FMs to agree on setting up a BRICS Bank Tuesday

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Arvind Padmanabhan | 26 Mar, 2013
Finance ministers of Brazil, Russia, India, China and South Africa are expected to agree on setting up a BRICS bank when they meet in Durban on Tuesday on the margins of the larger Summit among the leaders.

Their recommendation to this effect may also be endorsed in principle by the leaders of the five-nation bloc a day later, where India is being led by Prime Minister Manmohan Singh, who arrived in Durban on Monday.

The proposal for a bank, with a collective foreign exchange reserve and a fund for financing developmental projects, was mooted as an alternative to the World Bank and the International Monetary Fund (IMF).

Following that, an expert committee was set up, which has since given its report. The meeting Tuesday, where Finance Minister P. Chidambaram is leading India, is expected to endorse the suggestions, sources said.

But the sources were also quick to add that the modalities were yet to be firmed up and that the process could take at least two years. Differences also remain on some key issues, notably the size of the corpus.

Also remaining for resolution is the nature and role of the bank, whether it will fund infrastructure, the private sector or government schemes, as also if the loans will call for concessional or market-driven rates.

"China wants a corpus of $100 billion. Some others are speaking about $50 billion. This has to be reconciled. Then there is voting rights and the key issue of governance. They all remain to be resolved," an official said.

The five countries are otherwise clear that there has to be an alternate mechanism to the Bretton Woods twins, comprising the World Bank and the IMF, since they are more tuned to pursuing policies set by the West.

At the same time, some countries within BRICS also do not want the bank to end up being dominated by China.