India and the New Development Bank (BRICS Bank) Explained

The New Development Bank (NDB), also called the BRICS Bank, is a multilateral development bank founded by Brazil, Russia, India, China and South Africa in 2015 to finance infrastructure and sustainable development projects in emerging markets and developing countries. Headquartered in Shanghai, China, the New Development Bank was set up so that large developing economies could pool capital and lend to one another and to other developing countries, and India’s K. V. Kamath served as its first president.

For India, the New Development Bank is both a lender and a shareholder with an equal say. India borrows from the bank for roads, urban transport, water, clean energy and other projects, and it takes part in running the institution as one of its five founders. This explainer covers how the bank was created, how it is governed, how it lends, what it has done in India, how it has expanded and how it compares with older institutions such as the World Bank and the Asian Infrastructure Investment Bank.

Quick Facts

Key Takeaways

• The New Development Bank is a multilateral development bank created by the five BRICS countries, with its headquarters in Shanghai and operations starting in 2015.
• The New Development Bank had K. V. Kamath of India as its first president, and the presidency rotates among the founding members.
• The five founding members of the New Development Bank hold equal shares, which means that no single country, including China, controls decisions on its own.
• The New Development Bank finances infrastructure and sustainable development, and it aims to lend a meaningful share of its portfolio in the local currencies of borrowing countries.
• The New Development Bank has opened regional offices, including an India regional office, and it has admitted new members beyond the original BRICS five.
• The New Development Bank complements rather than replaces the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank, and it gives developing countries an additional source of long-term finance.

What Is the New Development Bank?

The New Development Bank is an international financial institution owned by member countries that mobilises resources for infrastructure and sustainable development projects in emerging market economies and developing countries. Its articles of agreement describe it as a bank that supports public or private projects through loans, guarantees, equity participation and other financial instruments.

The bank is often called the BRICS Bank because it was created by the BRICS grouping, which takes its name from the first letters of Brazil, Russia, India, China and South Africa. It is a separate legal entity with its own treaty, its own governance and its own capital, and its membership is not limited to the BRICS grouping. Members are countries, not private shareholders.

The bank also issues bonds to raise funds. It has borrowed in international markets and in domestic bond markets, including in China, and it uses these funds to lend for projects. Credit ratings from international agencies have helped it to raise money at competitive costs.

How and Why Was the New Development Bank Created?

The New Development Bank was created because the BRICS countries wanted a source of infrastructure finance that reflected the growing weight of emerging economies in the global economy and that offered an alternative to institutions in which they held limited voting power. The idea was put forward by India at the 2012 BRICS summit in New Delhi, and the leaders agreed to explore it.

The founding agreement was signed at the 2014 BRICS summit in Fortaleza, Brazil, together with an agreement on a separate Contingent Reserve Arrangement, a pool of foreign exchange reserves that members can draw on in times of balance of payments stress. The New Development Bank’s agreement entered into force in 2015, and the bank began operating from Shanghai that year.

Several reasons lay behind the decision. Developing countries face a large gap between their infrastructure needs and available long-term finance. Many emerging economies also argued that the voting shares in older institutions had not kept pace with their growing share of world output. A new bank with equal founder shares was seen as a way to address both concerns.

Key milestones

Who Runs the New Development Bank?

The New Development Bank is run by a Board of Governors, a Board of Directors and a president supported by vice-presidents, with each founding member having equal representation. The Board of Governors is the highest decision-making body, and each member country names one governor, typically a senior finance official. Governors meet annually and decide on major questions such as capital, membership and strategy.

The Board of Directors handles the day-to-day oversight of operations. It approves loans, policies and budgets, and it consists of directors nominated by the member countries. The bank’s presidency rotates among the founding members, and the first president was K. V. Kamath of India, a well-known Indian banker who had led a major private-sector bank before taking the job.

Equal shareholding explained

The founding members of the New Development Bank each subscribed an equal amount of capital and hold equal voting power. This design was deliberate. In many older institutions, voting power is tied to capital contributions, so the largest contributors dominate decisions. In the New Development Bank, the five founders each hold the same share, and the founding agreement states that the BRICS founders keep a combined majority of voting power, even as new members join.

