India and the AIIB share a relationship in which India is a founding member, the second-largest shareholder and one of the largest borrowers of the Asian Infrastructure Investment Bank (AIIB), a multilateral development bank headquartered in Beijing that began operations in 2016. The bank lends to governments and private projects for infrastructure such as power, transport, urban development and water, and India has used its funds extensively for metro rail, roads, energy and pandemic response.
The relationship is notable because the AIIB was proposed by China, a country with which India has a complicated political and strategic relationship, yet India has worked within the institution as a major, constructive stakeholder. This explainer covers how the AIIB was created, how it is governed, how India participates, the kinds of projects India has financed, and how the bank sits alongside other development banks.
| Quick Facts: India and the Asian Infrastructure Investment Bank (AIIB) | |
|---|---|
| Proposed by | China (announced by President Xi Jinping in October 2013) |
| Articles of Agreement signed | 29 June 2015, in Beijing, by 50 founding members |
| Commenced operations | January 2016 |
| Headquarters | Beijing, China |
| Authorised capital | US$100 billion at inception |
| India’s status | Founding member and second-largest shareholder after China |
| India’s representation | Handled by the Department of Economic Affairs, Ministry of Finance |
| Lending areas | Energy, transport, urban infrastructure, water, digital and social infrastructure |
| Governance style | Non-resident board of directors; supermajority required for key decisions |
Key Takeaways
- The Asian Infrastructure Investment Bank was proposed by China in 2013, established through Articles of Agreement signed in Beijing in June 2015, and opened for business in January 2016.
- India was one of the 50 founding members of the AIIB and holds the second-largest shareholding in the bank after China.
- India has been among the largest borrowers from the AIIB, financing projects in metro rail, roads, power, transmission and urban development.
- AIIB lending to India is usually carried out through co-financing with other multilateral lenders such as the World Bank and the Asian Development Bank.
- The AIIB requires a supermajority of voting power for certain major decisions, which gives China a practical veto over those matters because of its large voting share.
- India participates in the AIIB while also remaining a member of the World Bank, the Asian Development Bank and the New Development Bank, so it maintains a diversified portfolio of development partners.
What is the Asian Infrastructure Investment Bank?
The Asian Infrastructure Investment Bank is a multilateral development bank that provides financing for infrastructure and other productive sectors, mainly in Asia, and operates under a treaty-based Articles of Agreement signed in 2015. It is headquartered in Beijing and has grown to include more than one hundred approved members from Asia and from other regions.
The bank describes its approach as “lean, clean and green”, meaning a small professional staff, high ethical standards and a focus on sustainable infrastructure. Its stated mission is to finance the infrastructure needed for economic growth and connectivity, and it positions itself as a complement to existing multilateral development banks and not as a replacement.
Unlike the Belt and Road Initiative, which relies mainly on Chinese policy banks and state firms, the AIIB is a multilateral institution with its own charter, shareholders and procurement and safeguard policies. Projects it finances are open to competitive bidding from firms of member countries.
How and when was the AIIB established?
The AIIB was established after China proposed it in October 2013, fifty founding members signed its Articles of Agreement in Beijing on 29 June 2015, and the bank started operations in January 2016. The Articles came into force at the end of 2015 once enough members had ratified them and met the capital requirements.
The creation of the bank came against a background of a large infrastructure financing gap in Asia and calls for reform of the voting power in older institutions. Many countries, including several that are allies of the United States, decided to join as founding members despite initial reservations expressed by some governments about governance standards. Over time, the bank built a reputation for professional management and regular cooperation with other lenders.
Key milestones
| Year | Milestone |
|---|---|
| 2013 | China proposes the bank |
| 2015 | Articles of Agreement signed by 50 founding members; entry into force in December |
| 2016 | Inaugural meeting and start of lending operations |
| 2018 | Annual meeting held in Mumbai, India |
| 2020 | Emergency lending for COVID-19 responses, including support for India |
What is India’s role and shareholding in the AIIB?
India is a founding member of the AIIB and holds the second-largest shareholding after China, with a capital share of roughly one-twelfth of the total and a voting share of a similar magnitude. India’s membership is managed by the Ministry of Finance, and India has a seat in the bank’s Board of Governors and representation on the Board of Directors.
