BRICS Bank: Benefits Of Formation

BRICS, an association of five major developing economies viz; Brazil, Russia, India, China and the lately added South Africa in 2010, represents almost 18% of the world economy with 16 Trillion USD of GDP and 4 Trillion USD of FOREX. The association was developed with the purpose of encouraging monetary, political and cultural co-operation amongst the five countries.

The 6th BRICS summit 2014 was held at Fortaleza, Brazil. It seems Brazil is well versed with hosting the events after BRICS 2014 and FIFA 2014. BRICS was Narendra Modis first multilateral meet. The focus point of Modi was to bring in World peace by reducing security threats and regional crisis.

The purpose of the Summit was to open a New Development Bank (name suggested by Modi) which will fund the infrastructure projects in these 5 developing nations.
This Development Bank will fulfill the requirements which the western dominated World Bank and IMF failed to.
Headquarters will be at New Delhi, India as India is geographically centrally located and the Manpower in India is more skilled and English spoken.

Prospects:
The bank will start with 100 Billion US Dollars and the same amount of Reserve Fund. This is to counter the short term liquidity pressures faced by the countries.
India will hold the first Presidency for six years followed by Brazil and Russia who will hold it for next 5 years. China insisted on having a greater influence over the bank to expand its political power abroad. However, China will not supervise for next two decades.
$ 50 Billion of subscribed capital will be distributed amongst the 5 nations equally. One fifth amount will be in cash for seven years and the other part in guarantees. Chinas demand for higher contribution discarded.
The other nations have had a big trouble in tackling the differences between China and India and hence a negotiation between the two nations was the biggest agenda of the Summit.
Brics will hold at least 55% and the remaining stake will be open for other countries and the bank will start lending from 2016.
China will contribute towards contingencies of $41 Billion being the country with highest forex reserves. Brazil, India and Russia will contribute $18 billion and SA $5 Billion. On the contrary, China can ask for half of its contribution, SA double and other countries break even.

Advantages
Headquarters being in India would help the country with higher employment opportunities plus bring in higher FOREX reserves.
Narendra Modi is expected to wipe off the hopes and expectations committed so far and work on implementation to lower the delivery dilemma.
IMF and World Bank are cursed to serve only the wealthy and developed countries. This created greater inequality and environmental destruction. These both always prioritized export production over domestic economic development. BRICS Summit 2014 decided to wipe off such disadvantages.
The Summit also assured to address regional conflicts specifically the one between India and China over South Eastern flank of Himalayas. Addressing such conflicts would help pour in world peace and wipe off security threats. Specifically help build better India-China relationship and strengthen India-Russia friendship.
The five countries are likely to increase intra BRICS barter which will help reduce trade deficits amid reduced monetary transactions.
The money called up will be invested by the Indian Government in healthcare and affordable households, infrastructure, education and cleaner energy.

All said and done, Lets hope that the Ab Ki Bar Modi Sarkaar magic works and the provisions turn into implementation and the Development Bank as the name states will truly act as a transformer from Developing to the Developed.