prime Minister Narendra Modi.
On 15 July 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the BRICS states signed the Agreement on the New Development Bank, which makes provisions for the legal basis of the bank. In a separate agreement, a reserve currency pool worth $100 bln was set up by BRICS nations. Documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also signed.
On 11 May 2015, K. V. Kamath was appointed as the President of the bank.
The 7th BRICS summit in July 2015 marked the entry into force of the Agreement on the New Development Bank.
On 27 February 2016, the NDB signed Headquarters Agreement with the Government of the P.R.C. and the Memorandum of Understanding with Shanghai Municipal People’s Government concerning the arrangements in relation to Headquarters of the bank in Shanghai. The documents were signed on the sidelines of G20 Finance Ministers and Central Bank Governors meeting in Shanghai.
On 19 July 2016, the NDB reported that it successfully issued bank's first green financial bond with issue size of RMB 3 billion, tenor of 5 years in the China interbank bond market.
On 20 July 2016, the first annual meeting of the NDB Board of Governors was held in Shanghai. The participants of the meeting discussed Bank's future work and development and gave a positive assessment to the bank's work. At the meeting, the first green financial bond issuance in Renminbi was highlighted as a milestone event for the NDB. It was decided that the next annual meeting of the board will be held in India in 2017.
Structure and Objectives
According to the Articles of Agreement, the main organs of the bank are:
- Board of Governors
- Board of Directors
- President and Vice-Presidents
As of August 2016, the members of NDB Board of Governors are as follows:
- Henrique de Campos Meirelles, Brazil's Minister of Finance
- Anton Siluanov, Russia's Minister of Finance
- Arun Jaitley, Minister of Finance, Corporate Affairs and Information & Broadcasting - Chairman of the Board of Governors
- Lou Jiwei, China's Minister of Finance - Vice-Chairman of the Board of Governors
- Pravin Jamnadas Gordhan, South Africa's Minister of Finance
K. V. Kamath, from India, is the first elected president of the NDB.
The bank's primary focus of lending will be infrastructure and sustained development projects with authorized lending of up to $34 bln annually. The bank will have starting capital of $50 bln, with capital increased to $100 bln over time. Brazil, Russia, India, China and South Africa will initially contribute $10 bln each to bring the total to $50 bln. Each member cannot increase its share of capital without all other four members agreeing. This was a primary requirement of India. The bank will allow new members to join but the BRICS capital share cannot fall below 55%.
The bank aims to contribute to development plans established nationally through projects that are socially, environmentally and economically sustainable. Taking this into account, the main objectives of the NDB can be summarized as follows:
- Promote infrastructure and sustainable development projects with a significant development impact in member countries.
- Establish an extensive network of global partnerships with other multilateral development institutions and national development banks.
- Build a balanced project portfolio giving a proper respect to their geographic location, financing requirements and other factors.
The Agreement on the New Development Bank entered into force in July 2015, with the ratification of all five states that have signed it. The five founding members of the Bank include Brazil, Russia, India, China and South Africa.
Bank's Articles of Agreement specify that all members of the United Nations could be members of the bank, however the share of the BRICS nations can never be less than 55% of voting power.
According to the NDB vice-president Zhu Xian, it is very likely that we will see new members joining the bank in 2017 or 2018. He noted that the expansion of membership is unlikely in 2016, as it takes time to go through procedures and discussions with interested countries.
According to Articles of Agreement of the New Development Bank, the initial authorized capital of the bank is divided into 1 mln shares, having a par value of $100,000. The value of one share is also the minimum amount to be subscribed for participation by a single country. Attachment 1 to this document states that each founding member of the bank will initially subscribe 100,000 shares, in a total of $10 bln, of which 20,000 shares correspond to paid-in capital, in a total of $2 bln and 80,000 shares correspond to callable capital, in a total of $8 bln.
The current distribution of shares between NDB member countries is presented in the following table.
|Country|| Number of|
(% of Total)
| Voting Rights|
(% of Total)
| Authorised Capital|
The BRICS New Development Bank is planning to give a priority to projects aimed at developing renewable energy sources. As it was stated by the NDB Vice President, the Bank wants to cooperate with other institutions in accelerating ‘green’ financing expansion and promoting environment protection. He also pointed out that the NDB is planning to finance one project from each member state with the money raised via its first bond issue.
The NDB has expressed interest in funding projects that conform to high environmental standards, including those in the field of infrastructure, such as energy, railways and highways in the future. At the same time, according to K. V. Kamath, the President of the NDB, one of the key strategies of the bank will be financing profitable projects (bankable) with return on capital. The NDB wants "to fund projects that are creative and bring benefits to the local people and environment", said Vice President Zhu Xian.
In 2016, the NDB Board of Directors approved loans for 7 projects in all members of the bank for the total amount of over USD 1.5 bln.
