New BRICS bank set to fund green energy projects

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The New Development Bank (NDB) — a multilateral lender with a focus on the Global South of the of the Brazil-Russia-India-China-South Africa(BRICS) grouping — is all set to fund more than a dozen projects this year, which will focus on renewable energy.

NDB President K.V. Kamath revealed at a media conference that the “initial focus” of the bank would on green energy projects. “I think it would be safe to say that more than half the projects both in number and value would be green and that is something that we are consciously doing and we are heartened by the response we are getting from various governments in proposing such projects,” Mr. Kamath observed. He added that the lending, which will commence in April would fund a project each from the five member grouping.

But he added that 10-15 projects are in the pipeline for the remaining part of the year. The President of the NDB, on the eve of the signing of the Headquarters Agreement with the Chinese government — a move that would officially launch the bank for operations — clarified that the lender was not geared to issue soft loans. “On the rate of interest, we will not be lending on concessional terms. That was not the intent at all. We will need to factor our own cost of funds and add an appropriate margin.” He added the “cost of funds would be determined by our actual experience in the market. So we will function as a prudent bank should.”

Mr. Kamath explained that NDB would include market borrowing to raise capital, but stressed that bonds in local currency, rather than hard currency, would be favoured. “We will be resorting to bond issues. As has been said earlier, we will raise it in local currencies where it is feasible and of course we will supplement where it is required in with dollar bond issues.”

The NDB’s initial capital has been fixed at$50 billion, and the total paid in capital would be $ 10 billion, according to a NDB press statement. Analysts point out that following the 2008 financial crisis, the NDB and the China-led Asian Infrastructure Development Bank (AIIB) — both geared towards infrastructure development in Asia and the Global South — are reshaping the global financial architecture, a field that had been monopolised by western backed International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB).With Africa also one of its focal points, a NDB is set to open an African Regional Center (ARC), headquartered in Johannesburg, by thesecond half of this year.

It would aim to develop a “project pipeline” for the continent, the press statement said. The NDB “will soon become a strong and well-respected international financial institution, playing a leading role in the changing international financial architecture,” observed Anton Silunov, Russia’s finance minister who also steered Friday’s media interaction. He pointed out that the G-20 countries had now to mainstream the role of institutions such as NDB and the AIIB in shaping the global economy.On the eve of its operational launch, the NDB has bagged a AAA institutional rating from domestic credit rating agencies in China,where the China Development Bank (CDB) and the Bank of China have been appointed as rating advisers. Standard Chartered and Goldman Sachs are in the saddle as international rating advisors.

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