New Development Bank (NDB) Objective, Functions, Features, Membership, Shareholding, Criticism

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa). According to the Agreement on the NDB, “the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments.” Moreover, the NDB “shall cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank.”

The initial authorized capital of the bank is $100 billion divided into 1 million shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 billion divided into paid-in shares ($10 billion) and callable shares ($40 billion). The initial subscribed capital of the bank was equally distributed among the founding members. The Agreement on the NDB specifies that every member will have one vote no one would have any veto powers.

NDB is currently headquartered in BRICS Tower (former Oriental Financial Centre) in Shanghai The bank is headquartered in Shanghai, China. The first regional office of the NDB is in Johannesburg, South Africa.

Objective

The bank aims to contribute to the development plans established nationally through projects that are socially, environmentally and economically sustainable. Taking this into account, the main objectives of the NDB can be summarized as follows

• Promote infrastructure and sustainable development projects with a significant development impact in member countries.
• Establish an extensive network of global partnerships with other multilateral development institutions and national development banks.
• Build a balanced project portfolio giving a proper respect to their geographic location, financing requirements and other factors.

Functions

The New Development Bank will mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement existing efforts of multilateral and regional financial institutions for global growth and development.

• Fostering development of member countries
• Supporting economic growth
• Promoting competitiveness and facilitating job creation
• Building a knowledge sharing platform among developing countries

Membership

The Agreement on the New Development Bank entered into force in July 2015, with the official declaration of all five states that have signed it. The five founding members of the Bank include Brazil, Russia, India, China and South Africa.

Bank’s Articles of Agreement specify that all members of the United Nations could be members of the bank, however the share of the BRICS nations can never be less than 55% of voting power.

Expanding the NDB’s membership is considered by some experts to be crucial to its long-term development by helping boost the bank’s business growth.

According to the Bank’s General Strategy: 2017–2021, the NDB plans to expand membership gradually so as not to overly strain its operational and decision-making capacity.

Shareholding

According to Articles of Agreement of the New Development Bank, the initial authorized capital of the bank is divided into 1 million shares, having a par value of $100,000. Each founding member of the bank has initially subscribed 100,000 shares, in a total of $10 billion, of which 20,000 shares correspond to paid-in capital, in a total of $2 billion and 80,000 shares correspond to callable capital, in a total of $8 billion.