BRICS bank to start lending in local currency by April: Kamath

The New Development Bank, set up by five BRICS nations, including India, will start lending in local currency by April next year and member countries will primarily be the focus of credit facility, its chief and eminent banker K V Kamath said in Ufa on Friday.

He said a decision to open membership for other countries will be taken in the next few months by the bank's Board of Governors.

"I think we will start lending process sometimes early first quarter next year (April). . . The idea is that by April next year, we will create a state of projects from all the member countries (for lending)," Kamath told PTI in an interview in Ufa.

He said the NDB, with a capital of $100 billion, will look at various instruments of credit to the member countries -- Brazil, Russia, India, China and South Africa – which require huge resources for development.

"Basically, credit is what we are looking at.

“Various instruments of credit that we are looking at," said Kamath, who was here to attend the (Brazil Russia India China South Africa) BRICS Summit in which Prime Minister Narendra Modi and leaders from other member countries participated.

"Idea is that we will lend for developmental assistance in member countries," said the former Independent Director of Infosys and former Chairman of ICICI Bank, who has been made the NDB president for five years.

BRICS countries had decided last year to establish the Bank, with India getting the right to nominate the first president.

Asked whether the NDB would consider lending to non-member countries, Kamath said, "We will primarily lend to member countries.

“In due course, we will look at opening membership, in the next few months."

Specifically asked whether NDB could consider helping Greece which is in financial crisis, Kamath said, "I have no mandate to help any non-member. . . Beyond BRICS, I have no mandate."

At the same time, he said, "We will talk to the Board of Governors to expand in due course."

The board meeting is likely to take place later this month in Shanghai, the headquarter of NDB.

Kamath was asked to comment on a view that the BRICS bank has been set up to undermine the dollar as it will lend in local currencies.

"I will put it like this. In developing countries, particularly BRICS, there are pools of capital which can be tapped and lent.

“Local currency financing is what we will look at in addition to hard currency finance.

“We will look at all pools of capital in addition to hard currency," he said.

He went on to add that local currency credit will protect the BRICS countries from currency fluctuations and volatility and "it is critical that we do it".

Russian President Vladimir Putin, while justifying the setting up of NDB, recently said that "The international monetary system itself depends a lot on the US dollar, or, to be precise, on the monetary and financial policy of the US authorities. The BRICS countries want to change this."

Kamath said the ‘main intent’ of setting up the NDB is ‘to understand the borrowers' mindset’.

Asked what is that ‘mindset’, the NDB head said, "the borrowers' mindset is – please understand our challenges and lend accordingly. Don't look at us from the western mindset which is that of developed countries."

Queried whether that is the mindset in existing institutions IMF and World Bank, he replied, "I think that is what the developing countries are feeling and that is what has been articulated.

“We will look at it clearly understanding ethos of the borrower."

He maintained that the NDB will benefit the developing countries as the priority of the bank would be economic development of every single member country.

Kamath denied that NDB would compete with Asian Infrastructure Investment Bank, which was also set up recently.

"We will work together and have collaboration and cooperation."

Underlining that ‘structures’ of the two banks are different, he said, "The world is changing and it is an opportunity to have cooperation."

Is $100 billion sufficient?

In response, Kamath said, "$100 billion is about the capital other large multilateral development banks have.

“So it is substantial capital. It will be used over a number of years."

Image: KV Kamath; Photograph: Reuters