NDB

1. Origins, mandate and international economic significance

The New Development Bank emerged from demands for greater developing-country representation in global economic governance and the large unmet need for infrastructure finance. At the 2012 BRICS Summit in New Delhi, leaders considered establishing a development bank. The founding agreement was signed at Fortaleza in 2014 and entered into force in 2015. Lending operations began in 2016, with renewable energy prominent among the first projects.

Its treaty mandate is to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries. It is intended to complement, rather than legally replace, existing multilateral and regional financial institutions. Transport networks, clean energy, urban infrastructure, water supply and environmental protection are central areas of activity.

The NDB is an example of South–South cooperation: developing countries jointly own an institution that finances development priorities. Its significance also lies in providing another source of long-term capital and supporting a more diversified international financial architecture. Nevertheless, the bank operates within international capital markets and must maintain creditworthiness, repayment discipline and access to funding.

• Institutional category: multilateral development bank, not a central bank, trade organisation or monetary union.
• Primary function: long-term development financing, rather than routine short-term foreign-exchange support.

2. Membership, capital and governance

Brazil, Russia, India, China and South Africa are the founding members. Membership is open to United Nations members under the conditions set by the bank. Bangladesh and the United Arab Emirates joined in 2021, while Egypt became a member in 2023. These examples demonstrate that NDB membership is not restricted to the original BRICS grouping. Approval of a country’s admission and completion of the formal accession process are distinct stages; membership lists should therefore be read with their reference dates.

The initial authorised capital was US$100 billion, meaning the maximum share capital permitted under the original authorisation. The initial subscribed capital was US$50 billion, or the amount initially committed by shareholders. Each founder subscribed US$10 billion, comprising US$2 billion in paid-in capital and US$8 billion in callable capital. Paid-in capital is actually contributed, whereas callable capital is a contingent commitment available under the agreement to meet specified obligations; it is not ordinary cash available for project lending.

Voting power is linked to subscribed shares. Equal initial subscriptions gave the founders equal initial voting power, unlike institutions where the largest shareholder has a dominant capital share. However, it is inaccurate to describe the NDB as permanently following one-country-one-vote. The agreement protects a collective voting share of at least 55 per cent for the founders. Non-borrowing members together may hold no more than 20 per cent, while an individual non-founding member may hold no more than 7 per cent.

The Board of Governors is the highest governing body, while the Board of Directors oversees general operations. The President is elected from a founding member on a rotational basis. India’s K. V. Kamath became the first President. The headquarters are in Shanghai, and the Indian Regional Office was established at GIFT City, Gujarat, in 2022.

3. Financing instruments and project operations

The NDB can provide loans, guarantees, equity participation and other financial instruments, and can support project preparation through technical assistance. Its operations include sovereign financing, generally involving a government borrower or guarantee, and non-sovereign financing for eligible entities without a sovereign guarantee. Governments, public enterprises and private-sector participants may therefore be involved, depending on the operation.

Resources come from shareholder capital, borrowing in capital markets and income generated by operations. The bank issues bonds and on-lends the proceeds to eligible projects. Bond issuance and project lending are different sides of its balance sheet: investors lend to the bank, while the bank finances borrowers. Appraisal examines development benefits, financial and economic viability, implementation capacity and environmental and social risks.

Local-currency financing is a distinctive priority. Borrowing in a foreign currency can expose a project earning domestic-currency revenue to exchange-rate risk. A depreciation raises the domestic-currency cost of foreign-currency debt service. Local-currency loans can reduce this mismatch for borrowers, although they do not eliminate credit risk or the bank’s funding and hedging costs. The General Strategy for 2022–2026 set a target of 30 per cent of total financing in local currencies.

The same strategy aimed to direct 40 per cent of total financing towards projects contributing to climate-change mitigation and adaptation. These are strategic targets, not automatic entitlements or proof of achieved outcomes. Financing in renminbi or another member currency also does not mean that the bank has created a common BRICS currency.

4. Relevance for India and comparison with related institutions

For India, the NDB offers an additional channel for financing infrastructure and sustainable development alongside domestic resources, the World Bank, the Asian Development Bank and other lenders. Projects involving roads, metro rail, renewable energy and water infrastructure can address connectivity gaps and improve productivity. Participation also gives India a role in shaping lending policies and governance within a major Global South institution.

The NDB must be distinguished from the Asian Infrastructure Investment Bank, headquartered in Beijing. Both are multilateral development banks, but their founding arrangements, membership and voting structures differ. The IMF, headquartered in Washington, DC, primarily supports macroeconomic and external stability through surveillance, financial assistance and capacity development; it is not primarily an infrastructure project lender.

The BRICS Contingent Reserve Arrangement was agreed alongside the NDB in 2014 but is a separate mechanism. Its initial committed resources were US$100 billion, designed to provide support against actual or potential short-term balance-of-payments pressures. Do not confuse this amount with the NDB’s initial authorised capital, which was also US$100 billion.

• NDB: infrastructure and sustainable development finance.
• Contingent Reserve Arrangement: liquidity support for short-term external pressures.
• WTO: rules governing international trade, not development lending.

5. Opportunities, limitations and examination approach

The bank can broaden financing choices, mobilise capital for underserved infrastructure and make development cooperation more responsive to borrower priorities. Its use of country systems, subject to its requirements and assessment, can strengthen national institutions. Co-financing can combine resources and expertise, while environmental and social safeguards remain necessary to address displacement, biodiversity loss and other project risks.

Its effectiveness depends on affordable funding, strong project selection and sound implementation. Infrastructure projects may face land-acquisition delays, cost overruns and weak revenue generation. Local-currency lending is constrained by the depth of domestic bond markets and the availability of suitable funding. Expanding lending too rapidly can weaken portfolio quality, while excessive caution can limit developmental additionality.

Geopolitics also affects operations. In March 2022, the NDB announced that it had put new transactions in Russia on hold amid unfolding uncertainties and restrictions. This demonstrates that a Global South-led institution is not insulated from financial-market conditions and compliance risks. For Prelims, focus on the founding countries, Shanghai headquarters, capital terminology and the distinction between NDB and BRICS membership; for analytical answers, connect the bank with infrastructure gaps, currency risk and reform of global financial governance.

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