The BRICS bank an alternative that wasn’t 

Why in news?

As India hosts the 18th BRICS summit in New Delhi on September 12-13, 2026, experts review the New Development Bank’s success.

UPSC Relevance

Prelims 

Mains, GS2, Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

Important International Institutions, agencies and fora – their Structure, Mandate.

New Development Bank (NDB)

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank (MDB) established by the BRICS nations (Brazil, Russia, India, China, and South Africa). 

Important Facts 

NDB Members

The membership of the NDB is open to any member state of the United Nations(both borrowing and non-borrowing members). Member countries are divided into Founding Members and Admitted Members:

1. Founding Members (2015)

• Brazil
• Russia
• India
• China
• South Africa

2. Non-Founding Members – Since 2021, the NDB has formally admitted several new non-BRICS members:

• Bangladesh (Admitted 2021)
• United Arab Emirates (Admitted 2021)
• Egypt (Admitted 2023)
• Algeria (Admitted 2024)

(Note: Uruguay was approved as a prospective member by the Board of Governors and officially becomes a full member upon depositing its instrument of accession).

Functions 

1. Infrastructure & Sustainable Development Financing:
   • Direct financial assistance through loans, guarantees, equity participation, and other financial instruments to public or private projects.
   • Primary operational focus areas include:
     • Clean Energy & Energy Efficiency
     • Transport Infrastructure (roads, bridges, railways, urban transit)
     • Water & Sanitation Management
     • Environmental Protection & Restoration
     • Social & Digital Infrastructure
2. Promoting Local Currency Financing:
   • To mitigate exchange-rate volatility risks faced by developing economies, NDB issues local currency-denominated bonds (such as Green Bonds in RMB, Rupee bonds, etc.) and provides a significant portion of its loans in national currencies.
3. Technical Assistance & Knowledge Sharing:
   • Provides technical expertise for project preparation and implementation.
   • Conducts information and personnel exchanges to promote South-South cooperation.
4. Crisis Response Support:
   • Extends emergency funding during global shocks (e.g., establishing a $10 billion Emergency Assistance Program during COVID-19 to assist members with healthcare and economic recovery).

How does it provide an alternative global economic framework? 

The New Development Bank (NDB) challenges the US-led economic framework by creating a multipolar alternative to Western institutions like the World Bank and IMF.

• Equal Representation: It rejects Western weighted voting power (like US veto rights) by giving all founding BRICS members equal voting power without single-country vetoes.
• De-dollarisation: It reduces reliance on the US dollar by providing loans and issuing bonds directly in local member currencies to lower exchange-rate risks.
• No Political Conditions: Unlike IMF or World Bank loans, NDB grants development funding for infrastructure without imposing Western political reforms or stringent policy conditions on borrowing nations.

How has it fallen short of its objectives?

Reliance on Western Financial Structures

• Dollar Dominance: Half of the New Development Bank’s (NDB) outstanding bonds remain denominated in U.S. dollars. Local currency lending reached only roughly 22% as of mid-2025 (short of its 30% target).
• Credit Rating Agencies: The NDB continues to rely on major Western credit-rating agencies (S&P, Fitch, Moody’s). When these agencies’ rules clashed with bloc solidarity following the 2022 invasion of Ukraine, the bank froze all operations related to Russia (a 20% shareholder) to protect its credit standing in New York.
• Co-financing: Rather than competing, the NDB co-finances projects directly with the World Bank and International Monetary Fund (IMF).

The Contingent Reserve Arrangement (CRA) Trap

• Lack of Independence: The CRA was created in 2015 as a $100 billion pool to help members weather financial crises without turning to the IMF. However, any member wishing to draw more than 30% of its allotted share must first enter into an IMF programme, effectively tying emergency aid back to the very institution it was built to bypass.
• No Operational Capacity: The CRA has no permanent staff, independent surveillance capacity, or research wing, making it functionally incapable of operating independently.

Structural Limitations and Demands

• Limited Scale: Total NDB project approvals reached $39 billion by late 2024. In comparison, the World Bank Group commits roughly $100 billion annually—meaning the NDB approved less in a decade than the World Bank commits in six months.
• Reforming vs. Replacing: Instead of replacing Western institutions, official BRICS declarations (such as the 2024 Kazan and 2025 Rio summits) call for a “quota-based and adequately resourced” IMF—asking for more influence within existing rules rather than creating a new system.
• Lack of De-dollarisation Consensus: The bloc’s 126-point declaration at the July 2025 Rio summit did not contain the word “de-dollarisation,” and key members remain divided due to fears of trade reprisals or differing geopolitical interests.

To ensure its effectiveness, the NDB must scale local currency lending, operationalise independent crisis-support mechanisms, expand non-BRICS membership, and streamline loan processing. Aligning sustainable infrastructure financing with autonomous financial systems will truly position the bank as a credible alternative global institution.

Practice MCQ  

With reference to the New Development Bank (NDB) and the financial initiatives of the BRICS nations, consider the following statements:

1. ​Unlike the International Monetary Fund (IMF), no single member state holds veto power in the New Development Bank.
2. The total voting power of the founding members can legally decrease over time as new members join, provided it does not drop below 50%.
3. ​Emergency aid under the BRICS Contingent Reserve Arrangement (CRA) can be fully accessed by a member nation completely independent of any existing IMF programs.
4. ​Membership in the NDB is exclusively restricted to member states of the United Nations General Assembly.

​Which of the statements given above are correct?

​(a) 1 and 4 only

(b) 1, 2, and 4 only

(c) 2 and 3 only

(d) 1, 3, and 4 only

​Correct Answer: (a) 1 and 4 only

• ​Statement 1 is CORRECT: In the NDB, decisions are made on a voting system where each founding member has equal voting rights (one member, one vote base). No single country holds veto power, unlike the U.S. in the IMF (where the U.S. holds over 16% voting power, effectively giving it a veto on major decisions requiring an 85% supermajority).
• ​Statement 2 is INCORRECT: While the initial subscribed capital of $50 billion was divided equally among the five founding members ($10 billion each), the Agreement on the NDB explicitly states that the total voting power of the founding members cannot fall below 55% (not 50%) of the total voting power as new members join.
• ​Statement 3 is INCORRECT: The Contingent Reserve Arrangement (CRA) is not fully independent of the IMF. Under the rules of the CRA, if a member country wants to draw more than 30% of its allotted quota, it must first enter into an active program with the IMF.
• ​Statement 4 is CORRECT: According to the NDB Charter, membership in the bank is open to all member countries of the United Nations. Non-UN states cannot join.

Practice Question 

Discuss how the New Development Bank aims to reform global financial governance. Evaluate its key structural limitations in offering a true alternative to the Western-dominated economic order. (10 marks)

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