China holds the largest share, with nearly three-tenths of the capital and a little over a quarter of the voting power. India comes next, followed by Russia and Germany among the largest shareholders. The exact percentages have changed slightly as new members joined, but the order of the top positions has remained stable.
India’s position gives it influence over the bank’s strategy, policies and approvals. It also gives India an opportunity to promote infrastructure investments in South Asia and to ensure that the bank follows international standards.
How is the AIIB governed?
The AIIB is governed by a Board of Governors, a non-resident Board of Directors and a management team led by a President elected by the governors. Each member appoints a governor, and the governors hold the highest decision-making power, delegating much of the oversight to the directors.
- Board of Governors: the supreme body, with one governor and one alternate for each member, meeting at least annually.
- Board of Directors: a non-resident board with twelve directors elected by constituencies of members, which reviews and approves projects.
- President: the chief executive and legal representative, elected for a term of five years, with Jin Liqun serving as the first President.
- International Advisory Panel: a group of experts that advises management on strategy and policy.
Voting power is based on each member’s shareholding, with a portion distributed equally among members to protect smaller states. Certain important decisions, such as changes to the capital stock or the election of the President, require a supermajority of 75 percent of voting power. Because China’s share is above one quarter, it can block those decisions, although it does not control ordinary project approvals.
How does the AIIB finance infrastructure?
The AIIB finances infrastructure through loans, guarantees, equity investments and other instruments offered to sovereign governments and to private sector projects. Its priority areas include sustainable energy, transport, water and sanitation, urban development, digital infrastructure and climate-related investment.
Financing can be sovereign, meaning lent to or guaranteed by a government, or non-sovereign, meaning lent to a private or public company without a government guarantee. In India, much of the AIIB’s lending has gone to state governments, public agencies and public-sector companies, although it has also taken part in private-sector and fund investments.
The bank funds its lending through paid-in capital, borrowing in international bond markets and retained earnings. It has a high credit rating, which allows it to borrow at low cost and pass the benefit on to its borrowers. The bank also has environmental and social frameworks that require assessment and public disclosure for its projects.
Why is India one of the largest borrowers from the AIIB?
India is one of the largest borrowers from the AIIB because its large and growing infrastructure needs, its strong creditworthiness and its capacity to implement projects make it a natural client. Urbanisation, transport networks, electricity systems and water supply require substantial long-term financing that complements domestic funds.
The AIIB has financed Indian projects in several sectors. Some of the best-known examples include metro rail lines and regional rapid transit in major cities, rural roads in Gujarat, power distribution and transmission strengthening in Andhra Pradesh, and urban infrastructure programmes. The bank has also provided emergency financing to help India respond to the COVID-19 pandemic.
Examples of AIIB-supported areas in India
- Urban transport: metro rail projects such as the Bengaluru Metro and the Delhi-Meerut Regional Rapid Transit System, often co-financed with other lenders.
- Energy: power transmission and distribution strengthening, including a programme for reliable round-the-clock electricity in Andhra Pradesh.
- Rural connectivity: road building and upgrading in Gujarat’s rural areas.
- Health and emergency response: pandemic-related financing in 2020.
- Investment funds: participation in infrastructure investment platforms such as the National Investment and Infrastructure Fund.
How does the AIIB relate to other development banks?
The AIIB works alongside the World Bank, the Asian Development Bank (ADB) and the New Development Bank (NDB), often co-financing projects and following shared standards on procurement and safeguards. It is designed to complement these institutions rather than to replace them.
| Institution | Established | Headquarters | India’s position |
|---|---|---|---|
| World Bank (IBRD and IDA) | 1944 | Washington, D.C. | Founding member of the International Bank for Reconstruction and Development; major borrower |
| Asian Development Bank (ADB) | 1966 | Manila | Member since 1966; one of the larger shareholders and borrowers |
| Asian Infrastructure Investment Bank (AIIB) | 2016 | Beijing | Founding member; second-largest shareholder |
| New Development Bank (NDB) | 2015 | Shanghai | Founding member as part of BRICS |
The AIIB’s relationship with the older banks is practical. Many of its early projects were co-financed with the World Bank or ADB, which allowed it to use existing project preparation and monitoring systems. Over time the AIIB has increased the share of projects it develops independently.
