The New Development Bank set up by BRICS countries aims to lend up to USD 2 billion this year starting in about two months and the multilateral lender's first loan to India could be for a green solar energy project, its president K V Kamath said.
Shanghai: The New Development Bank set up by BRICS countries aims to lend up to USD 2 billion this year starting in about two months and the multilateral lender's first loan to India could be for a green solar energy project, its president K V Kamath said.
"For this year, if we can approve one-and-a-half to two billion dollars I will be happy. We are six months into setting up the bank. We do not want to take steps which are too fast," Kamath told PTI.
While the bank is in the process of finalising its set of loans to green projects from each of the BRICS countries -- Brazil, Russia, India, China and South Africa -- India's first loan could be for a solar project, the eminent banker hinted.
"The projects we are looking at are all green projects. They are primarily in solar. A variety of initiatives were placed before us by the government," he said.
Kamath, 68, said the bank is also looking for water projects and thereafter road projects to fund. The bank will release the first set of loans by April this year.
"These are primary steps for us. We will understand what is the larger context that is playing out in India and follow that strategy. We have no pre-set mind," he said.
About how NDB can back the 'Make in India' campaign, he said "our key role is of a catalyst. Multilateral bank can not meet the entire development effort. It is how you innovate and add value and bring together markets and other players in the baking in system make a difference," Kamath said.
"We will work with the country and what they think is priority," he said, adding that the signals suggest that the members states are articulating green projects.
"We are happy to work along on green (projects)," he said.
The NDB became fully-operational yesterday after it signed an agreement with China to place its headquarters in Shanghai, according the bank a legal status under Chinese regulations.
Established with an initial subscribed capital of USD 50 billion, the NDB has a total paid-in capital of USD 10 billion. Its founding members have already brought-in a capital of USD 1 billion as initial contribution.
Reserver Bank of India Governor Raghuram Rajan, who witnessed the signing of the headquarters agreement, termed the bank a "worthwhile venture" by the five-member bloc.
"It is a co-operative effort between all the BRICS countries. Let us see how it develops. Lots of hopes embedded in it for greater cooperation among BRICS countries," he said.
Rajan was in Shanghai to attend the meeting of G20 finance ministers and central bank governors.
India, expected to grow at 7 or 7.5 percent this year, is the only BRICS member that posted a better economic growth than other members, including China.
Asked how the NDB has planned its funding, Kamath said 1
billion paid-in capital has come in. "We are starting at debt leverage. We could safely leverage this capital to two to two and half times, which is another two and half billion dollars."
"We said we would like to raise local currencies predominantly. The first issue only will be in Chinese market because the rates of interest is very attractive. India is right up there in terms of wanting to access," he said.
"The first borrowing is happening in China. There could certainly borrowing in India as we go along and other member countries. In the course of time there will be a dollar borrowing," he said.
The bank is also sounding out other potential markets.
"We find South Africa is a deep market for the local needs. Russia interestingly is also welcome the local issue. Brazil we are yet to look at. All the member countries want to play this card of local currency financing and not relying on hard currency like dollar which later create problem," he said.
Kamath also dismissed concerns over overlapping of interests of China-backed Asia Infrastructure Investment Bank (AIIB) and the NDB -- both of which are based in China.
"The developmental needs are many. More authoritative report talks of USD 1 trillion of investment needs every year or for the next 10 years. All the developmental banks put together they are raising one-tenth of that. So the answer is to collaborate and cooperate and there is no competition really," he said.
About the NDB emerging as a rival to IMF and World Bank, he said the "key difference NDB would like to do without comparing others is speed. We want to emphasise on speed. Where as it is time consuming affair for variety of reasons. The leverage that we can bring to market place is speed, that is what we will do. It can be done by simplification of process, avoid publicity in steps, we find so many process changes that can be done," he said.
He said all the current existing multilateral banks wants to bring about change.
"For a variety of reasons they may not have been able to effect that change. I would think there will be a definitive demonstration effect (from NDB) that could lead to change," he said.