The New Development Bank (NDB), referred to as Brics bank, may give the first batch of loans to India and China in their respective currencies in April, sources said, even though the default operating currency of the NDB is US dollar.
The move is aimed at allowing the new multilateral agency headquartered in Shanghai to use a larger basket of currencies for lending and borrowing.
The NDB could raise funds by issuing rupee bonds in India or rupee-linked bonds overseas (masala bonds) for its rupee loans operations in the country.
In the past, the Asian Development Bank (ADB) has issued both domestic and overseas rupee bonds to finance projects in India.
The NDB, set up earlier this year, has an authorised capital of $100 billion. To start with, the it would begin with $50-billion subscribed capital, split equally among BRICS (Brazil, Russia, India, China and South Korea) countries.
It will scale up later by inducting more countries as members and raise resources from the market.
India, which needs $1-trillion investment in infrastructure in five years through 2017, could be one of the big beneficiaries of the new institution. The country is already the largest borrower of the World Bank and the ADB.
Even though NDB, sources said, is likely to give loans in local currencies to India and China, it would stick to US dollar as the default currency for raising funds from global markets as well in its lendings to countries. Exceptions will be made depending on the appetite for local currency loans in member countries, sources said.
With the process of operationalising the NDB (on the lines of the World Bank) gathering momentum, its board of directors met on November 20 to discuss and frame draft lending, borrowing and environmental policies for the bank before it commences operations in early 2016.
These norms will be ratified by the board of governors in March-April.
In the meantime, a pipeline of projects are being readied to seek the board of governors’ approval. India has already submitted three proposals including the Centre’s Green Energy Corridor and Grid Strengthening Project for evacuation power from renewable energy sources such as solar.
In this project, the NDB could be a co-financier along with the World Bank and the Asian Development Bank, sources said.
Two other projects sent to the NDB relate to a power project as well as an irrigation project in Rajasthan.
More projects will be sent to the bank after state governments submit their proposals to the Centre, sources said.
