Fortaleza: In a major victory for India, the BRICS Summit Tuesday night decided to establish the new development bank with an initial authorised capital of USD 100 billion for which the initial subscribed capital will be equally shared by the founding members, a point New Delhi emphasised to prevent by domination by anyone of the members.
The agreement on establishing the bank and a contingency reserve arrangement with an initial size of 100 billion dollars came at a Summit meeting of the five-nation grouping in which Prime Minister Narendra Modi launched his first multilateral engagement with global leaders.
The bank will have an initial authorised capital of USD 100 billion. The initial subscribed capital shall be of USD 50 billion to be equally shared by the founding-members.
China won the race for getting the bank's headquarters in Shanghai even as India also made a pitch for its location in New Delhi.
India will be the first President of the bank while the first chair of the Board of Governors will be from Russia.
The new development bank's Africa regional centre will be established in South Africa and currently with the headquarters.
"We direct our Finance Ministers to work out the modalities for its operationalisation," the leaders said in the Fortaleza Declaration adopted at the Summit.
India's insistence on the equal sharing of the initial subscribed capital was based on the premise that BRICS bank should not fall into the practices of the Bretton Woods institutions like the IMF and the World Bank dominated by the United States.
Hailing the establishment of the bank and the CRA, Modi said in the plenary session that the bank would now benefit not only the member-nations but also the developing world.
The two institutions would now be a new instrument of safeguarding the economic stability in the context of the great international financial volatility.
He said there was a great need for reforms of the UN Security Council and international financial institutions to reflect the ground realities and to create a new financial architecture.
Noting that it is his first BRICS Summit, Modi said he looks forward to working with the leaders and building from personal bonds in the days to come.
He said BRICS entered the second cycle of Summits today at a time when instabilty is growing in many regions.
For a climate of peace and stability, it calls for newer levels of cooperation, he said.
"I believe for the first time an institution like BRICS brings together a group of nations on the basis of future potential rather than existing prosperity. The very idea is forward-looking. BRICS must provide a united, clear basis for a peaceful and stable world", the Prime Minister said.
Modi said that along with the reform of the UNSC and internataional financial organizatgions, the WTO regime should also be reformed so that an open trading regime is necessary for a strong global trading arrangement that must address the aspirations of the developing world.
First Published: Wednesday, July 16, 2014, 00:10