The finance ministers of the BRICS group of nations - Brazil, Russia, India, China and South Africa - today gave a go ahead to set up a development bank, which would challenge the domination of US backed institutions like the International Monetary Fund and the World Bank.
An announcement about the bank -- which is likely to focus on infrastructure financing -- is expected to be part of the BRICS declaration tomorrow when the BRICS leaders meet.
"It is a development which we are all very interested in because it will help mobilise resources for infrastructure, development projects and at least provide some of the credit enhancement that projects sometimes need to borrow," said Naina Lal Kidwai, director of HSBC (Asia Pacific) and country head for India operations.
She added that the country's need for funds for infrastructure is close to $1 trillion, which the banking sector is unable to meet.
However, sources said, it will take at least a year or more for the bank to begin running as key areas of concerns regarding capital, membership and governance still have to be worked out.
Another contentious issue is how much money each country should put in. Since China has more funds at its disposal, it may propose a reserve of over $100 million -- a figure the others cannot afford. The fear is the bank may be dominated by China if it pledges the most money, something that India is trying hard to avoid.
BRICS countries have been under pressure to reach a deal to send a strong message to the US and Europe to prove they are still a relevant grouping. Together the BRICS account for 25 per cent of global GDP and 40 per cent of the world's population.
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