How does India balance its political concerns with AIIB membership?
India balances its political concerns with AIIB membership by treating the bank as a rules-based multilateral institution that is separate from China’s bilateral initiatives, while continuing to criticise unilateral connectivity projects that affect its sovereignty. India has declined to join the Belt and Road Initiative, objecting in particular to the China-Pakistan Economic Corridor, which passes through territory India claims.
The AIIB is different in structure. It has a multinational shareholder base, a charter with governance rules, and a Board that includes directors from many countries. India uses its position to push for high standards, transparent procurement and attention to sustainable development. Funding for projects in territory under dispute has been a sensitive issue, and the bank’s policies indicate that it avoids financing projects in disputed areas without consent from the concerned parties.
The relationship has continued even in periods of border tension between India and China. Indian policies restricting some Chinese investment and applications have not generally been applied to multilateral institutions in which India holds a shareholder position, which shows that the government treats the AIIB as a multilateral partner.
What are the benefits and criticisms of the AIIB for India?
The main benefits of the AIIB for India are access to long-term, relatively low-cost infrastructure finance, additional options beyond older development banks and a stronger voice in a regional institution, while the main criticisms concern governance concentration and strategic dependence. Both views are part of the debate on the bank’s role.
Benefits
- Financing capacity: additional resources for India’s large infrastructure programme.
- Diversification: a wider set of lenders, which reduces reliance on a single institution.
- Influence: a senior shareholding that gives India a significant say in the bank’s direction.
- Project quality: co-financing arrangements that bring in international safeguards and project management standards.
Criticisms and cautions
- China’s dominant share: the veto-like effect of China’s voting power on key decisions.
- Geopolitical sensitivity: concern over whether bank lending might support wider Chinese strategic aims.
- Environmental standards: debate over whether safeguards are as strong as those of older institutions, particularly in energy projects.
Evidence so far suggests that the AIIB has operated as a conventional multilateral lender, with professional management and a record of working with other development banks. The debate nevertheless continues, and it is likely to influence how India uses its stake in future.
Bottom Line
India and the AIIB have developed a pragmatic partnership in which India contributes capital, takes a leading role in governance and borrows heavily for infrastructure. The relationship shows how India can engage with a China-initiated institution on multilateral terms while remaining cautious about unilateral Chinese projects. The AIIB is one of several development partners for India, alongside the World Bank, the ADB and the NDB.
Frequently Asked Questions
Is India a member of the AIIB?
Yes, India is a founding member of the Asian Infrastructure Investment Bank and the second-largest shareholder after China. It signed the Articles of Agreement in 2015. The Department of Economic Affairs in the Ministry of Finance manages India’s membership.
Who proposed the AIIB and where is it headquartered?
China proposed the AIIB in 2013, and the bank is headquartered in Beijing. Its Articles of Agreement were signed by 50 founding members in June 2015, and it started lending in January 2016. Its first President was Jin Liqun.
Why is India one of the largest borrowers from the AIIB?
India is one of the largest borrowers because it has large infrastructure needs and the capacity to implement and repay projects. AIIB money has supported metro rail, rural roads, power transmission and pandemic response. India often borrows alongside the World Bank and the Asian Development Bank.
Does China control the AIIB?
China holds the largest share of capital and voting power, which gives it a blocking position on decisions that need a 75 percent supermajority. However, ordinary lending decisions are made by a non-resident board of directors representing many members. Management and operations follow multilateral rules rather than bilateral Chinese policy.
How is the AIIB different from the World Bank and the Asian Development Bank?
The AIIB is a newer bank, established in 2016 and focused on infrastructure, with a small professional staff and a non-resident board. The World Bank dates from 1944 and the Asian Development Bank from 1966, and both have broader mandates and larger operations. The AIIB frequently co-finances projects with them.
Why did India join the AIIB but not the Belt and Road Initiative?
India joined the AIIB because it is a multilateral bank with shared governance and international standards, whereas the Belt and Road Initiative is a Chinese-led programme. India objects to the China-Pakistan Economic Corridor, which is part of that initiative and passes through territory India claims. India has therefore treated the two differently.
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