Because voting is equal among founders, China, as the largest economy among them, does not have a controlling vote. Important decisions need broad agreement. This equal structure is a feature that India has welcomed, since it gives India the same formal weight as the larger economies in the group.

How Does the New Development Bank Lend?

The New Development Bank lends mainly for infrastructure and sustainable development projects, using long-term loans to governments, public bodies and, in some cases, private entities. Its priority areas include clean energy, transport, water and sanitation, social infrastructure, digital infrastructure and urban development.

Several features distinguish its approach:

• Infrastructure focus: The bank concentrates on long-term projects such as roads, railways, ports, power and water systems that are essential for growth.
• Sustainable development: The bank has set out strategies that emphasise environmental sustainability, climate-related finance and social inclusion.
• Local-currency lending: The bank aims to lend a considerable share of its portfolio in the local currency of borrowing countries, which protects borrowers from exchange rate risks.
• Country systems: The bank often uses a borrower’s own procurement and safeguard systems when they meet agreed standards, which can reduce delays.
• No prescriptive policy conditions: The bank positions itself as a lender that does not attach broad economic policy conditions to project loans.

The bank raises its funds through paid-in capital, callable capital and bond issuance. Callable capital is a commitment from members to provide funds if needed, and it supports the bank’s credit rating. The bank’s financing is therefore backed by the strength of its shareholders.

Why Does Local-Currency Lending Matter?

Local-currency lending matters because borrowers in developing countries often earn revenue in their own currency but repay loans in dollars, which exposes them to losses when the local currency weakens. When a development bank lends in rupees, for example, an Indian project developer can repay in the same currency in which it earns, removing the exchange rate risk.

The New Development Bank has made local-currency lending a stated objective and has issued bonds in domestic markets, including in China, to fund such loans. This approach also supports the growth of domestic bond markets in member countries. For India, it is relevant because many Indian infrastructure projects generate revenue in rupees and long-term, rupee-linked funding can improve their financial stability.

What Has the New Development Bank Done in India?

The New Development Bank has financed projects in India across transport, water, energy and social infrastructure, and India has been among its largest borrowers. The bank has supported projects such as urban rail and regional rapid transit, rural roads, water supply and irrigation, and clean energy, often working with central ministries and state governments.

In urban transport, the bank has backed metro and regional rail systems in large cities, including the regional rapid transit corridor connecting Delhi and Meerut and metro lines in Mumbai. In rural development, it has supported programmes to build and improve roads in several states. It has also lent to projects focused on water, irrigation and renewable energy.

The bank opened an India regional office to support its work in the country. The office is located at GIFT City in Gujarat, India’s International Financial Services Centre, and it serves as a local presence for project preparation, dialogue with government agencies and monitoring. A regional office helps the bank understand local needs and shortens the distance between a loan decision and project delivery.

The New Development Bank’s lending to India is usually extended to Indian government bodies or public agencies, often with a guarantee or sovereign backing, and the projects must follow the bank’s environmental and social standards as well as national laws. Exact amounts change as new loans are approved, so readers should check the bank’s own publications for current figures.

Which Countries Are Members of the New Development Bank?

The members of the New Development Bank include the five founding BRICS countries, Brazil, Russia, India, China and South Africa, and several additional countries that have joined since 2021. These include Bangladesh, the United Arab Emirates and Egypt, and the membership has continued to grow with further admissions in the following years.

The articles of agreement allow membership to be open to members of the United Nations, subject to approval by the Board of Governors. Prospective members may first be given a status that allows them to prepare before full admission. The agreement also includes a provision that the combined voting power of the BRICS founders must not fall below a defined majority, so new members cannot dilute the founders’ control below that level.

Expansion has implications for India. A larger membership enlarges the bank’s capital base and borrowing options, but it also requires careful governance so the bank remains focused on development and maintains strong credit standing. India has generally supported an orderly, consensus-based expansion that keeps the bank’s mandate clear.