|Country||Loan Amount||Sov. / Non-sov.||Borrower||Guarantor||End-user / Onlendee||Modality||Target Sector||Impact|
|Brazil||USD 300 mln||Non-sovereign||BNDES||-||Sub-projects|| - National financial intermediary
- Two step loan
(wind, solar etc)
| - 600 MW renewable energy
- Avoided 1 mln t CO2/year
|Russia||USD 100 mln||Non-sovereign||EDB / IIB||-|| - Nord Hydro-Bely Porog
- Other subprojects
| - National financial intermediary
- Two step loan
| - Renewable energy (hydropower)
- Green energy
| - 49.8 MW renewable energy
- Avoided 48 000 t CO2/year
|India||USD 250 mln||Sovereign guaranteed||Canara Bank||Government of India||Sub-projects|| - Sovereign guaranteed
- 3 transactions
(wind, solar etc)
| - 500 MW renewable energy
- Avoided 815 000 t CO2/year
|India||USD 350 mln||Sovereign||Government of India||-||Government of Madhya Pradesh||Sovereign Project Finance Facility||Upgrading Major District Roads||- About 1,500 km of MDRs will be upgraded|
|China||RMB 525 mln
(USD 81 mln)
|Sovereign||PRC Government||-||Shanghai Lingang Hongbo New Energy Development Co. Ltd.||Sovereign project loan||Renewable energy
(solar roof-top PV)
| - 100 MW solar energy
- Avoided 73 000 t CO2/year
|China||RMB 2 bln (USD 298 min)||Sovereign||PRC Government||-||Fujian Investment and Development Group||Project Loan||Renewable energy (wind power)|| - 250 MW wind energy
- avoided 869 900 t CO2/year
|South Africa||USD 180 mln||Sovereign guaranteed||ESKOM||Government of RSA||ESKOM||Sovereign guaranteed project loan||Renewable energy (transmission)|| - 670 MW renewable energy evacuated (transmitted)
- Avoided 1,3 mln t CO2/year
Source: NDB Handout materials, Press Release of the NDB (22 November 2016)
In March 2016, the NDB announced that it will do a bond issue in China to raise funding domestically on the Chinese market. The bond issue is likely to happen in the second quarter of the year 2016, said the NDB Vice President Leslie Maasdorp. He added the bank is starting to finalize the exact size of this bond issue.
On 18 July 2016 the NDB successfully issued its first green financial bond with issue size of RMB 3 billion, tenor of 5 years in China onshore interbank bond market. The bond's nominal interest rate is 3.07%. The bank became the first international financial institution that issued a green financial bond in the China onshore bond market. The proceeds of the bond will be used for infrastructure and sustainable development projects in the member countries.
Relations With Other Institutions
The Articles of Agreement of the bank say that the NDB was established to complement the existing efforts of multilateral and regional financial institutions for global growth and development. Moreover, the NDB is authorized by its founders to cooperate within its mandate with other international organizations, as well as national entities (public or private), in particular with international financial institutions and national development banks.
Asian Development Bank
In July 2016, the NDB signed with Asian Development Bank (ADB) a memorandum of understanding on strategic cooperation. Two institutions expressed willingness to work together through co-financing and knowledge exchanges in areas including sustainable development projects in renewable energy, energy efficiency, clean transportation, sustainable water management, and sewage treatment.
Asian Infrastructure Investment Bank
Although some analysts hypothesize that Asian Infrastructure Investment Bank (AIIB) and the NDB would compete with one another, currently there is no evidence of competition among theses institutions.
Talking about the relations with AIIB, officials from the NDB's member-states point out the difference in the member-states of the NDB and AIIB as well as a potential to complement in working together to meet development and infrastructural needs.
According to a representative of the Bank's management, the NDB and AIIB are sister institutions in many respects. These two banks have complimentary mandates and different geographic focuses, with the NDB being more focused on BRICS countries. At the same time, there is a certain overlapping between mandates of the NDB and the AIIB, as both of them are aimed at developing infrastructure and pay a special attention to sustainable development. However, due to the fact that current financing and investment patterns are inadequate in meeting investment needs, there is "space for newcomers", he said.
According to media reports, other multilateral development institutions, including the World Bank Group (WBG), have expressed an intention to work together with the NDB.
In July 2014, Nobel Prize winning economist Joseph Stiglitz said the NDB marks a "fundamental change in global economic and political power." In his opinion, "The existing institutions just don’t have enough resources."
Chinese Premier Li Keqiang called the opening of the NDB an "important step forward" in cooperation among BRICS countries. "This is great progress in financial cooperation among developing countries and emerging economies, as well as a helpful supplement to the global financial system," Li Keqiang said at a meeting with K. V. Kamath in Beijing in July, 2015.
China Finance Minister Lou Jiwei said that the establishment of the NDB and the Beijing-led AIIB would encourage existing multilateral institutions to do better. At a news conference at the conclusion of the G20 meeting of finance ministers and central bank governors in Shanghai he added that the New Development Bank could help drive aggregate global demand.
8 July 2015, VTB CEO Andrey Kostin said that the NDB is "important because it’s a first institution created by the BRICS countries." "Actually we are talking about the institutionalization of the BRICS process, and that’s quite important I think. It’s a permanent working instrument which will be working every day and which will be in the heart of BRICS cooperation," he added.
According to Reserve Bank of India governor Raghuram Rajan, the NDB "Is a co-operative effort between all BRICS countries." "We have already reached contingency reserve agreement (CRA). This is second. Let’s see how it develops. Lots of hopes embedded in it for greater cooperation (among the) BRICS countries,” he told reporters in February 2016.
Logo and Identity
The logo of the New Development Bank borrows from the mathematical concept of a Mobius strip that symbolizes the idea of continuous transformation. Its nature is not to disrupt but drive change in the existing system from within.
The logo consists of a triangle in motion at one end signifying balanced evolution. The other end, moving in the opposite direction, is a propeller that represents speed and dynamism. These two entities are held together by a wireframe, the skeletal basic of infrastructure. The logo is rendered in gradient of green that symbolizes sustainability. This constant motion symbolizes the values that the bank strives to live by – agility, innovation and continuous transformation.
- BRICS Contingent Reserve Arrangement
- Asian Infrastructure Investment Bank
- One Belt, One Road initiative
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