BRICS leaders say yes to launch of development bank

Leaders of BRICS countries made the big-ticket announcement today in Durban of the launch of a development bank. The leaders, however, failed to agree on how much initial capital the bank needs.

The development bank, which is likely to focus on infrastructure financing, will be on the lines of US-backed institutions like the International Monetary Fund, which Prime Minister Manmohan Singh today said needs urgent reform.

India is trying to avoid a situation where China puts in more money and ends up dominating the bank.

On the set-up of the bank, Finance Minister P Chidambaram told reporters that a lot needs to be done in the next one year.

"As far as bank is concerned, president of Brazil said capital must be commensurate with challenges and goals that countries face. A lot of work to be done over next few months on bank on issues relating to governance," the Finance Minister said.

He said the amount of capital for the bank depends on the capacity of the countries to contribute.

"We are happy with $50 billion as initial capital. But further discussion needed," he added.

Naina Lal Kidwai, director of HSBC (Asia Pacific) and country head for India operations, had commented on the set-up of the bank earlier saying, "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."

She had also said that the country's need for funds for infrastructure is close to $1 trillion, which the banking sector is unable to meet.

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.