How Does the New Development Bank Compare With the World Bank and AIIB?

The New Development Bank differs from the World Bank and the Asian Infrastructure Investment Bank (AIIB) in its ownership, its geographic scope and its governance, although all three finance development projects. The World Bank is the oldest and largest of the group, and the AIIB was launched in 2016 with a focus on Asian infrastructure. The New Development Bank is based on equal founder shares and aims to serve emerging economies globally.

These institutions are not rivals in a strict sense. They often co-finance projects, share expertise and operate under similar international standards. For borrowers such as India, having several multilateral lenders means more options for tenor, currency and project type.

What Are the Challenges and Criticisms of the New Development Bank?

The New Development Bank faces challenges that include building a large lending portfolio, maintaining a strong credit rating, managing a more diverse membership and operating in a complicated geopolitical environment. As a young institution, it has had to grow carefully while setting up standards and staff capacity.

• Scale: The bank’s capital and lending volumes are smaller than those of the World Bank, so its impact depends on selective project choice.
• Geopolitics: Sanctions and tensions involving member countries can affect operations. After 2022, the bank announced that it would not initiate new transactions in one founding member’s case, to protect its standing in financial markets.
• Governance in an enlarged membership: Adding members requires consensus and may slow decisions if interests differ.
• Standards: The bank must maintain high environmental, social and procurement standards to keep the confidence of bond investors and partners.
• Perception: Some observers see the bank as a rival to established institutions, while its members describe it as complementary.

The bank has responded by diversifying its funding, improving its risk management and focusing on projects with clear development benefits.

Why Does the New Development Bank Matter for India?

The New Development Bank matters for India because it offers long-term infrastructure finance, a founding voice in a multilateral institution, and a platform to cooperate with other major emerging economies. India needs very large investments in transport, power, water and urban systems over the coming decades, and no single source can meet this demand.

The bank also advances India’s wider diplomatic approach, which seeks reform of global institutions and a larger role for developing countries, while remaining engaged with existing institutions. India has remained a member of the World Bank, the Asian Development Bank and the AIIB, and it uses the New Development Bank as an added channel rather than a substitute.

The choice of an Indian banker as the first president showed how much weight India carried in the bank’s creation. Since then, India has continued to take part in its governance through its governor and director and through the rotating leadership structure.

Bottom Line

The New Development Bank is a BRICS-founded multilateral lender that has grown from a summit-level idea in 2012 into a functioning bank with a Shanghai headquarters, regional offices and an expanding membership. For India, it provides infrastructure finance, local-currency options and a founder’s seat on equal terms, and it adds to the choices available alongside the World Bank and the AIIB.

Frequently Asked Questions

What is the New Development Bank?

The New Development Bank is a multilateral development bank founded by Brazil, Russia, India, China and South Africa in 2015. It finances infrastructure and sustainable development projects in emerging markets and developing countries. It is headquartered in Shanghai and is commonly called the BRICS Bank.

Who was the first president of the New Development Bank?

The first president of the New Development Bank was K. V. Kamath of India. He is an Indian banker who had earlier led a major private-sector bank. The presidency rotates among the founding member countries.

Where is the headquarters of the New Development Bank?

The headquarters of the New Development Bank is in Shanghai, China. The bank also operates regional offices, including an Africa regional centre in Johannesburg and an India regional office at GIFT City in Gujarat.

How much does India own in the New Development Bank?

India holds an equal share with the other four founding members of the New Development Bank. Each founder subscribed the same amount of capital and has the same voting power, so no single founder has a veto or a controlling majority. Newer members hold smaller shares.

Is the New Development Bank a rival to the World Bank?

The New Development Bank is generally described as complementary to the World Bank, not a replacement for it. Both finance development projects and sometimes co-finance them. The New Development Bank differs in its equal-share governance and its focus on emerging economies.

What projects has the New Development Bank funded in India?

The New Development Bank has funded projects in India in areas such as urban rail and metro systems, regional rapid transit, rural roads, water supply and clean energy. The loans typically go to Indian government bodies or public agencies. Current project details and amounts are published by the bank.

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