India has recently signed to become founding a New Development Bank (NDB) and also the Asian Infrastructure Investment Bank (AIIB) .How will the role of the two Banks be different? Discuss the significance of these two Banks for India.
The NDB and the AIIB are both international financial institutions that are in the early stage of their existence. While the NDB is formed and will lend to only the members of the emerging countries grouping BRICS, which stands for Brazil, Russia, India, China and South Africa, the AIIB currently has 21 founding members which are all Asian nations. Membership to the AIIB is still open, and other countries may join provided they are accepted by the founding members. The NDB, however, is restricted to only the BRICS nations, and aims to also further the agenda of BRICS by fostering cooperation among the member nation along with performing other banking functions. Both banks will focus on financing the infrastructure needs of its fast growing members. In addition to that, the NDB will seek to provide protection and assistance against global liquidity pressures and volatility. Significantly, all countries in the NDB will have equal voting share despite differences in contribution, and no country will have the power to veto. While the NDB is to be an alternative to the WB and IMF, the AIIB will operate more in the area now occupied by the ADB.
India needs $1 trillion to finance and achieve holistic development of its infrastructure. Domestic banking institutions and finances are insufficient to meet such high demand for investment, and thus, the role of multilateral institutions targeting infrastructure projects such as NDB, AIIB assumes significance.